By Dayne Anderson, BSc, MBA, RFC

In 2008 in the midst of one of the worst recessions in history
crude oil prices reached a record price of $130 a barrel. By
September of the same year, prices were hovering around $110.00
per barrel. This was influenced by a cut in output by the Organization
of the Petroleum Exporting Countries (OPEC).

The OPEC nations are made up of Algeria, Angola, Ecuador, Iran,
Iraq, Kuwait, Libya, Nigeria,Qatar, Saudi Arabia, the United Arab
 Emirates (UAE) and Venezuela.
Oil is considered as the black gold of commodities in some circles.
Oil went as high as 159 in 2008 before dropping sharply to around $39.00 a barrel
in the early part of 2009.Now in 2010, oil is again on the rise ranging from between
$83.00-$86.00 a barrel of late. It seems that the lessons of the past two years have
not been learnt. But it is evident that the price of petroleum will continue to rise as the
demand for this precious commodity increases worldwide. The fact is that oil is critical
to any emerging market. One can consider the fact the 90% of vehicular

fuel needs are met by oil. Oil is easily converted to byproducts such as:

Petroleum is also the raw material in chemical products, pharmeuticals, solvents,
fertilizers, pesticides and plastics. Oil touches every aspect of human existence
and thus the demand for it. In countries like China and India with populations in the
 billions, the need for oil cannot be overemphasized. As these nations middle class
continue to grow their spending power increases. China on average imports around

100 million tons of crude oil a year to supply its energy demand. The United States is
considered another great consumer of oil. Even though they have good oil reserves
they still have to import large quantities of oil to outset the demand. American love
their SUV’s and trucks.

If you look deeper into the return of high oil prices you will see that the road ahead
will be very slippery for all nations. The developing and third world nations are going
to be adversely affected as they are mere importer of oil, as most of do not produce oil.

There is also a direct correlation of oil prices and food. As mentioned before, oil is used
in fertilizers and pesticides which is crucial to third world nations, who often supply first
world nations. With the increase in oil, the cost of fertilizers and pesticides continue to rise,
making it difficult for smaller nations to compete with larger nations or conglomerates.
The cost to even move the agricultural produce is even further increased as oil affects
gasoline and diesel prices. At the end of the stick, the customer who goes to a supermarket
will be forced to endure higher prices for goods, and this is not just agricultural, but everything
that has to be moved via air or ground.

Nations who depend of tourism are also affected. With the increase in oil prices, jet fuel rises,
increasing the cost to travel. Many Caribbean nations were severely affected in 2008-2009 as
many persons were forced to stay in their host country.

If we break down the usage of oil by nations we see a clearer picture of the demand.
The percentage of oil usage looks like this:

World consumption of oil average 30 billion a year based on 2009 data.

The recession is far from over, and it is evident that oil prices are climbing higher each month.
Where it will end no one knows. Several speculators are predicting $250 a barrel, but that is
just outrageous.