Crude oil prices, which just a year ago appeared on the verge of falling below $10 per barrel, began a steep climb this year, at one point hitting $34 per barrel -- the highest level since the Persian Gulf Crisis. There are two major reasons behind this phenomenon.
First, the supply-demand situation has changed. On the supply side, the Organization of Petroleum Exporting Countries made a series of cuts in production quotas, which were observed fairly strictly by the OPEC member countries.
On the demand side, Asian nations have generally recovered from the economic confusion caused by the drastic inflow and outflow of short-term capital. Increased real demand in these countries is pushing up oil prices, and this has prompted the United States to dispatch its energy secretary to ask oil-producing countries to boost output to ease the tightness in supply. But these factors alone do not explain the recent sharp rise.