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The price of crude oil futures hit a new high of $109 this week, far surpassing any previous record.

And, according to the AAA, unleaded gas in the U.S. currently averages $3.222 per gallon, up from $2.537 per gallon a year ago.

Why are oil prices going up so much? Experts point to a number of factors: ever-increasing demand from the fast-growing economies of China and India, expanding reliance on sources in unstable parts of the world, declining production from established large oil fields and, while still not widely accepted, the possibility of the globe having reached peak oil.

Peak oil refers to the point at which oil production reaches its maximum, then begins to decline as remaining oil resources become increasingly hard to discover and pump.

Saudi Arabian oil minister Ali al-Naimi touched on the subject of peak oil in an interview last week. He said his country had ample proven reserves to make peak oil unlikely over the next five to 10 years, and attributed the current high prices of oil to growing government subsidies for biofuels, which are competitive with crude oil only when oil prices are above $60 to $70 a barrel.

However, Kjell Aleklett, president of the Association for the Study of Peak Oil and Gas (ASPO), questioned the Saudi oil reserve estimates. Based on reserve calculation methods used by other companies like BP, ExxonMobil and Shell, Aleklett said, Saudi Arabia’s reserves would be only half as large as currently reported.

Also questioning official reassurances of ample oil supplies is the Energy Watch Group, which last year released a study saying that global oil production had peaked in 2006.

“The most alarming finding is the steep decline of the oil supply after
peak,” said the Energy Watch Group’s Jörg Schindler. “Since crude oil is
the most important energy carrier at a global scale and since all kinds of transport rely heavily on oil, the future oil availability is of paramount importance as it entails completely different actions by politics, business and individuals.”

Earlier this month, despite an appeal from U.S. President George W. Bush, the Organization of Petroleum Exporting Countries (OPEC) decided not to increase its levels of oil production. The group pointed to the weak U.S. economy as one of the reasons for the decision.

In its last International Energy Outlook, the U.S. Energy Information Administration estimated that global liquid fossil fuel consumption would rise from the 2004 level of 83 million barrels a day to 118 million barrels a day in 2030. Two-thirds of that increase was expected to be used for transportation.

The U.S. remains the world’s top consumer of oil, using more than 20 million barrels per day. The next five largest consumers are China (7.273 million barrels per day), Japan (5.159 million barrels per day), Russia (2.920 million barrels per day), Germany (2.665 million barrels per day) and India (2.587 million barrels per day).