Oil hit its highest average annual price in 2011, since 1860, the year after the modern industry began. According to a report issued last month, IHS CERA determined the average price of benchmark Brent crude at $111 for the year, well above the previous high of $97 in 2008. [Right, pump jack in northeast Arizona. Credit, Navajo Nation Oil & Gas Corp.]
Famed oil industry expert and author Daniel Yergin attributes the costs to "the fundamentals of supply, demand, and costs." World demand is at a record 89 million barrels a day, while supplies were disrupted by civil war in Libya, and costs of operating in extreme environments are rising. Tensions over Iran's threat to close the Straits of Hormuz exacerbate the price rise.