Prices of oil have been rising due to several reasons: Supply issues with production declines in certain oil producing countries such as Mexico, an unstable oil industry in Venezuela and Nigeria and possible shrinking production capacity in the Middle East; a weak dollar and political instability in some oil-producing countries; a tight market due to increasing demand in developing countries such as China and India, speculative traders bidding up the price as a hedge against inflation and as protection from the sinking U.S. dollar; the fact that it is becoming harder and more expensive for oil companies to find and tap new petroleum reserves; forecasts that the world’s energy needs will escalate by more than 50 percent in the next two decades, etc. Several other factors contributed to the run-up in oil prices. World oil production decreased slightly between 2005 and 2007. Declining production from mature oil fields in the North Sea and Mexico played a role, as did political instability in Nigeria. Saudi Arabian production, which many analysts had expected to increase to meet rising demand, fell by 850,000 bbl a day between 2005 and 2007. These declines were enough to offset production gains in places such as Angola and Central Asia, with the result that total global oil production dropped slightly. Meanwhile, demand continued to grow, with world petroleum consumption increasing by 5 million b/d during 2004 and 2005 driven largely by a 9.4% increase in global gross domestic product. Over the next two years, 2006 and 2007, world GDP grew an additional 10.1% which, in the absence of an increase in the price of oil, would have produced further big increases in quantities consumed. Even with price increases, Chinese oil consumption increased by 870,000 b/d between 2005 and 2007. With no more oil being produced, that meant that residents of the US, Europe, and Japan had to reduce consumption by a comparable amount. The price of oil needed to rise by whatever it took for these western consumers to do so. Consumers finally began to respond when gasoline’s US average price was more than $4/gal > >