Puerto Rico Economic Pulse ©

February 2008: Black Gold Becomes a Luxury Good

An analysis of the reasons behind escalating oil prices

You cannot wear it or display it in your living room but black gold has experienced a similar trend as yellow or white gold. Yet, in each case the underlying reasons may be different. On September 2003, the price of crude oil in NYMEX was $25/barrel. After a series of events, the price kept escalating and by January 3, 2008, the price was $100.05/barrel, a 400% increase. As a result, gasoline retail prices in Puerto Rico rose from 30 cents per liter in 2003 to 78 cents by November 2007. What drives this trend? Is it China’s insatiable demand for oil, or war and conflicts in some producer countries, or bad weather, or the dollar depreciation, or diminishing oil reserves, among others? Find out in this issue, what is the principal cause of this price explosion, how this fact affects Puerto Rico, and what the future will bring us.