Three driving forces in the oil market suggest consumers will be living with higher crude prices for some time to come. High global demand, low spare capacity and easing worldwide recessionary risk are pushing up crude prices, now trading close to $45 a barrel. "Low capacity and strong economic growth has put significant inflationary pressure on crude oil," said Agbeli Ameko, a managing partner at energy-forecasting firm Enercast.com. "Prices could remain at or above $38 for the next one to two years." Oil prices fell 6 percent in the last two weeks, but are up 35 percent this year. On an inflation-adjusted level, they're higher than any time since shortly after the Civil War, except for 1979-84. During that five-year span, surplus oil capacity doubled as global demand fell 8 percent, according to WTRG Economics. Of course, the U.S. was in its worst recession since the Great Depression. "Unlike past price spikes, demand-side pressure remains relatively high, especially as there seems little likelihood of a recession," said Michael Lynch, president of Strategic Energy & Economic Research. Excess capacity is at its lowest level -- and worldwide demand is at its highest -- in at least 30 years. In such a volatile environment, few oil experts are willing to suggest where prices are headed -- but the key determinants in the market do, publishes MarketWatch. According to Reuters, an extra 3 million barrels per day (bpd) of production capacity worldwide is needed to avoid another year of blistering oil prices, International Energy Agency (IEA) executive director Claude Mandil warned on Sunday. "We expect oil demand will be around 2 million barrels per day more in 2005 versus the average in 2004, so we need something like 3 million barrels per day of additional capacity globally to avoid another year of high prices," Mandil told Reuters on the eve of the 19th World Energy Congress in Sydney. He said improved political stability in the Middle East would also be needed to temper prices. U.S. oil, propelled by surging world demand for petroleum and violence in Iraq, traded at $44 a barrel on Friday, within $5.50 of record highs reached in August. Asked whether he expected the Organization of Petroleum Exporting Countries (OPEC) to raise official production quotas at its next meeting on September 15, Mandil said: "I don't think OPEC can do a lot immediately because they produce more than what is needed. The best thing for the OPEC meeting would be a pledge for immediate investment in additional capacity." Mandil said he believed higher output from Saudi Arabia -- the world's top exporter -- should be enough to bring U.S. oil prices below $40 but declined to elaborate. The sabotaging of oil pipelines in the Middle East has helped to stoke the increase in prices. Yesterday the crucial Iraq-Turkey pipeline was still on fire four days after militants attacked it, causing 600,000 barrels per day of exports to dry up. Officials estimated that repairs to the northern pipeline would take at least a week. Sabotage has kept the pipeline, which runs from Kirkuk in Iraq to the Turkish port of Ceyhan, mostly closed since the US-led invasion of Iraq. The attacks to the pipeline last Thursday came just as flows had reached a postwar high. Another factor responsible for the upward pressure on oil prices is the rapid economic growth and consequent burgeoning oil consumption in China and India. In London, the price of Brent North Sea crude oil fell 34 cents to $41.23 a barrel on Friday, while US oil traded at $44 a barrel, reports Times Business.
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Unilateral alliances are a rule in the history of US-Latin America relations. As well as in the US's relations all over the world.