After temporarily topping US$135 a barrel to set a new record, crude oil prices settled down Thursday and closed the trading day at $130.81.
Fluctuating prices are leading to concerns that falling supply and skyrocketing demand will push prices into uncharted territory in days and weeks to come.
The International Energy Agency, one of the world's leading global energy monitors, said Thursday it believes demand for oil could soon outpace supply. The agency is currently working on its first ever oil supply study, monitoring depletion rates in about 400 oil fields, chief economist Fatih Birol told the Associated Press.
"We are entering a new world energy order," Birol told AP.
The agency is considered by many industry analysts to be the most reliable source of independent oil information in the world.
Its forecasts are closely monitored by major traders and its current gloomy outlook will likely impact the market, which has seen oil price records on a near-daily basis in recent months.
Between the end of trading on Wednesday and Thursday morning's opening, oil prices the New York Mercantile Exchange briefly rose to US$135.09 per barrel in electronic trading.
One year ago, barrels of oil were trading at about $65.
The falling U.S. dollar has also been cited as a factor in rising oil prices. On Thursday, the U.S. dollar strengthened against the euro, making oil slightly more expensive to investors from overseas.
Strong demand for diesel in China, where power plants are running short of coal after last week's earthquake, is also playing into the demand for crude.
According to analyst Kevin Norrish, with Barclays Capital PLC, new data from China shows diesel demand was already rising before the quake -- about 9.2 per cent in April compared to one year earlier.
Other analysts argue oil's price has risen far beyond levels that can be explained by supply and demand, suggesting the dollar's decline has attracted speculators, which artificially inflates prices.
According to this school of thought, price differences between current July crude contracts and those for delivery in future months could indicate oil prices are set for decline.
Meanwhile, Iraq announced on Thursday that exports from the seaport of Basra were down 12 per cent due to a damaged pipeline -- news that also affected the price of oil.
While consumers are feeling pain at the pump, the high oil prices continue to pay off for oil and gas companies.
Calgary-based Husky Energy Inc. announced it expects to make a record profit this year due to the rising prices.
The owner of that company, Hong Kong billionaire Li Ka-shing, bought shares in 1987 when oil was selling for an average price of $19.12 per barrel.
So far in 2008, first-quarter net income rose 36 per cent to $887 million from a year earlier, the company announced.
In addition to rising prices at filling stations, air travellers are also beginning to feel the effects of the higher costs.
Air Canada and WestJet Airlines both added fuel surcharges to the per-ticket price earlier this month.
And American Airlines announced it will charge $15 for each piece of checked baggage, starting in mid-June.
With files from The Associated Press
