I still remember the days when crude oil prices were at $25 a barrel – not decades ago but as recently as June 2004… Crude oil, by the way, is what the oil companies extract from the ground and refine into various fuels such as gasoline, diesel, heating oil, etc. And here in the US, we typically use a type of crude that we call West Texas Intermediate or WTI – so the prices I talk about today are for WTI Crude, which broadly trade in sync with Brent Crude – the other major crude oil category that is popular in Europe and with the OPEC, short for Organization of Petroleum Exporting Countries.
So… from a low of $25 in 2004 (btw, all prices are per barrel), prices rose, more or less steadily, to $76 by August 2006 – they tripled in two years, which is pretty phenomenal. This sharp increase in oil prices was due to ravenous energy demand from emerging economies such as China, Brazil, India, Eastern Europe and so on.
Then, a combination of fundamental factors like declining oil production in non-OPEC countries like Britain, Mexico and Norway, saber-rattling statements from people like Hugo Chavez of Venezuela – a prominent oil-exporting nation, unrest tied to the Arab Spring in the middle-east, and market frenzy driven by commodities traders took prices all the way up to to $144 by July 2008 – almost double their August 2006 levels.