The Arab oil embargo, the Iranian Revolution or the Gulf War are no longer seen as "the most dreadful period" in the history of global petroleum market as crude oil prices in this decade have reached an all time high, with fears that it might touch US$200 per barrel soon. Though crude oil prices shot up from US$3 to US$12 during the embargo, it cost much less than the current price in terms of adjusted inflation rates. However, the longest lasting crude oil price fluctuation has been witnessed in this decade, with prices more than quintupling in this period and what is more, the rise in prices is expected to continue in the months ahead. The initial years of this decade attributed oil price rise to the political volatility in Persian Gulf, and subsequently to the growing demand of developing countries, particularly Chinese demand. Some oil industry analysts also pointed out reasons such as impact of the Hurricanes Ivan and Katrina in the Gulf of Mexico, political problems in African producer countries and the fall of Russian oil giant Yukos as the key reasons for the surging oil price. However, it is important to note that none of the politico-strategic events in the past few years, in reality, were detrimental to mercantile activities in the global energy market.

Though some experts feel that there could be a sudden fall in the price of oil as it defies all basic economic fundamentals, several factors could actually result in a continuing increase in global crude oil prices in the months ahead. First, many of the producing countries and companies engaged in exploration and production are the major beneficiaries of the windfall oil revenue. These countries and oil companies have already adjusted to higher income and increased spending and hence avoiding a price fall would be one of their strategic goals.

Second, with growing concerns about reserve extinction - more commonly known as peak oil - investments in non-conventional fuels have been increasing significantly. The production of petroleum from oil sands, oil shale, gas hydrates and other hard-to-extract-reserves of deepwater and ultra deepwater regions and their continued operation will be profitable only if the price remains high. Most of the projects were seen as economically unfeasible in the past, when oil prices were low. Investments towards unlocking these reserves in places such as Brazil's Carioca, Tupi and Gulf of Mexico, Canada's Alberta also contribute to the price rise.

Third, oil prices have been highly controlled by the speculation market which is based on the concerns of supply interruption, potential growth in consumption and production shortage. The price rise in this decade appears to be a calculated move by financial institutions and producing companies whose value of shares in the stock market is measured by the value of each barrel of oil produced. Speculation will thus continue to be a key determinant in the global oil price rise as oil is one of the most traded and important commodities in the global market.

Despite the above developments, however, there have been limited attempts from import-dependent economies to bring in effective measures to check global crude oil prices. It has been largely been impossible to control the market mechanism and many experts believe that controlling the price mechanism would create financial repercussions in some other sectors in the global economy. Until recently many also experts also believed that the price rise would only result in developing countries reducing their energy consumption, and the big economies would not be affected in the long term. Various Western analysts criticizing the demand explosion in India and China as a threat to the global energy market have also concluded that the price rise would cut down the demand growth in developing world and thereby ensuring the continued supply of fuels to the developed world.

Recently China and India have increased the petroleum fuel price in order to decrease domestic consumption and to reduce the impact on domestic energy industry. While China appears to have checked any significant damage to its economy even after the 18 per cent rise, the domestic fuel price in India made way for highest inflation rates of the decade. For India, which imports more than three-fourths of its total oil consumed domestically, the global price rise would continue to inflict a higher energy bill year after year. Though any complete immunization against price fluctuation is not possible for an import-dependent country like India, risk alleviation steps involving the right blend of domestic and global strategy would help the country in the long run. On the domestic front, reestablishing an oil pool account (OPA) could help minimize the sudden impacts of global petroleum price rise, while promoting new and renewable energy development would potentially minimize the growing dependence on hydrocarbon fuels. On the global front, unless the importing countries voice their demand together for a reasonable crude oil price, the speculative market would well push the price to US$200 per barrel or beyond. Hence, it would be in India's strategic interests to promote a coalition of import-dependent economies to fight against crude price rise.