The price of crude oil

During 2007, Albania imported gasoline and diesel worth $300 million. During the same period, ARMO, the Albanian refinery, produced diesel worth $50 million. The current gas price (ALL 155 per litre) reflects the price of crude in world markets. In the beginning of 2007, the oil price was around $50 per barrel and has increased to $98 per barrel by the end of the year. The average oil price during the year 2007 was, according to Reuters, $72.30 per barrel. In 2008, the oil price increased, by March, to $106 per barrel and in May, oil prices reached an all time high at $135 per barrel.
This price reflects a number of factors. First, the ratio of supply to demand. For the moment, there are limits to the supply side, i.e. to the increase of oil production. During the coming years, it is expected that oil production is going to increase by around one million barrels per year. On the demand side, lower demand in the industrialised West is being matched by increased demand from China, India, and other developing countries.
Further, the increased price reflects the falling US dollar. Oil is priced in US dollars and the weaker it gets, the more attractive it becomes to seek shelter in oil-denominated goods and stocks. Therefore, we have seen a rush of traders buying oil futures and driving the price of crude oil and, subsequently, gas prices even higher.
Lastly, the price reflects the instability of the oil producing countries and regions. Nigeria is a prime example. It takes only a gang of several men to disrupt oil production there followed by an immediate increase in oil prices on stock markets. The Middle East is the other volatile region. Last month, the oil price jumped $2.46 per barrel in a single day because of news that a ship under contract to the U.S. Defence Department fired warning shots at two small boats in the Persian Gulf. While the U.S. Navy could not confirm that the boats were Iranian, the fear of an armed conflict between the USA and Iran is enough to push prices up. (Tirana Times Staff)