It's concern about the future. If nothing bad happens to oil supplies for several months, everyone will relax a little and prices will come down.

Uncertainty means more risk, higher risk means higher prices. That's not psychology, but economics.

Economics is psychology.

Brandon:

Nothing bad has happened for three years and they've stayed too high--it's just psychology.

oj. Psychology spelled m e d i a ?

The Chinese economy has been growing at what, a 10% annual rate for a while now while the Chinese state has been subsidizing the cost of oil to the Chines consumer. India is building out basic infrastructure and the threat of supply disruptions is on the mind of every energy centered industry.Maybe the increase in incremental demand caused by China and India coming on-line, economically, should have no effect on the world price but it's probably unlikely.

It's certainly had no effect on the excess supply.

One nit: crude supply is not the same thing as refined product supply.

OJ,

Too high for three years? What do you think the price should be right now, and why?

$40-$50 a barrel, that's what reliable analysts like Daniel Yergin say.

Yegin would probably be in agreement with the idea that increases in incremental global demand in conjuntion with ideologically driven political instability and counter-productive government policy are responsible for the current price. There is plenty of oil and the investment capital coming into the sector along with better technology could probably cut the current price by 30%. So, what's the problem? Policy.

Hedge funds.

Wasn't there a story on here not long ago saying that the Chinese & Indians were trading in their bicycles for cars? That probably affects demand.

sharon:

That is correct.
Increasing demand from India and China, not just for gasoline for cars but for all forms of petroleum products, is 75% of the reason that oil prices are higher than $ 20/bbl.

But Tom C. has part of the truth too.
Bad American gov't policy concerning exploiting known oil reserves in Alaska, California, Florida, the Rockies, and in the Gulf of Mexico have driven up prices by at least 10%.

Noam:

That's quite wrong. There's ample oil for China and India.

Actually, WRT reserves off California/Florida, if you're inclined to think that offshore oil drilling creates its own heat source, and that heat source greatly fed Katrina, you may want to think carefully about exploiting such reserves.

Otherwise, I will continue to maintain this whole oil price kerfuffle is but a mere attempt by energy traders to game the system, using the available data that predates even the Iraq war.

oj:

You may wish to consider reading something on the subject.

Michael:

Daniel Yergin has been spot on about oil for several decades now:

www.npr.org/templates/story/story.php?storyId=4713059

Presuming Castro lives another 5 years, there could be Chinese, Indian, and Russian oil/gas rigs off the Cuban coast, 40 or 50 miles from Florida, sucking up NorteAmericano energy. Would Bill Nelson propose that we destroy them to save the environment?