I had some huge reply written up for another site, but I hate to type it all here. Oil prices have risen nearly 300% in the last two years.
Demand worldwide has not been increasing 300% since oil was at $50 a barrel. In fact, demand in the largest market, the US, has dropped over the last year. Even China has reduced its oil imports recently. Demand and production worldwide have been essentially flat for the last 7 years: http://www.jodidata.org/
In the U.S. alone, stockpiles of oil climbed by 11.9 million barrels in the month preceding the Energy Information Agency's (EIA) May 7 inventory report; they were up by nearly 33 million barrels since Jan. 1. At the same time, MasterCard's (MA) May 7 gasoline report showed that gas demand has fallen by 5.8%, while the government suggested that gasoline consumption might have fallen by slightly over 6%.
The dollar also has not devalued 300% in the last two years. it has dropped, but not at anywhere near the rate oil has been increasing.
Here's an interesting outlook from Businessweek magazine: Article here
"ExxonMobil (XOM) Chief Executive Officer Rex Tillerson was quoted by Marketwatch as saying, "The record run in oil prices is related more to speculation and a weakening dollar than supply and demand in the market." He added, "In terms of fundamentals, fear of supply reliability is overblown."
As for the speculators, in 2000 approximately $9 billion was invested in oil futures, while today that number has gone up to $250 billion. Now, if any publicly traded company had an additional $241 billion put into its stock in the same period, its stock would rise out of sight too—even if the company was not worth anywhere near that amount of market capitalization. "
Another interesting article: Businessweek article
""Performance-chasing financial inflows to commodities cause prices to rise, thus delivering good performance, and attracting even more inflows," Lehman Brothers (LEH) analyst Edward Morse wrote in a May 16 report, Is It a Bubble?
"The temporary self-sustaining nature of financial inflows means the bull run in commodities has potentially more to go," he added, saying crude could reach $150 or $200 before a correction. "
