The crude oil basket price increased last week, thus exceeding the 80 dollar level, after hovering between 70 and 79 dollars in the past two months. As is known, oil prices are usually influenced by the commercial inventories of the United States and other industrialized countries, the economic and financial developments in the United States and China, the strength of the dollar or its weakness against other hard currencies, in addition to the dangerous political developments in the Middle East and the surplus production capacities in major oil-producing countries. But in spite of the role these parameters play and their influence on the markets in a continuous fashion, the present increase in oil prices goes beyond these parameters. Instead, the main cause behind the increase is the ongoing global demand for oil, in spite of the two global economic crises, be it the U.S subprime mortgage crisis and its implications, or the crisis of the euro zone and Greece. Demand for oil did not collapse to low levels as a result of either crisis. In other words, demand did not fall to low levels, i.e. to 70 dollars per barrel or less, which could have negatively affected the markets. Instead, demand continued within the range of 85 million barrels per day, and is expected to rise further during the coming year. One of the main reasons behind the stable high level demand lies in the fact that the two crises have significantly affected the service industry, instead of directly and strongly affecting the consumers themselves. Since demand for oil mainly comes from the transportation sector, citizens continued using their vehicles and consuming gasoline as usual during both economic crises. We did not see massive queues of hundreds or thousands of unemployed individuals in the media, as had been the case with previous economic crises. Needless to say, the crises affected the jobs of millions of people. However, the financial and monetary measures that were quickly and purposefully adopted by certain countries, helped avoid the major problems that were predicted by many economists. Another important reason is that production outside of OPEC countries has peaked, and is now on a downward trend in the majority of non OPEC countries, with the exception of Russia. Production is particularly low in Norway and Britain in the North Sea, and also in Mexico. In contrast, Russia has managed in the past eleven months to maintain a production rate of over 10 million barrels per day of crude oil, making Russia the number one oil-producing country in the world at present. However, this level has not offset the decline in the production of non-OPEC countries. This time, these countries did not benefit, as was usually the case, from production increases when prices rise, as the production levels of non-OPEC countries have peaked and mostly began to decline. In the meantime, OPEC countries continued to adopt a balanced production policy that reconciles market needs by offering supplies, and the demand for oil. Also, OPEC, in a manner hitherto unseen in the history of the organization, has remarkably adhered to the agreements reached during the ministerial meetings, with some violations here and there. But these are not quite significant in light of the current conditions in the markets, and the prices recorded. Credit here must be given to the coordination and cooperation seen among the countries of OPEC, despite the sharp political differences among some major oil-producing countries. This is a very important characteristic of the organization's policies at this stage, as it helped maintain stability in oil markets despite the global economic crises. The organization succeeded in avoiding political differences among Member States by adopting rational oil policies in order to attain a reasonable price range. Finally, the developments of the world economy have led to some kind of a separation between the economies of major industrialized countries and those of emerging nations (China, India, Brazil and the Middle East). Demand for oil continued rising in these countries, to relatively high levels. What is the outlook for oil demand in 2011? Here, points of view diverge between OPEC and the International Energy Agency (IEA). As usual, OPEC's forecasts for oil demand are usually more cautious than those of the IEA, which usually forecasts high increases in demand, and then on the basis of this, the IEA calls for production increases by OPEC. Currently, OPEC predicts an increase in oil demand by about one million barrels per day in 2011, while the IEA estimates this by 1.3 million barrels per day, or 300 thousand barrels more than OPEC's forecast. OPEC estimates that demand for its oil in particular will be around 28.8 million barrels per day, which is about 200 thousand barrels more only than the demand for OPEC's oil in 2010; this is the first increase in demand in three years. *. Mr. Khadduri is an energy expert
