|SCrude oil prices had been relatively flat – hovering just
under $20 per barrel (nominal) for
many years from the mid 1980’s to 1997.
In 1997-98, they dropped with the Asian financial collapse and lack of
OPEC cohesion, but OPEC rallied, pulled back production and prices climbed in
|SIn nominal terms, prices seemed to resettle in the $30-$35
range. But in 2004, a large increase
in demand driven mainly by growth in China started an increase in crude
prices that no one had anticipated.
|SDemand was outpacing supply, and excess crude oil
production capacity dwindled. EIA’s
outlook early in 2007 showed price projections through 2008 around $65 per
barrel, but with slow growth in crude oil supply expected, and seemingly
unstoppable demand growth, there was much uncertainty.
|SIncreasing prices began to impact feedstock economics for
refiners. For example, Canadian oil
sands looked more economic, and biofuels such as ethanol became more
|SWe now know what happened to prices in 2008, but that will
be discussed more later. As of 2007,
price pressure was up.