. innovation is already altering the power source of motor vehicles, and much research is directed at reducing gasoline requirements. at present, gasoline consumption in the united states alone accounts for 11 percent of world oil production. moreover, new technologies to preserve existing conventional oil reserves and to stabilize oil prices will emerge in the years ahead. we will begin the transition to the next major sources of energy perhaps before midcentury as production from conventional oil reservoirs, according to central tendency scenarios of the energy information administration, is projected to peak. in fact, the development and application of new sources of energy, especially nonconventional oil, is already in train. nonetheless, it will take time. we, and the rest of the world, doubtless will have to live with the uncertainties of the oil markets for some time to come.

oil industry to build inventories, demand from investors who have accumulated large net long positions in distant oil futures and options is expanding once again. such speculative positions are claims against future oil holdings of oil firms. currently, strained capacity has limited the ability of oil producers to quickly satisfy this markedly increased demand for inventory. adding to the difficulties is the rising consumption of oil, especially in china and india, both of which are expanding economically in ways that are relatively energy intensive. even the recent notable pickup in opec output, by exhausting most of its remaining excess capacity, has only modestly satisfied overall demand. output from producers outside opec has also increased materially, but investment in new producing wells has lagged, limiting growth of production in the near term. crude oil prices are also being distorted by shortages of capacity to upgrade the higher sulphur content and heavier grades of crude oil. over the years, increasing demand for the environmentally desirable lighter grades of oil products has pressed refiners to upgrade the heavier crude oils, which compose more than two - thirds of total world output. but refiners have been only partly successful in that effort, judging from the recent extraordinarily large increase in price spreads between the lighter and heavier crudes. for example, the spread between the price of west texas intermediate ( wti ), a light, low - sulphur crude, and dubai, a benchmark heavier grade, has risen about $ 10 per barrel since late august, to an exceptionally high $ 17 a barrel. while spot prices for wti soared in recent weeks to meet the rising demand for light products, prices of heavier crudes lagged. this temporary partial fragmentation of the crude oil market has clearly pushed gasoline prices higher than would have been the case were all crudes available to supply the demand for lighter grades of oil products. moreover, gasoline prices are no longer buffered against increasing crude oil costs as they were during the summer surge in crude oil prices. earlier refinery capacity shortages had augmented gasoline refinery - marketing margins by 20 to 30 cents per gallon. but those elevated margins were quickly eroded by competition, thus allowing gasoline prices to actually fall during the summer months even as crude oil prices remained firm. that cushion no longer exists. refinery - marketing margins are back to normal and, hence, future gasoline and home heating oil prices will likely mirror changes in costs of light crude oil. with increasing investment in upgrading capacity at refineries, the short - term refinery problem will be