Pricey barrels add a burden

PUBLISHED : Monday, 16 June, 2008, 12:00am
UPDATED : Monday, 16 June, 2008, 12:00am

A 36 per cent price increase in five months? About 400 per cent in five years? The price of which product has soared that much?

It's crude oil!

Since 2000, crude oil prices have steadily climbed. And many economists expect this trend to continue.

In early January, oil was traded at US$100 a barrel and the price rose to US$136 earlier this month.

Economists have blamed the rising demand for the soaring oil costs. Crude oil production has remained stable while fast-growing economies like China and India are consuming more and more oil.

In addition, some oil-producing countries, such as Mexico, Indonesia and Russia, export less oil while their consumption has risen.

When supply fails to meet demand, prices rise.

What are the reasons for the oil shortage?

Unlike other products, it takes time to produce more oil. It is expensive to find and exploit new oilfields, especially offshore, and to build new refineries.

Also, demand is growing in many booming Asian economies, and petrol is used for transportation, heating and air-conditioning. Power plants and manufacturing industries, too, need oil for their daily operations.

American and European consumers are wary as oil price rises have a significant impact on their family budgets while other staples, like food, also are becoming more expensive.