At the end of October the oil price had more than doubled in dollar terms since the late 1990s, while increasing substantially, though somewhat less, in terms of the other major currencies. The chapter begins by investigating the fundamentals driving longer-term oil market developments and the implications for the long-run equilibrium price. It then identifies short-term influences which may have caused risk premia to rise, volatility to increase, and the oil price to diverge from its equilibrium. It concludes with an assessment of the impact of higher oil prices on OECD growth and inflation and the implications for economic policy.