Supply uncertainty drives prices higher

Fuel prices jumped this week, led by gasoline which gained over a dollar a gallon on average. Oil distributors pointed to several "renegotiated" delivery contracts as proof that a long-rumored shortfall in the supply of U.S. oil has finally arrived. Oil producers were tight-lipped about the adjusted contracts, and as I write this it's still unclear how extensive the shortfall will turn out to be.

NATIONS COMPETE TO WIN CONTRACTS

The news set off a flurry of activity as nations bid to secure remaining contracts, driving oil prices to record highs. Strong developing nations such as China and India featured strongly in the negotiations, while poorer nations were effectively shut out.

U.S. GOVERNMENT PROMISES INVESTIGATION

U.S. Government officials urged calm "until all the facts are known," and promised that the U.S. would "compete effectively" for an uncompromised flow of oil. Industry observers noted that national reserves are very low, due to widespread declining production among the oil-exporting nations. More on this next week.

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