Why does the cost of oil continue to rise?

Many nations around the globe have trying to determine the root cause. There are those who would simply place the blame on the “money hungry oil companies”, “investors” or “OPEC”.

Oil Refinery in Nigeria

A vast number of investors and hedge fund managers have looked to commodities for high returns that are not being met with traditional stocks and bonds, there are also those sitting on the sidelines hoping to drive the cost of a barrel of oil through the roof.

In November of last year the International Energy Agency published its annual World Energy Outlook report. Normally the agency will predict the energy supply in the upcoming years based on the demand.

The IEA has announced that China and India wll be the leaders in the increasing need for energy which will make up 45% of the total growth around the globe. The importing of oil to China and India is expected to increase to 19.2m barrels a day by the year 2030 in comparison to 5.3m barrels a day back in 2006.

The IEA's annual report forecasts that energy demand will spike in the next two decades, driven in large part by fast-growing India and China. OECD refers to the 30 developed nations in the Organization for Economic Cooperation and Development. (Credit: IEA)

The overall demand for oil will increase to 115m barrels a day by the year 2030, a rise of 36% from the oil usage in 2006. Looking at the report in November the International Energy Agency announced that the cost of a barrel of oil may increase to $158 by 2030 as a result of the increase in demand. Currently this estimate looks to be quite conservative.