This article is correct. Read and learn:
http://www.cpeterson.org/2011/03/10/why-gas-is-so-expensive-today-hint-its-not-libya/
Good post and speculation and traders account for a some of the increase.
And i may have been misunderstanding BF's point of view, i do concede that inflationary policies have led to an increase in oil, i would imagine without it oil would be no less than 60 no higher than 80.
However, there is little a government can do other than nationalize it's oil reserves and sell it to it's people cheaply a la OPEC, or subsidize oil imports a la India. Stopping the printing presses will result in a temporary decrease, but it will not result in a return to $40 a barrel oil.
You need to look no further than what the oil companies themselves are investing in and saying. There are generally two types of oil, crude and tar sands/bitumen. One is relatively easy and cheap to pump once you have the infrastructure set up. The other is costly and energy intensive not to mention environmentally toxic.
Access and abundance of crude have kept oil prices low, OPEC shocks notwithstanding, for decades. The cost is relatively small and once an oil well reaches it economic life (this is different from its actual oil capacity as it is more costly to pump the last 40% or so than it was to pump the first 60%) they seal it up and move on.
This worked well for a long time, but then we stopped finding new crude in easily accessible places. It was becoming cost intensive and more and more risky. We see that with the boom of offshore drilling n the gulf of Mexico, a hurricane haven. But the economics worked, oil had risen enough to offset the costs to set up and pump.
The exact same thing is happening in Canada. They have the 2nd largest proven reserves in the world but it ain't crude. It's bitumen/tar sands. This is exponentially more cost intensive than crude, you dig a pit, pump chemicals heated to 1000's of degrees to lighten the oil trapped in the sand and pump it to the top. This costs and involves a lot more than pumping crude and does not make economic sense unless oil is at or above the generally accepted break even point - $60 per barrel. Prior to the economic crisis investment from the oil companies was worth billions of dollars, when oil collapsed to $40 a barrel almost every single project for expansion was canceled.
But when it rises over $60 a barrel what happens? Billions flood back into Canada. The oil sands start expanding again and new plans are in place. The oil companies don't spend this money thinking "lets do this for a while and wait for oil to drop back down". They do this because they know crude is in short supply. Exxon has already forecast that for every barrel of crude they produce of the next 10 years .95 will be replaced. Meaning less crude, more reliance on tar sands. What does that mean for the consumer? Sustained higher oil prices.
