If oil prices are going to reach the levels they reached last year, they still have a ways to go. Oil grew to $125 a barrel last summer, forcing consumers to try and save gasoline. This time, the rise in oil prices is much steeper than last year’s: while prices at this point last year were up 33 percent from the beginning of 2008, this year they are up 50 percent.

According to Ann-Louise Hittle with the consulting firm Wood Mackenzie, “what we are seeing here is a replay.” Analysts have pointed out a variety of similarities between last year’s price spike and this one, but the fact that this time the world is in the midst of a deep recession has everyone wondering how this one will turn out.

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Summer of 2008 All over Again?

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A sharp spike in oil prices has been supported by OPEC but strongly condemned by many economic analysts. OPEC contends that it needs to drive oil prices higher in order to spur energy investments, but analysts tend to agree that a skyward oil prices would eradicate any improvement in the delicate economic situation.

Despite OPEC’s apparent eagerness to send oil prices even higher, the organization will not take action until its meeting on Thursday to discuss policy. Until then, the rest of the world will just have to wait and see.

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For OPEC, Gas is Still Too Cheap

In their statements, ministers from the G8 and fifteen other countries concluded that the current financial crisis should not stand in the way of energy investment. Instead, countries that are able should make investment in energy one of their top priorities.

A handful of energy ministers from the Rome gathering will eventually make their way to discussing production quotas with OPEC. Although they hope to negotiate a deal with OPEC, the energy ministers are fairly certain that OPEC will continue producing as much oil as it has been.

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Invest in Energy, G8 Nations Says

Their position is that while the US continues to supply the militaries of oil producing countries, the same countries have reduced their oil production, thus reducing the world oil supply.

For example, currently, Saudi Arabia is producing an average of 8,722,000 barrels of crude oil a day – in 2005 the average was 9,550,000.
 
Saudi Arabia’s current “spare crude capacity” (that is, the amount that could be, but isn’t, produced) is some 3,456,000 barrels per day; in 2006 it was 1,473,000 (BPD).

In addition to the demands for increased production, House Democrats have asked President Bush to halt the stockpiling of crude oil in the Strategic Petroleum Reserve.

House Speaker, Nancy Pelosi, told reporters that such a suspension would reduce gas prices between 5 and 24 cents per gallon.

Scott Stanzel, White House spokesman, stated that the reserve is a protection against supply emergencies and that “we don’t believe the fill rates have a meaningful impact on oil supplies.”

The amount of crude that is stockpiled is less than one percent of the nation’s daily supply.

Currently, the US holds over 700 million barrels of oil in reserve.

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Got Oil?