In 1998 it was $11.

In 2003 it was $25.

Yesterday the price of a barrel of oil reached $100 before settling at $99.67 at the end of the day. The price of oil has risen 60% in the last year alone.

Why has the price of oil risen so much so quickly?

I believe the answer is simple(well not really simple at all, but easy to sum up in two words): collusive monopoly.

Whenever I read about the price of oil rising, it's tied to an event somewhere. Usually prices of oil will rise after experts speculate what effects an event will have on the market. For instance, the assassination of Benazir Bhutto and the unrest that it will create in Turkey, not unrest that has already happened, mind you, or that we're seeing now, but speculative future unrest, was given as a prime reason for the price of oil reaching the $100 milestone.

 

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The following chart shows the price of a gallon of gas for the last 29 years from one region of the US. The lower line shows the price per gallon adjusted for inflation. The faint line is the US average. It contains data from 1074 fill ups.

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It doesn't look so bad adjusted for inflation. In 1973 the Arab oil embargo began which effectively doubled oil prices at the refinery level and caused massive shortages in the US, and had a huge effect on prices right into the 80's. In '81 the downturn began due to price controls by the United States. They stayed down until the buildup for war began and in '91, the year the Gulf War began, prices peaked at about $20 per barrel. The prosperity of the 90's, as well as OPEC quota increases, kept gas prices fairly static and also increased our want of oil. We started buying lots of things that run on oil including bigger houses, cars, bikes, watercraft, etc.

 

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The following is a rough chart showing crude oil prices over the years.

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Is it fair to blame ourselves though? Is our consumption solely to blame for high gas/oil prices? The fact that oil companies are achieving record profits across the board every year says to me the answer is no. How could they profit so much and yet claim that geopolitical and market climates are pushing the prices up yearly, 60% this last year? How could they be profiting so much when the ROI on oil investments is typically down around 10%? This is not an industry known to be a good investment. Are they lying to us? Will we ever know?

The idea that all of the companies are working together to influence prices and policy (Cheney met with top oil company brass before setting the administration's energy policy), this idea of collusive monopoly, is, in my opinion, the best explanation. True competition would yield lower prices at the pump, right? But, what if we're running out of oil? Then nobody is going to profit, right?. Well, it turns out the middle east isn't nearly as close to running out of oil as the US is.

 

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This is a chart showing US oil production from 1920 until now.

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This is an example of the Hubbert peak theory, which explains the pattern that oil production follows from a certain source.

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Imagine one placed over the top of the other, they look pretty similar. So, if the US oil companies all had a collective epiphany at one point that they were running out of oil, wouldn't it make sense that they work together and start investing in the middle east and seeking power within the government in order to create the instability needed in certain regions for them to take over the market? We've had oil men in positions of power, including the presidency for most of our recent history. About the time our oil production peaked, we turned the tip of our spear toward oil rich regions. US oil companies have profited all the way through.

I suppose there is a lot I'm missing here, I'm no expert after all. I'm just a guy with access to google and time to kill. I imagine Guglielmo is going to pounce on my presentation. Mostly, I did this to learn more about the topic, second, to provide some food for thought. Enjoy.