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From the mid-1980s to September 2003, the inflation adjusted price of a barrel of crude oil on NYMEX was generally under $25/barrel. Then during 2003, the price rose above $30, reached $60 by August 11, 2005, and rose above $147 in June 2008. Commentators attributed the price increases of this period to a confluence of factors, including reports from the United States Department of Energy and others showing a decline in petroleum reserves, worries over peak oil, Middle East tension, and oil price speculation. Some events have had short term effects on oil prices, such as North Korean missile launches, the crisis between Israel and Lebanon, tension between Iran and U.S., and "a hundred factors."
At the start of September 2008, prices had fallen to $110. Analyst Jan Rudolph proposed that "weakened economies" and record high prices had reduced demand worldwide, claiming that the oil market had changed fundamentally in 2008 and was no longer sensitive to price spikes from events such as Hurricane Gustav and the Russo-Georgian war. In response to falling prices, OPEC members reduced their production levels by 1.5 Mbb/d on November 1, but prices had continued to drop as U.S. demand fell 10% from early October to early November 2008 and global demand growth and car sales dropped significantly as well.
Prices in the $95 to $105 per barrel range, in 2007 U.S. dollars, tied the previous all time inflation-adjusted record of 1980. This was broken during the first quarter of 2008. In terms of crude price, U.S. records suggest that equivalent prices were last seen in the 1860s. In terms of refined petroleum products, similar prices in real terms have not been seen since the 1920s. Outside the U.S., the history of both inflation and oil prices will be different, but after being adjusted for inflation, prices over $120/barrel are unprecedented since the very earliest days of commercial oil production. Sustained high prices contribute to fears of an economic recession similar to that of the early 1980s. In the United States, gasoline consumption dropped by 0.5% in the first two months of 2008 in response to higher prices, compared to a drop of 0.4% total in 2007. Average price for a barrel of OPEC crude oil for the week ending October 3, 2008: $93.24.
World oil demand in 2009
The ongoing financial market turmoil is expected to continue to impact oil demand well into the coming year. Oil demand in the USA will be affected negatively, at least in the first half of 2009. The expected spillover to other economies will affect oil demand elsewhere to a certain degree. Hence, world oil demand growth for 2009 was revised down by 0.1 mb/d to 0.8 mb/d, averaging 87.2 mb/d. OECD oil demand is expected to shrink by 0.4 mb/d next year; however, non-OECD oil demand growth is estimated to reach 1.1 mb/d with most of the growth coming from China, the Middle East, and India.
World oil demand in 2008
The declining US oil demand pushed OECD oil demand further down by more than 1.8% to average 48.3 mb/d. Factors affecting world oil demand in September such as a slowing economy, high retail prices and hurricanes led to a y-o-y decline in total OECD consumption which exceeded 1.0 mb/d. Non-OECD oil demand growth increased 1.16 mb/d y-o-y in September. Most of this is attributed to Asian and Middle Eastern oil demand.
Total world oil demand growth now stands at half the initial figure. Robust non-OECD oil growth more than offset the sharp unprecedented decline in developing countries. Oil demand in China, the Middle East, India, and Brazil added more than 1.0 mb/d to world oil demand this year. The slow US economy is seen as the main cause of the sharp slowdown in petroleum product demand this year, contributing to a 1.0 mb/d year-to-date contraction in US oil demand. World oil demand for 2008 was revised down by 0.33 mb/d to show growth of 0.55 mb/d for an average of 86.5 mb/d.
It is estimated that there may be 57 ZJ of oil reserves on Earth (although estimates vary from a low of 8 ZJ, consisting of currently proven and recoverable reserves, to a maximum of 110 ZJ) consisting of available, but not necessarily recoverable reserves, and including optimistic estimates for unconventional sources such as tar sands and oil shale. Current consensus among the 18 recognized estimates of supply profiles is that the peak of extraction will occur in 2020 at the rate of 93-million barrels per day (mbd). Current oil consumption is at the rate of 0.18 ZJ per year (31.1 billion barrels) or 85-mbd.
There is growing consensus that peak oil production may be reached in the near future, resulting in severe oil price increases. A 2005 French Economics, Industry and Finance Ministry report suggested a worst-case scenario that could occur as early as 2013. There are also theories that peak of the global oil production may occur in as little as 2-3 years. The ASPO predicts peak year to be in 2010. Some other theories present the view that it has already taken place in 2005. World oil production decreased from a peak of 84.59 mbd in 2005 to 84.55 mbd in 2006 and to 84.48 in 2007, but is projected to increase to 87.58 mbd in 2009. According to peak oil theory, increasing production will lead to a more rapid collapse of production in the future, while decreasing production will lead to a slower decrease, as the bell-shaped curve will be spread out over more generations.