Multiple reasons:
1. High global demand... This is the primary reason --virtually every global region has been in economic boom in recent years. Oil along with virtually every other commodity has gone up in price a lot. China alone is using about 60% more oil then they used in 2000. It isnt just oil thats gone up a lot. copper, lead, steal, coal, virtually everything has gone up.
2. A weakening US dollar --- though the weaker dollar is helping our exports, it makes imports, including oil, more expensive.
3. Global instability and fear --- Iraq, Iran, Nigeria, Venuzuela, and so on --- this is called the risk premium as companies and traders buy up more oil because fof fear of future supply shortages --- it is estimated that between $20 and $30 per barrel out of the $95 or so fo the cost has been caused by this factor. It was a Nigerian rebel attack that was the final push of oil to get to $100 the other day. (Keep this in mind when considering what to do with Iraq. If the whole country falls into a massive civil war, oil will skyrocket in price).
4. A move towards more government takeovers and regulation --- whether it be US restrictions on offshore and Alaskan drilling, European compliance to the Kyoto Protocol, of state takeovers of oil in Venezuela or Russia, governments around the world are making it increasingly difficult for companies to produce low cost new supplies of oil. Either they are off limits, run by inefficient state companies, where they were not in the past, or they much comply with stricter environmental standards, which raises the price. Companies are also finding it difficult to build new refineries due to regultion. The ones that can build are also holding back because of uncertainty with future carbon emmition taxes or alternative fuel policies. In either case, no one is going to invest billions in a long term project such as an oil refinery when the future is unclear.
5. Easily extractable oil is running out --- outside of OPEC, most new sources of oil that are allowed by governments to be tapped are more expensive. For instance, there is a ton of oil in Alberta in the oil sands, and in the Western US in the Shale oil, but both of these sources are not conventional and cost a lot more to extract.
6.A time lag on investment projects -- the low prices of the late nineties caused oil companies to spend less on investment for future production. They have only started ramping up in the last few years, but it take long time for new projects to come on line.
7. Trader speculation --- because prices have gone up so much, many traders speculate it will go up further, so futures contracts are bought for investment purposes. However, this oil is not actually used and at some point, either all at once or gradually over time, these contracts will have to be sold. So right now, the price is higher then what supply and demand would indicate, but at some time in the future, the price will be lower then what supply and demand would indicate.
8 OPEC --- Usualy, they do not like to have the price this high because it will induce substitutes and potentialy cause global recsssion; both f which will ultimately hurt them. However, as explained above with the booming global demand and the low prices of the late ninetees, OPEC too did not invest enough in future production (for todays demand), so a couple of years ago they lost cotrol of the price. They no longer had any reserve capacity to increase production. They do have some now, though still quite little, and mst of it is in saudi arabia; however, they got used to these higher prices and for the time being it doesnt seem to be destryong the world economy. BUt even if they wanted to lower prices, they dont have much spare capacity to bring it down by much.Oil prices?? Any real reason for this?
ask the cartel
basic supply and demand issues- however these are manipulated. China and India have been feeding their need for petroleum products at a rate that out-paces most other nations. This strains the global supply for oil thirsty nations like the U.S.- but not totally. In the US the major oil companies are not only slow to build new and more refineries, but they companies manipulate the available supply of finished products by closing existing refineries. Add to that the fact that the average person would never dream of cutting back on petroleum use by downgrading from a Hummer to a Honda along with the winter-time demands on the heating oil industry and you see that even when OPEC meets or exceeds output quotas there is a bottleneck in supply due to inadequate refineries.
As consumers and economists we really need to cut back our petroleum consumption. Personally I have taken to using a motorcycle any day there isn't ice on the roads to use less and have switched from oil heat to LP gas.
The deterioration and high depreciation of refineries in all the world; this reduce the supply because limit the kinds of petrol that can be processed. Plus the increase in demand by the high rate of growth of many countries.
I need to write a book to explain why!
This is a basic and precise answer!
The higher the demand, the higher the price. The increasing oil price is because of the increasing demand. Of course, many kinds of demand!
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