Oil Energy Money

Illustration by Kevin Kallaugher, Courtesy of The Economist 

America is finally realising what Western Europe has known for a few decades: Oil is expensive.  There’s a reason why the French drive cars smaller than the average American lawnmower, the soaring cost of crude can no longer be considered  a passing fad.

A new report from the U.S. Energy Department states that oil will average $101 for this year.  It was $72.32 last year and a January 2008 report predicted $87 for 2008, so today’s figure is a remarkable upward revision. 

The report comes on the same day as a $2 rise pushed crude futures to $110 amid a surprise announcement about declining American inventories.  The Energy Department reported a 3.1million barrel decline, much larger than analyst expectations of less than 2 million.  The news sent gasoline to record highs and many believe $120 for NYMEX crude oil futures is around the corner.  Declining American demand doesn’t seem to deter international consumers from pushing up the price.

Summer is traditionally a period of high demand and the closer we get the more erratic oil prices are becoming.  But while Europeans take this in stride, America should look on the bright side: the predicted average price for 2009 is only $92.50.