Simple answer, lagging production. As Ben Bernanke identified this week at his speech in Atlanta, failure by producers to satisfy growing global demand for oil (NYSE:USO) needs is driving up the price of the commodity. Bernanke singled out one organization in particular, OPEC, as culpable for much of the oil market drag and fuel costs that continue to spiral higher. Even following Bernanke’s pointed comments, the Arab-dominated organization failed to come to agreements on new production targets at a meeting in Vienna this week. One Saudi representative called it “the worst meeting I have ever seen.”
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More from The Economist, “Brent crude to a one-month high of $118.59 per barrel—after OPEC representatives meeting in Vienna were unable to reach an agreement on production quotas.
Many had expected an increase in quotas as members with spare production capacity, led by Saudi Arabia, pushed to avoid a price spike that may dampen long-term demand. As figures released in BP’s (NYSE:BP) “Statistical Review of World Energy” show, global oil production has struggled to keep up with increased demand recently, particularly from Asia.”
Particularly from China (NYSE:FXI) really, as the nation has accounted for some 40% of the global rise in oil demand over the past ten years. In 2010, for the first time in history oil consumption exceeded production and reserves were drained.