World Oil Demand and Its Effect on Oil Prices

Abstract

The price of oil began rising in October 2003 and reached record levels in 2004 and again in 2005. As a result of these price increases, consumers' budgets have been under pressure, business costs have risen, and oil producers profits have increased. The 109th Congress is considering broad energy legislation (H.R. 6), that addresses conditions in the oil and petroleum products markets. A long term explanatory factor for increasing oil prices could be the decline of the world reserve base. The reserves to production ratio is the measure which indicates the world's ability to maintain current production, based on proved reserves. Over the past decade there has been little change in the reserve to production ratio, suggesting that, at least for now, long term forces are not driving up the price of oil.