After twenty months of U.S. military presence in Iraq, consumers are concerned about the indexes of West Texas Intermediate (WTI) and of Brent oil. This has been a year in which oil prices have reached historical peaks, to the point that the yearly average of Venezuelan oil products, until November 19th , is 24% above the same figure at the close of 2003.

Such uneasiness have prices caused that, in October, the president of the Opec, Purnomo Yusgiantoro called upon producers, including non-Opec members, to increase their supply. Opec admits that its surplus supply capacity is small. Therefore,due to the extra oil income, the near future is promising for producers.
Although the price raising effects of hurricanes and of bombing Iraq, among other countries -just to mention two of the circumstantial factors involved- is unpredictable, the increase in the consumption of hydrocarbons was also unexpected.

The International Energy Agency (IEA), an advisor for 26 industrialized countries, has admitted that in 2004, consumption has increased by 2.710 million barrels per day, the greatest in 24 years, and expects the rise in 2005 to be of 1.45 million barrels per day. The IEA has also said that the atypical rise in the demand is being led by China, whose economic growth rate, expected to surpass the world average this year and the next, makes its need for oil predictable.

José Zanoni, director of the Faculty of Economic and Social Sciences of the Central University of Venezuela, included physical perturbations and speculation, as well as the demand from India and China, in his analysis of the market. The Venezuelan authorities have also attributed the current prices to a deficit in refining in the U.S. Other analysts are considering the level of reserves as additional factors.
Rodrigo Rato, director of the International Monetary Fund, acknowledged a “certain clear impact” on the world economy; nevertheless for the president of the U.S. Federal Reserve, Alan Greenspan, the current price in real terms is three fifths of the 1981 peak.

Published in Quantum N.42

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