Where is the price of oil headed and why?
Mr. Barkindo: This is not something that OPEC or any other entity can predict. What I can do, however, is provide some background as to what has happened over the past few years. It has been well documented that energy prices have risen to unexpectedly high levels over the past three years. In June 2003, the OPEC Reference Basket price stood at approximately $27 a barrel, but today it has risen in nominal terms to over $65 a barrel. I would like to point out, however, that in real terms, prices have been lower than the levels seen in the early 1980s, when the OPEC Reference Basket—projected backwards—reached over $85 a barrel in today’s prices. It should also be noted that over the same period there has been a strong increase in non-energy commodity prices, sometimes at rates greater than that of oil. This fact is often overlooked. The last two years have also seen the oil market be very much out of sync with what has gone before. Prior to 2004, there was a relatively simple rule of th
