Why are the world's oil prices rising?
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Where does oil come from?
What factors impact the world’s oil prices?
We’ve all heard the news predict high oil prices lately and we’ve gasped at the climbing numbers as we pull up at the gas station, but lets take a look at where oil really comes from and what factors are impacting this key market.
The world’s oil reserves are generally spit up according this pie chart to the right:
As you can see, and we all expected, most of the world’s oil comes from the Middle East, but Africa, the Americas, and Eurasia, have no small part to play. Here’s how that play out on a world map.
So much has happened throughout the world in the past few months that the experts are calling it a “perfect storm” for oil prices jumping through the roof. Egypt’s political revolution marked the initial rise of oil prices. The recent violence in Libya, which has the largest oil reserves in Africa, has almost completely stopped petroleum shipments from that region. Experts are worried that unrest in Libya will affect the Middle East as well, impacting oil production even further. Yemen, an essential transport point for global oil supplies, has also been wrought by political strife. We are all horrified by the ramifications caused by the recent tsunami in Japan, but what you might not have considered is that some of world’s major oil refineries are in Japan and they have also been severely affected by the disaster.
Due to the overall supply and demand constraints caused by all this unrest, crude oil prices are have risen to $106 per barrel compared to the $70 per barrel which was the case last year at this time. Unfortunately prices are predicted to keep rising and hit $125 a barrel by Memorial Day weekend and $140 per barrel in the next 12 months. For every $1 increase in the price of crude oil, drivers can expect a 2- cent increase in the price of gasoline and diesel fuel.
These dramatic and continual increases in fuel cost are not only affecting drivers and auto shipping companies, but there will be a greater and global effect on cargo transportation companies whose prices will have to rise accordingly. Most of the world’s economy is very dependent on goods and products being shipped across the globe from manufacturer to distributor, placing cargo shipping companies in a very essential role.
The world’s oil market requires a very sensitive balance both between countries and governments, and currently that balance has suffered some severe disruptions.
