The Major Increase in Gas Prices

Introduction

Since March 2008 , the prices of petroleum products have increased incessantly and at an unprecedented scale , crossing all the previous milestones . This astronomical rise in petroleum prices have suddenly brought forth possibilities of a major economic crisis looming over world , one that may prove more crippling than the oil crisis of 1973 . As the prices continue to soar and with dire future predictions , the market has become very volatile , rife with speculations and fears that threaten to destabilize many leading economies of world , cause widespread unemployment and general hardship for

public . Meanwhile governments , oil industry and petroleum producers are engaged in discussions to find out methods to lower the domestic and international heat generated by rising petroleum prices

Cause of Fuel Price Increase

The giant economies of China and India , with their billion plus population , have caused petroleum demands to jump drastically since 2002 , in addition to sustained increase in fuel demands by Western developed nations . It is estimated that since 2002 , oil consumption has increased by more than 100 percent in fuel consumption in China and India . On the other hand , oil supplies have failed to keep pace with the increase in demand and have considerably slowed down since 1980 . Wild speculations on this demand-supply discrepancy constitute is one of the reason behind increase in fuel prices

An equally important reason is disturbance in Middle East , following U .S ' invasion of Iraq in 2003 . The invasion of Iraq was a significant event from oil markets perspective because Iraq posses vast reservoirs of oil . The fact that rise in petroleum prices have started their upward curve since 2003- the year of Iraq War , suggests a strong correlation between these two events , which is also obvious when one considers that the Iraq war had also caused substantial increase in petroleum demands while lowering Iraq 's production capacity . The price of oil rose in the months running up to the invasion in March . For a short while prices were lowered in mid-2003 , which was attributed to speculations on quick end to war . But as the war dragged and production of oil suffered in Iraq , prices resumed their northwards journey . Many analysts prefer to view the situation on broader scale while taking in account of peaking and decline of many present or former oil-exporting countries around the world , such as Mexico , Indonesia , and the U .K . However , all the analysis comes to agreement that that the combination of relentlessly rising global demand and peaking and eventually declining supply has very general economic implications that the price must eventually go up Further , as evidenced in 1973 oil crisis , once prices go up , they maintain the upward trend despite cessation of original cause of increase . Hence experts estimate that prices would continue to rise end of year 2009

Trends in Fuel Price Increase

Crude oil prices reflect the same economic constraints of demand , supply and speculations as any other commodity . Prices undergo wide fluctuation at times of shortage or oversupply . However , one major difference...