Just as in the case of major foodgrains, deregulation of financial markets has had a significant role in affecting global oil prices. JAY MALLIN/BLOOMBERG NEWS The Senate Homeland Security and Governmental Affairs Committee of the United States hearing testimony on whether speculation in the commodities market by institutional investors and hedge funds is contributing to food and energy price surges, in Washington, D.C., on May 20. IT may seem hard to believe now, but for more than half a century, world oil prices have not moved much around the average figure of U.S. $27 a barrel in 2007 price terms. The occasional shifts away from this average have been few, and the periods of oil price spikes were relatively short, the most notable being the "shocks' induced by the Organisation of the Petroleum Exporting Countries (OPEC) in the 1970s. Between the mid-1980s and 2003, the real price (that is, adjusted to inflation) of crude oil on the major international trading exchanges was typically less than $25 a barrel. The recent rise in the price of oil began in 2004, when it became evident that the United States-led invasion of Iraq was going to be ineffective in securing Iraq's oil reserves for the U.S. However, even then the price rise was substantial without being a surge. It is really only in the past year that the global oil price has behaved like a runaway horse, breaking all speed limits and previous barriers. In the three years between January 2004 and April 2007, the oil price in nominal dollar terms increased by around 2.3 times, to $65 a barrel. But in the period between then and early June this year, that is just 14 months, the price more than doubled again, to reach a peak of $139 a barrel on June 6 before coming down slightly to $132 on June 10. A price of around $100 a barrel in 2007 prices would be equal to the maximum achieved in the post-Second World War period, in 1980. So the global price of oil is now higher in real terms than it has been since the 1920s. And the rate of increase of oil prices in the past year has been the fastest ever recorded. Also, there seems to be no ceiling in sight: some market analysts have gone on record to predict oil prices of $150-200 per barrel by the end of the year. This has already spawned a mini-industry of explanations as to why this has happened. And, just as in the case of global food prices, the various explanations reflect not so much the clear empirical evidence as the interests of those presenting them. Thus, it is common for policymakers and commentators in the developed world to argue that the current high oil prices are essentially the fault of the developing world: a combination of supply cutbacks by OPEC and increased demand from the rapidly growing economies of China and India. However, both of these factors, while they may at some point in future play a role in changing the long-term conditions of the world oil market, have next to nothing to do with the most recent increase in oil prices over the past year. But to understand this, it is necessary to consider each of the most commonly advanced arguments in turn. Most of the explanations deal with supply conditions. One argument that has been around for a while is that of "peak oil'