Crude oil prices reached all time highs of above $95/barrel in the last quarter of 2007. Specifically on November 2007, WTI crude almost hit the $100/barrel mark while Brent and Dubai hit over $95/barrel and $88/barrel respectively.

Towards the end of 2007, crude prices softened a bit at $91.2 to $91.48/barrel for Brent and WTI respectively or a decline of $1.25 to $3.20/barrel as the risk premium on jitters caused by weather disturbances in the Gulf region and geopolitical uncertainties eased a bit, Dubai crude declined by $1.30/barrel in December 2007 compared to its month ago level, in tandem with the trends of its counterpart crudes in the USA and Europe.

The assassination on December 27, 2007 of former Pakistan Prime Minister Bhenazir Bhutto and the continuing clashes between the Turkish and the Kurdish rebels' added fire to an otherwise improving tense situation in the Middle East.

Crude price behaviour in 2007 was characterized by impacts of a mix of geopolitical risks, militant pronouncements of OPEC member countries Iran and Venezuela and the continuous weakening of the US dollar against the major currencies of Europe and the Asia Pacific.

More specifically price hike trends in 2007 was influenced mainly by the following concerns adding speculative risks factors to the already tight supply situation.

1. Supply and Demand Fundamentals

1.1 Sustained high demand in China, India and even the US in spite of its internal economic-related concerns.

1.2 Demand growth worldwide is increasing faster than the rate of supply,

1.3 Crude supply is estimated to be approaching the maximum OPEC crude production thereby reducing flexibility of increasing oil production when supply is threatened not to disregard the reality of depleting oil reserves.

2. Geopolitical Tensions and Conflicts

2.1 Tensions and conflicts in oil producing countries of Iraq, Nigeria, Venezuela and Iran were prevalent in 2007.

2.2 The nuclear stand-off in North Korea as well as the terrorists threats in the US and UK added sentiments on speculative trading which oil analysts have termed the "fear factor".

3. Climate and Weather Disturbances

3.1 The Year 2007 was not without the damage wrought by hurricanes Felix and Humberto affecting the oil supply and production facilities in the Gulf Region on November 2007.

4. Weak US Dollar

4.1 The declining value of the US dollar vis-à-vis the world's major currencies particularly the Euro has greatly affected the oil trading business as it uses the US dollar as the reference trading currency necessitating upward trend in oil prices to compensate for the losses incurred resulting from weak dollar trading.

Not to be outdone, petroleum product prices as reflected in the MOPS November showed diesel reaching an all-time high of $108.53/barrel and unleaded gasoline average for November 2007 almost touched the $100/barrel mark at $99.21/barrel. LPG contract price for December likewise reached $877/MT

Closer to home, following the crude and MOPS trends in 2007, domestic pump prices of diesel and unleaded gasoline hit the average P36.50 and P45.50/liter levels following a series of almost weekly adjustments of P0.50/liter.

The prevailing pump prices however were significantly tempered by the strong appreciation of the Philippine peso vis-à-vis the US dollar. DOE estimated that were it not for the strong peso, domestic pump prices would have been P8/liter higher just to reflect the actual significant increases in both crude and petroleum product prices in the world market.