The year 2004 may be characterized as a year of extremes, which^A) witnessed record prices for crude oil and gasoline, a severe hurricane season, and world energy markets that^B) were disturbed by unexpectedly high oil demand in China and continued volatility in the Middle East. West Texas Intermediate (WTI) crude oil prices for the near-term futures contract on the New York Mercantile Exchange soared and closed at an all-time record of more than $55 per barrel on October 22, a level about two-thirds above the $33.78-per-barrel price of crude oil at the beginning of the year. Since the October peak, WTI crude oil prices have fluctuated downward to about $42 per barrel as of December 28, 2004. Although the record high crude oil price this year can be attributed to a number of factors, the most influential of those^C) were: low U.S. crude oil inventories held in commercial storage, particularly during the early months of the year; uncertainty about the flow of Iraqi oil exports in the face of the high level of turmoil within that country; the damage inflicted on Gulf Coast and offshore oil installations following hurricanes Charley, Frances, and Ivan; unexpectedly strong world oil demand, particularly in China; and capacity constraints. Moreover, Venezuelan political instability, Nigerian labor strikes, and internal strife between the Russian government and Yukos, the giant oil company, contributed as well to keep crude oil and other petroleum prices higher this year.

Rising crude oil prices also pushed most petroleum product prices higher during 2004, including retail regular gasoline. Another noteworthy item during 2004 was record distillate fuel demand, which^D) measured nearly 4.1 million barrels per day. Even high diesel fuel prices, reaching a record (unadjusted for inflation) 221.2 cents per gallon on October 25, 2004, were not sufficient to temper strong demand that^E) was in part fueled by a still strong U.S. economy.

From This Week In Petroleum

(http://tonto.eia.doe.gov/oog/info/twip/twip.asp).

Released on December 29, 2004.