Why Gas Prices Are So High

A global industry—from OPEC to the oil traders, even petroleum economists —has been caught off guard by how high gas and oil prices have soared.

"I don't think anyone expected prices to stay this high this long," said Michael Rothman, an analyst at Merrill Lynch.

What has sent oil prices to their highest levels in a decade? As CBS News Correspondent Anthony Mason reports, the U.S. and European economies have been booming, together consuming 40 percent of the world's oil. But Asia has also bounced back from recession faster than anyone foresaw.

"So all the pistons are pumping right now. And what we've had is, on the other side, the fuel line has been somewhat clogged because of under-investment in the capacity of getting that out to market," said Faheed Mohamedi of the Petroleum Finance Co.

OPEC has upped it's production by three million barrels a day this year to try to bring the price down. But demand has yet to ebb and, says Michael Rothman of Merrill Lynch, production is near its peak.
"In the near term, only Saudi Arabia, Kuwait, and the United Arab Emirates appear capable of supplying any additional crude beyond what they're already producing," said Rothman.

But together it's estimated that those three Arab countries could add only another 2.5 million barrels a day. Oil companies are trying to up their capacity, but it'll take time.

"These are big projects. These are multi-billion dollar projects. You have to lay down pipeline. You have to, you know, dig a lot of holes," Mohamedi said.

In the meantime, any disruption in an oil producing region could cause prices to jump even higher, and many analysts believe thacrude, which closed near $34 a barrel Wednesday, could easily hit $40—a level not seen since October 1990.

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