Oil prices and inflation

The price of world commodities is governed by a number of factors. The most obvious factor is the law of supply and demand. An average American manages to get through 25 barrels of oil a year. South Korea, which has a highly developed economy, consumes seventeen barrels of oil per person per year. China at present consumes three barrels of oil per inhabitant each year; in 2006 it consumes only one and a half barrels per person. India consumed four fifths of a barrel of oil a year. Clearly as demand increases with increasing prosperity in China and India, vast nations, so we are likely to expect great upward pressure on oil over the next ten years unless the oil producers can find and bring to market an additional 50% of the oil that they sell each year today. Continue reading