Oil prices breaking records [View All]

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For the past several weeks I've been watching the price of oil and in that time I've seen it go from $65/barrel to the up-to-the-minute current price of $80.10/barrel.

Dated Brent Spot is considered by many to be a bellwhether indicator of the overall state of oil prices, which is also the indicator I actively track. The graph below shows the current price and comes from http://www.bloomberg.com/markets/commodities/energyprices.html">Bloomberg.com:



Just a few weeks ago, the price ceiling for oil, according to industry pundits and investors, was $70/barrel. It's taken less than three weeks for the price to not only sail past that figure, but to reach all time highs (without a single hurricane or terrorist attack) for almost all grades.

Foriegn media outlets cite the reason for this amazing rally as being a result of supply concerns in the US (I'm working on a separate article about that). In the US, last week at least, the media (including CNN) say the reason for the record price of oil is due to the flooding that occured which shut down the refinery in Coffeyville, Kansas. I see this as complete and total bullshit spewed with the knowledge that the general public knows nothing about such things, and really they don't. The problem with our media on this issue is that fact that a shut down refinery means a surplus in oil, which doesn't usually cause a spike upward in price. I believe the reason for the high price of oil is one of two things:

1. The price of oil is skyrocketing because the best (sweetest) oil is all gone and we're down to the dregs.

2. The market has noticed that despite higher gas and oil prices, demand continues to increase. This has encouraged investors to test how high they can push the price before demand destruction dictates a ceiling price.

Now, a disclaimer. I'm not a petroleum expert nor am I an investor or commodities market expert. So, if I have gotten anything wrong, please feel free to call me on it. I'm always willing to learn, and be schooled :)