What explains the high price of oil ?

Question

Clearly a complex of factors is at work. The falling value of the dollar has sent up dollar-based oil prices. The increased demand from industrialising economies like India and China has played a part. I've heard there's insufficient refinement capacity to process crude oil. I've also heard of speculators though nobody seems able to identify them. Put all this together and you still don't get a clear, plausible explanation of the sudden, vicious and rising spike in crude oil prices. The factors I've mentioned would account for gentle and steady oil-price inflation but not the current catastrophe. Can anybody answer the question or tell me why the question is wrong - too oversimplified to be answered ?

Answer 1

Greed

make the fast buck, without regard to the world and your fellow man

Answer 2

You captured part of the problem in the use of your word "catastrophe," which happens to be a branch of mathematics.  I am attaching the wikipedia page on it.  A catastrophe can be thought of as a discontinuous jump in a visible variable because of other non-measured variables.  I believe the non-measured variable has been the banking crisis.  It shattered the prior stable equilibrium in many different markets.  It wasn't the lending crisis per se, but the inability of real estate prices to fall to market clearing levels.  This forces global repricing of everything.  Oil is simply the most flexible variable.  It also reflects an unwillingness of China's central bank to spend its reserves.  That creates a global economy with two inflexible variables, American real estate prices and Chinese inflation.  That oil is so very elastic implies that producers are unable to produce an efficient amount of oil for the demand level.  Until the banking crisis the dollar was considered good as gold, now people are searching for a reserve currency and this has set stable oil prices as an historical phenomenon until tattonement finally resets prices OR inflation becomes persistent and oil price stability is lost potentially for decades.

You are seeing a discontinuous jump, I believe, because you have two frozen variables and oil prices are the least bad alternative for policy makers.

Answer 3

Because we've already reached our peak in oil, and were running out quickly, and because of the war America is waging more and more oil is going to the military and so theres less for consumers but in our world demand is high, and when demand is high, and supply is low, prices go up and up and up, thats why we need electric cars and solar electricity, biofuels just causes food prices to rises as well as a war between energy and food, and so energy is going to win and get good land and so there wont be enough land or enough ariable land for food and so there'll be a food crisis and then energy crisis when the switch the land for the two, so we need electric cars and solar energy, wind is not good, it ruins land and takes up to much