Here is an excerpt from an article I just read about the price of oil:
A year ago, a barrel of West Texas sweet crude sold for $37.05 on the spot market. On July 5, the price was $59.59, a 60% spike in price.
When Will Oil Run Out of Gas?
But don't worry. That rate of increase isn't sustainable forever. Eventually the good old laws of supply and demand will combine to slow the
meteoric rise in oil prices.
Unfortunately, in the near term, those laws are taking their sweet time to go to work. There's certainly a good chance that over the next few days or
weeks, oil prices will retrace part of their recent run to $60 from $48 as speculators take profits. But the trend for the rest of this year, and for
2006, is still up. I'd say we're likely to test $75 oil before the laws of supply and demand kick in to: 1) at least put a damper on the rate of
price increases and 2) maybe even send the price back toward $50 a barrel for a while.
Part of the problem is that oil was depressed during the 90's and little investment went into oil development. China and India have started to use
more oil creating more demand. The cheapest oil to refine is the sweet type of crude and there is not enough being produced to satisfy demand so other
types of less attractive oil is having to fill in the production gap. These types of oil are heavy crude and they are more expensive to get out of the
ground and to refine for use. Another issue is that there are roughly 1500 oil tankers for oil transportation. They are another bottleneck to get
crude to the market. The last I saw it cost 50,000 per day to rent an oil tanker this does not take into effect the rising insurance costs associated
with terrorism. Remember the oil tanker that al-qaida attacked of the coast of yemen? There are many different aspects causing the rise in crude
prices oil speculation just being one of them.