Oil price

"With the price of oil hurtling towards $130 a barrel, the cost of petrol in America crept even higher just before the start of the summer driving season, which begins on Memorial Day( the last Monday in May). Meanwhile, the International Energy Agency again cut its forecast for the growth in demand for oil this year, causing analysts to ponder whether rising oil prices would cause global energy consumption to fall."

From page 10, "The Economist" May 17th - 23rd 2008,

A quite short article... What are the reasons contributing to the rise in oil price?



There's an increasing demand from expanding economies^, mainly in China and India but also elsewhere, while supply has been artificially curtailed through the OPEC oil cartel.
Efforts to increase supply lag behind the increasing demand of recent years. Regulation and environmental efforts have also increased the shortage and price of oil.
This is because there is a limited amount of fossil fuel, and the remaining accessible supply is consumed more rapidly each year. Increasingly, remaining reserves become more technically difficult to extract and therefore more expensive. Eventually, reserves will only be economically feasible to extract at extremely high prices.
In addition, turbulence in the Middle East, the world's largest oil-producing region, has led to decreased exports, especially civil unrest in Iraq, after the 2003 U.S. invasion. Outside the Middle East, Venezuela has experienced strikes and political turbulance, and there is growing instability in West Africa.
Another reason may be oil's historically high ratio of energy returned on energy invested continues a significant decline. The increased price of oil also makes other non-conventional and less cost-efficient sources of oil attractive to businesses, e.g. Canadian tar sands
Other issues, such as labour strikes, hurricane threats to oil platforms, fires and terrorist threats at refineries, and other short-lived problems, have also had some effect on oil prices.
Recently, there has also been increasing speculation on the oil futures market that tends to push up prices.

Low supply and high demand lead to high price.

When less people are able to afford oil, the demand for oil will decrease. Thus global energy consumption may fall.