From the mid-1980s to September 2003, the inflation-adjusted price of a 

barrel of crude
oil on NYMEX was generally under US$25/barrel in 2008 dollars. During 2003, the price rose above
$30, reached $60 by 11 August 2005, and peaked at $147.30 in July 2008. [1] Commentators
attributed these price increases to many factors, including Middle East tension, soaring demand from
China,[2] the falling value of the U.S. dollar, reports showing a decline in petroleum reserves,[3]
[4]
 worries over peak oil,[5] and financial speculation.[6]
For a time, geopolitical events and natural disasters had strong short-term effects on oil prices, such
as North Korean missile tests,[7] the 2006 conflict between Israel and Lebanon,[8] worries over Iranian
nuclear plans in 2006,[9] Hurricane Katrina,[10] and various other factors.[11] By 2008, such pressures
appeared to have an insignificant impact on oil prices given the onset of the global recession.[12] The
recession caused demand for energy to shrink in late 2008, with oil prices collapsing from the July
2008 high of $147 to a December 2008 low of $32. [13] However, it has been disputed that the laws of
supply and demand of oil could have been responsible for an almost 80% drop in the oil price within
a 6-month period.[14] Oil prices stabilized by August 2009 and generally remained in a broad trading
range between $70 and $120 through November 2014, [15] before returning to 2003 pre-crisis levels
by early 2016, as US production increased dramatically. The United States went on to become the
largest oil producer by 2018. [16]
The price of crude oil in 2003 traded in a range between $20–$30/bbl. [17] Between 2003 and July
2008, prices steadily rose, reaching $100/bbl in late 2007, coming close to the previous inflation-
adjusted peak set in 1980.[18][better  source  needed] A steep rise in the price of oil in 2008 – also mirrored by
other commodities – culminated in an all-time high of $147.27 during trading on 11 July 2008,
[19]
 more than a third above the previous inflation-adjusted high. [citation needed]
High oil prices and economic weakness contributed to a demand contraction in 2007–2008. In the
United States, gasoline consumption declined by 0.4% in 2007, [20] then fell by 0.5% in the first two
months of 2008 alone.[21] Record-setting oil prices in the first half of 2008 and economic weakness in
the second half of the year prompted a 1.2 Mbbl (190,000 m3)/day contraction in US consumption of
petroleum products, representing 5.8% of total US consumption, the largest annual decline since
1980 at the climax of the 1979 energy crisis.[22]
World crude oil demand grew an average of 1.76% per year from 1994 to 2006, with a high of 3.4%
in 2003–2004. World demand for oil is projected to increase 37% over 2006 levels by 2030,
according to the 2007 U.S. Energy Information Administration's (EIA) annual report.[23] In 2007, the
EIA expected demand to reach an ultimate high of 118 million barrels per day (18.8×10 6 m3/d), from
2006's 86 million barrels (13.7×106 m3), driven in large part by the transportation sector.[24][25] A 2008
report from the International Energy Agency (IEA) predicted that although drops in petroleum
demand due to high prices have been observed in developed countries and are expected to
continue, a 3.7 percent rise in demand by 2013 is predicted in developing countries. This is
projected to cause a net rise in global petroleum demand during that period. [26]
Transportation consumes the largest proportion of energy, and has seen the largest growth in
demand in recent decades. This growth has largely come from new demand for cars and other
personal-use vehicles powered by internal combustion engines.[27] This sector also has the highest
consumption rates, accounting for approximately 55% of oil use worldwide as documented in
the Hirsch report and 68.9% of the oil used in the United States in 2006. [28] Cars and trucks are
predicted to cause almost 75% of the increase in oil consumption by India and China between 2001
and 2025.[29] In 2008, auto sales in China were expected to grow by as much as 15–20 percent,
resulting in part from economic growth rates of over 10 percent for five years in a row. [30]
Demand growth is highest in the developing world,[31] but the United States is the world's largest
consumer of petroleum. Between 1995 and 2005, US consumption grew from 17.7 million barrels
(2,810,000 m3) a day to 20.7 million barrels (3,290,000 m3) a day, an increase of 3 million barrels
(480,000 m3) a day. China, by comparison, increased consumption from 3.4 million barrels
(540,000 m3) a day to 7 million barrels (1,100,000 m3) a day, an increase of 3.6 million barrels
(570,000 m3) a day, in the same time frame.[32] Per capita, annual consumption is 24.85 barrels
(3.951 m3) by people in the US,[33] 1.79 barrels (0.285 m3) in China,[34] and 0.79 barrels (0.126 m3) in
India.[35]
As countries develop, industry, rapid urbanization and higher living standards drive up energy use,
most often of oil. Thriving economies such as China and India are quickly becoming large oil
consumers.[2] China has seen oil consumption grow by 8% yearly since 2002, doubling from 1996–
2006.[31]
Although swift continued growth in China is often predicted, others predict that China's export-
dominated economy will not continue such growth trends due to wage and price inflation and
reduced demand from the US.[36] India's oil imports are expected to more than triple from 2005 levels
by 2020, rising to 5 million barrels per day (790×10 3 m3/d).[37]
Another large factor on petroleum demand has been human population growth. Because world
population grew faster than oil production, production per capita peaked in 1979 (preceded by a
plateau during the period of 1973–1979).[38] The world’s population in 2030 is expected to be double
that of 1980.[39]
Role of fuel subsidies[edit]
State fuel subsidies shielded consumers in many nations from higher market prices, but many of
these subsidies were reduced or removed as the governmental cost rose.
In June 2008, AFP reported that:
China became the latest Asian nation to curb energy subsidies last week after hiking retail petrol and
diesel prices as much as 18 percent... Elsewhere in Asia, Malaysia has hiked fuel prices by 41
percent and Indonesia by around 29 percent, while Taiwan and India have also raised their energy
costs.[40]
In the same month, Reuters reported that:
Countries like China and India, along with Gulf nations whose retail oil prices are kept below global
prices, contributed 61 percent of the increase in global consumption of crude oil from 2000 to 2006,
according to JPMorgan.
Other than Japan, Hong Kong, Singapore and South Korea, most Asian nations subsidize domestic
fuel prices. The more countries subsidize them, the less likely high oil prices will have any affect [sic]
in reducing overall demand, forcing governments in weaker financial situations to surrender first and
stop their subsidies.
That is what happened over the past two weeks. Indonesia, Taiwan, Sri Lanka, Bangladesh, India,
and Malaysia have either raised regulated fuel prices or pledged that they will. [41]
The Economist reported: "Half of the world's population enjoys fuel subsidies. This estimate, from
Morgan Stanley, implies that almost a quarter of the world's petrol is sold at less than the market
price."[42] U.S. Secretary of Energy Samuel Bodman stated that around 30 million barrels per day
(4,800,000 m3/d) of oil consumption (over a third of the global total) was subsidized. [40]