The US must shoulder some blame for sky-high oil prices. The world's biggest user has made no effort to wean itself off cheap gasoline and its foreign policy has made matters worse. Other factors are:
Iraq
The violence and instability in Iraq is seen as symbolic of a wider battle between the West and militant Islam. Oil traders fear supply disruption as Iraq is an important provider of crude.
The country produced 2.5 million barrels of oil a day under former president Saddam Hussein but has failed to reach 2 million barrels a day so far this year due to pipeline attacks.
Deposing Saddam brought its own uncertainty but the failure of the US government to impose its will there militarily has made matters worse. The White House has lost much of its ability to influence the global oil markets through pressure on OPEC allies such as Saudi Arabia.
Saudi Arabia
The turbulence in neighboring Iraq and involvement of Saudi nationals in the Sept. 11 attacks on the US has put increasing pressure on the ruling monarchy in Saudi Arabia. A series of terrorist attacks around the country amid threats to unseat the House of Saud -- key Washington allies -- has led to fears that the 10 million barrels a day production from the world's biggest exporter could suddenly be removed from circulation.
The Saudis insist such fears are unwarranted. They point out that key facilities are heavily protected and their political power remains undiminished but deep unease about the country remains.
Speculators
The biggest new influence on stability is the role of hedge funds and other "non-commercial" players in oil futures bourses such as London's Interna-tional Petroleum Exchange and the New York Mercan-tile Exchange. Crude prices used to be pushed up and down by the physical requirements of buyers and sellers such as major oil companies.
Last year around 60,000 trades of oil futures a day were undertaken by non-commerical players on Nymex for in the first six months of this year, the number had rocketed to 200,000.
Speculators bet billions of dollars on future oil prices and thrive on volatility. But their growing presence only seems to encourage more wild price gyrations.
Yukos
The political wrestling match between Russian President Vladimir Putin and the jailed oligarch Mikhail Khordokovsky threatens bankruptcy of the country's biggest oil company, Yukos.
It produces 1.6 million barrels a day of oil and faces tax demands apparently driven by a Kremlin desire to demonstrate its power over the commercial world.
Traders fear vital production could be knocked out and investment by BP, Shell and other Western companies threatened. Russia is the second biggest crude exporter but was also seen by Washington as an exciting new source of energy as US faith in the Middle East deteriorated after Sept. 11 and now the Iraq war.
The majors
Western oil companies have not been searching for new oil and gas reserves in the North Sea or elsewhere as they did in the past.
Spending on production has also been falling despite historically high global crude prices. Cynics say firms are withholding spending to keep supply limited and prices up.
ExxonMobil spent US$1.2 billion on exploration last year, its lowest for five years, while ChevronTexaco spent US$1 billion, almost half of what it spent in 1998.
Yet ExxonMobil is sitting on US$20 billion of cash while rivals such as BP and Shell have made record profits but are giving money to investors through share buybacks and major dividend payouts.
Venezuela
The country has a critical role to play in the oil markets because it produces 3 million barrels a day of crude and two thirds of this finds its way to the world's biggest user, the US. But Venezuela has seen strikes and other protests against an unpopular government disrupt crude output in the past. The state-owned oil company PDVSA is doubly important as it is also the biggest single refiner and distributor of oil in the US.
Venezuelan President Hugo Chavez consolidated his domestic political position by winning the weekend referendum. This should reduce domestic tension but tense relations with the US -- due to personal antipathy betweenChavez and US President George W. Bush -- might not be reduced unless Senator John Kerry snatches the presidency this autumn.
Western companies have been wary about investing in Venezuelan oil projects under a president who appears to admire Castro more than capitalism.
China
The biggest driver of new oil demand, China has been sucking in record imports to feed its commercial and social revolution.
Demand rose more than 11 percent last year and has increased by a further 20 percent in the first half of this year as the Chinese modernize their infrastructure and swap bicycles for cars. This, plus higher than expected demand in the US as its economic recovery takes root, has taken everyone by surprise although some question the veracity of Chinese statistics.
Experts are convinced demand will slump as oil at US$45 per barrel damages the world economy and buyers switch fuels.
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