What is causing prices to rise?
For one, because the cost of the raw product has gone up. Crude oil accounts for about 50% of the wholesale cost of a gallon of heating oil. When crude prices rise, this affects everything from heating oil, gasoline, propane and even natural gas prices. As of this writing, crude oil is up 77% over last year. In addition, world demand is higher. Rapid industrial development in China, India and other developing countries, combined with the economic recovery in the U.S., has resulted in a greater demand for oil. According to the International Energy Agency, world energy demand hasn’t risen this fast since 1996. Plus, investors are staying skittish. In the commodities market, even a perceived change in conditions causes a heavy volume of buying and selling. Oil traders estimate that unrest in the Middle East has added a “risk premium” of $4 to $8 to a barrel of crude oil, according to a May 16, 2004 story in The New York Times.
