Recently the world economy has been dogged by a vexed question of escalating international oil prices. Crude oil prices touched a new all-time high of $126.25 per barrel last week, doubling same period last year. According to auto group AAA's Web site, retail gasoline prices increased for the sixth straight day and hit their fifth consecutive record.

Since 2001, international oil prices have repeatedly broken the bench mark and remained a steady rise. In particular, the mark of $100 a barrel was breached last year, and the runaway oil prices have since gone beyond control. A Goldman Sachs analyst on Tuesday predicted that oil prices could reach $ 150 to $200 a barrel over the next 6 months to two years, but added that how far prices could climb still remain a major uncertainty.

Analysts also attributed the roaring oil prices to the frequent occurrence of geopolitical events. For instance, petroleum-related facilities were constantly attacked by armed forces in Nigeria, Turkey launched a fresh strike on Iraqi Kurdistan Workers' Party (PKK), and the tension between Venezuela and the U.S mounted, so on and so firth. It is almost certain that breaking events will cause butterfly effects to the oil prices. In the long run, the fluctuation of oil prices chiefly depends on the relations between supply and demand, and financial sectors.

Let's first get down to the relations between supply and demand. There has long been an assumption that the rise in demand for oil and fuel from the emerging economies brings about the strain on oil supply. However, OPEC Secretary General Abdalla Salem El-Badri dismissed the statement saying that supply is adequate in the international crude oil market, and that highly inflated oil prices cannot reflect the basic sides of supply and demand. Meanwhile, some analysts also echoed his opinion saying that since the second half of 2004, global oil prices have jumped up by 4 times, while the total demand for oil has not seen a quickened jump, actually the annual increase rate for oil demand averages 1 percent as matters stand.

In terms of financial sectors, both oil producers and consumers will somehow benefit from a stable oil prices system. Considering this and for the long-term and sound development of oil industry, oil producers and consumers might as well keep oil prices stable, but at present the control over oil prices seems beyond both of them. Since 1980s, the controlling power of oil prices has been transferred from OPEC to the New York Mercantile Exchange. Statistics show that ever since 2004, risk capital involved in transactions in crude oil futures market has exceeded the half of the total turnover. Many analysts believe the weak dollar has driven oil prices to levels that defy supply and demand economics.

A growing concern is that foams could come up in the oil market and the controlling conducts on oil prices could take place. When the dollar is weak, investors often look to commodities like oil as a hedge against inflation. But a stronger U.S currency can reverse that trend. Accordingly, some analysts anticipated that oil prices would possibly fall back to settle at $80 a barrel by the end of next year.

By People's Daily Online