Oil prices have maintained an 80 dollar plus price range since the beginning of this year, compared to an average of 75 dollars per barrel for the Brent North Sea oil crude last December. However, prices dropped at the end of last week to about 78 dollars, on expectations of the near end of the cold snap affecting the United States, and of an increase in the oil reserve levels due to additional imports. Also, speculative price levels in the New York Stock Exchange are showing signs of a possible future increase in oil prices to about 90 dollars. There are many reasons behind this price hike. First of all, there is the wave of arctic storms that have hit the northern hemisphere, and second, there is the positive economic news about the possibility of the global economy achieving recovery sooner than expected. Thirdly, there is the weak dollar, and fourthly, the interruption of oil and gas supplies for political or technical reasons in various areas of the world, such as, for instance, the suspension of production in the Ormen Lange field, the second largest Norwegian natural gas field in the North Sea, because of snowstorms. This is in addition to the outage caused by a fire in a Canadian refinery owned by the Korean National Oil Company, and the reduction in Chevron's output in Nigeria, following the attacks by the Niger Delta rebels against its installations. And finally, there is the series of positive economic news coming from China, and which indicates that record sales have been achieved. There is no doubt that China's positive economic news, in spite of the global financial crisis, are the key element behind the rise in oil prices, as China's imports of crude oil and petroleum products rose to approximately five million barrels per day last December. The main news coming from China show that a sustainable economic growth is being achieved there, despite the global financial crisis; also, car sales in China exceeded car sales in the United States this year, and for the first time ever: 13.6 million cars were sold in the country, compared to about 10 million cars in the United States. Last week, reports indicated that for the first time in 14 months, the value of Chinese exports increased last December. The value of these exports in fact rose by 17.7 percent from the levels of 2008. The value of Chinese exports in 2009 then exceeded 1.2 trillion dollars. Owing to this rise, China surpassed Germany, whose exports were estimated to be 1.17 trillion dollars. This increase in the value of exports rendered China - for the first time in its history - the world's largest exporting country. These statistics and figures led the British magazine Economist to wonder whether China will overtake Japan and become the world's second economy in 2010. However, the Economist also wondered at the same time whether China will follow in Japan's footsteps, with the bursting of a massive bubble followed by years of decline. The Economist answered these questions as follows: Because of the large opportunities still available in China, given the broad underdevelopment still prevalent in many important sectors of the Chinese economy, and given the governmental policies in transforming the economy from being based on agriculture to an industry and services based economy, the Chinese economy may be able to avoid experiencing a bubble like Japan's economy. The argument made in this vein is that the Japanese economy was already developed enough during the massive growth that it experienced, while there is much more room for growth for the Chinese economy, and hence, there no threat in this respect of the bubble bursting. The gradual rise of oil prices during 2009, from about 30 dollars earlier this year to about 75 dollars at the end of 2009, and despite the ongoing global financial crisis, is evidence that we are in a new phase of high oil prices. This is in spite of the setbacks suffered here and there, as the global supply and demand trends are moving in the direction of a higher price range. In fact, this has been the prevailing image since the middle of this decade, where prices only radically dropped during the worst days of the global economic crisis. Nonetheless, it is obvious that this equilibrium in supply and demand is not taking place haphazardly; rather, there is an important role played by OPEC in achieving this equilibrium, and hence the importance and the necessity of cooperation and coordination among OPEC's member states in the foreseeable future, all in order to maintain a reasonable price range, and perhaps in order to also avoid any “chaos” in price mobility, as happened in 2008 when oil prices rose to about 147 dollars. *. Mr. Khadduri is an energy expert
