Five reasons:
Rising demand
China's economic expansion has given a dramatic boost to world oil demand. Chinese crude imports are up 40 per cent so far this year and show no sign of slowing despite high prices and Beijing's efforts to calm economic growth.
Indian oil consumption is rising fast too. Solid growth in the US economy, which devours a quarter of all world oil, has not slowed yet despite oil price gains.
Capacity crunch
OPEC producers have pushed supplies to the highest level in 25 years in an effort to keep prices under control.
This has left no capacity outside top exporter Saudi Arabia and even Riyadh has little to spare.
The strain on the supply system has left it more vulnerable to supply disruptions like outages in Iraq caused by sabotage.
Political tensions
Violence in post-war Iraq has restrained exports. Supplies from Russia also are a concern. Leading oil company Yukos is fighting bankruptcy after the Kremlin cracked down on oligarchs like former Yukos chief Mr Mikhail Khodorkovsky.
Traders fear Islamic militants could target oil infrastructure in OPEC's biggest producer, Saudi Arabia. Deadly attacks on foreign oil workers in the Saudi oil city of Khobar in May fostered fears of a larger attack on the kingdom's tightly-protected oil facilities.
Refinery bottlenecks Environmental regulations in the West are pushing up the price of making fuel, forcing companies to build expensive new facilities and making it harder to ship supplies between regions.
US gasoline demand is rising in part because of the growing numbers of low-mileage-per-gallon sports utility vehicles on America's highways.
The United States accounts for about 45 per cent of world gasoline consumption.
Scarcer oil
Big oil reservoirs are becoming harder to find and more expensive to develop. Many of the oil provinces outside OPEC are mature, which means that finds are now smaller, need more costly technology to develop and fall faster from peak production.
