This is a great article in the WSJ. The author, Mr. Feldstein, was chairman of the Council of Economic Advisers under President Reagan, and is a professor at Harvard and a member of The Wall Street Journal's board of contributors. He notes that both OPEC and the stock market (speculations) are involved in the prices. However, it is a difficult explanation.

The simple explanation is this. If I'm OPEC, I'm in the business to sell oil. I can sell my oil for cash. I can then invest the cash. That investment is x%. Now, there is a financial question. Will the rise in interest be more than the rise in oil prices? That is, should I sell oil and get the cash, or back off production and rely on supply/demand to push the oil prices above the rise in interest?

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Interesting article about US gas consumption.

The U.S. Energy Information Administration revised downward U.S. April oil demand by 863,000 barrels per day (bpd) to 19.77 million bpd -- 3.9 percent below year-ago levels. The revision, which showed April demand was the lowest for the month since April 2002, came even before gasoline prices surged to new records in June.

Yet the prices go up. Something wrong with the supply and demand.

Back in 1959 the United States used about 6 million barrels of oil per day. The US had a population of about 132 million in 1959 versus about 304.4 million at the time of this writing. Okay, with 2.3 times more people we would use almost 14 million barrels a day if we used oil at the same rate as in 1950. But we use about 20 million barrels a day. So once prices go high enough to cut US demand by 6 million barrels a day we will have traveled back in time to 1950 in terms of oil usage.

If we keep going, we shouldn't need much gas at all. Let the prices soar!