by Umer Javed

Created on: June 20, 2008   Last Updated: December 08, 2011

On our planet where more than one trillion barrels of crude oil are left, the soaring of oil prices is the key issue that can be blamed for the spoilage of the economies of certain countries, rising inflation, and conversion of middle class people to poor.

Last year in June, the price per barrel of oil was around $70. And now, it's around $136 per barrel; almost double and it's expected that it'll hit $150 mark by July 4, 2008. In an interview, Gary Ross, CEO PIRA Energy, revealed that the price of oil may ascend to $250 by the end of June, next year. Strong demand, supply halts, taxes and subsidies, and political tensions are the bold reasons of high oil prices.

The demand for oil is rising solely in industrialized countries. The rapid increase in the number of vehicles is also causing a huge demand for oil. Gasoline consumption in the first four months of 2008 has increased by 5.5 percent from the same period last year.

Among suppliers, Saudi Arabia is the only sound supplier, which contributes 40% of total oil extraction in OPEC countries. The oil export from Iraq has been curtailed due to the attacks on their oil facilities.

The accusation made by the United States on Iran's Revolution Guards of supporting terrorism and the imposition of economic sanctions on Iran, can result in the lessening of oil supply. The tensions between Turkey and Kurdish rebels in northern Iraq could disrupt suppliers from Iraq.

Taxes and subsidies are the main reasons for the oil prices. Subsidies actually protect consumers but hurt governments, which must find a way to afford rising oil prices. And when oil taxes are raised, consumers criticize the oil producers, but it's the responsibility of their own governments.

As a result of high oil prices, the daily consumers are facing huge problems, and we often see that strikes and protests go around in many countries. Oil consumers hate even to think about the ascension of oil prices.

Some governments try to soften the impact of high prices by increasing wages or subsidizing food items. In Pakistan for instance, the government has raised the wages by 20% but it compensates for only part of the price increases, and people who work in the private sector get no such relief.

Consequently, the rise in oil prices is the main cause that is letting the majority of countries, their economies, and the people face inflation and other problems. Deficits have outweighed the profits. Economic targets are not being accomplished by the governments. Poverty is spreading. The zooming prices of oil have made our lives a bit more difficult.

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