Just supply and demand. China and India are major new consumers of oil. Worldwide supply has not expanded to meet their requirements. It's sort of a "safety stock" problem. Major economies keep reserves. They will use those reserves when it makes economic sense to do so, and then replenish. When major customers are replenishing safety stock, demand spikes occur. True in any manufacturing business, including energy.
Oil prices are not dissimilar to arbitrage in that respect. Hour by hour investors (and governments) look to optimize their return by buying low and selling (or consuming reserves) high.
It's not your fathers energy market anymore. And the only way we get off the rollercoaster of global speculation and supply manipulation is to become energy independent. oil shale, clean coal technology, natural gas reserves, wind, sun, biomass, tidal. It's all got it's place in a free market economy, and let the best technology win.
By the way, what do you think would happen to oil prices (and global oil supply) if we were to announce that we would begin drilling anywhere and everywhere we found oil? I'm pretty sure we would see our global competitors drop prices and increase supplies in an attempt to make not drilling more economically attractive than drilling.
CAclubindia
