Most everyone understands the fundamental economic principles of supply and demand from personal experience. For example, demand for flowers increases on Valentine's Day, and since supplies become more limited at that time, prices tend to rise. The very same market forces are at work in the oil and natural gas industry.

When demand for oil and natural gas increases, upward pressure is applied to prices. During the past few years, the world’s demand for oil has been rising as the newly industrialized economies of China and India require more energy. These two nations have begun competing with the United States and other countries for available oil supplies. The result is an imbalance in the growth in supply and demand, leading to a higher price for oil on the global marketplace.

No matter where a barrel of oil is produced -- Texas, Venezuela or Saudi Arabia -- it enters a global marketplace where its price is ultimately determined.

The world will need oil and natural gas for generations to come, even with the growth expected in renewable and alternatives.