Global benchmark Brent crude oil prices are poised to hit their highest average annual level in history this year, in both inflation-adjusted and nominal terms, according to a new report by energy analysts.
The annual average price for a barrel of Brent crude so far this year is well above its previous high of about $97 in 2008, said IHS Cambridge Energy Research Associates (IHS CERA). The analysts expect Brent to average about $111 for the year at the end of 2011.
That would set a record in both nominal and inflation-adjusted terms going back to 1860, the year after the birth of the modern oil industry in Titusville, Pa., IHS CERA said.
"Brent crude prices are approaching their highest annual average, a level higher than the peaks recorded by other widely accepted benchmarks going back to Colonel Drake and the origins of the modern petroleum industry in Pennsylvania more than a century and a half ago," said IHS CERA chairman Daniel Yergin, in a statement.
Yergin, a globally recognized authority on the oil industry, is the author of two comprehensive histories and analyses of energy and its role in geopolitics, most recently, The Quest: Energy, Security, and the Remaking of the Modern World.
"Quite simply, we are looking at the highest average price since the age of oil began," Yergin said.
Oil prices have shot up on record-high demand of 89 million barrels a day at a time of anxiety about supply from the Middle East and North Africa, where civil war disrupted Libyan supply for much of 2011, IHS CERA said in a media release. The standoff between the West and Iran also continues to increase tension, which is pushing up the price of oil, the analysts added.
Rising oil-production costs, including labor and materials, and the shift to increasingly expensive deepwater drilling regions, are also playing a role in record price levels.
"These record prices are being driven by the fundamentals of supply, demand and costs," Yergin said. "With rising tensions over Iran, geopolitics are coming back into the oil price again."
"What would reverse the trend and send prices down again are a financial contagion and a European recession that slows the world economy," Yergin added.