In terms of Supply and Demand, why are oil prices still rising?

Question

We all know crude oil is going to run out sooner or later. But, I know many places such as Alberta in Fort McMurray, there's many oil rigs there and yet they still jack up the oil prices. What the reason behind it even though there is tons of oil?

Answer 1

Even though the demand for oil has fallen a little in most industrialized countries due to the high prices, the growth of the economies in Asia, especially China, means the would demand is still rising.  In many oil producing countries (Russia, Mexico) the output is declining, and in only a few (Canada) is it increasing.

http://www.infoplease.com/ipa/A0922041.h...

Answer 2

Refining oil in to a product that can be used in the production of gasoline, plastics, and other products, is much more complicated than just taking the oil out of the ground. It is very expensive and slow to build up the machinery and labor force necessary to do this, not to mention the fact that many governments are involved in activities that restrict the import and exportation of oil. All of these factors make it difficult for supply to keep pace with rapidly increasing global demand (which is mostly driven by developing third world countries), and as long as demand is increasing quicker than supply, the price will rise.

Answer 3

The U.S. Senate Commerce Committee held a hearing on this very issue on June 3 2008, last Tuesday.  The hearing was titled Energy Market Manipulation and Federal Enforcement Regimes. For a real eye opener, take a look at the testimony from that hearing:

http://commerce.senate.gov/public/index....

In particular look at the testimony of Michael Greenberger, who served as the Director of the Division of Trading and Markets at the Commodity Futures Trading Commission from September 1997 to September 1999:

http://commerce.senate.gov/public/_files...

After reading this stuff, you will understand what exactly is going on with oil. You are paying at least $1 more for a gallon of gas than you would pay under non-manipulated supply and demand.

Any explanations that blame factors such as increased demand from China and India, dwindling supply, or "peak oil", are simply irrelevant. Nobody knows what the actual driving forces are, nor their actual effect, so long as large scale speculators such as hedge funds and Morgan Stanley (the latter is actually buying and stockpiling oil as a hedge against the falling dollar) continue to manipulate the price in unregulated markets.

Don't take my word for it -- read the testimony above. You'll gain a good clear understanding of what exactly has been going on.