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I would agree with almost everything you said, but Oil is an ugly picture. Quite frankly, 'a perfect storm' of factors started happening simultaneously to drive prices up so quickly. I would say it's a result of four factors, none of which are speculation (which actually help keep the price reasonable, and we're not seeing $250 Oil)
1. Demand. As we've already mentioned, the increasing demand from China, India, and other countries have just exploded. I heard a guy from GMR mention that China and India cannot get the oil fast enough. They almost appear desperate. It's why companies like FRO are rolling in the cash right now. The demand has gone through the roof in the last few years.
2. Inflation. To help ease the credit and solvency crisis, the Fed cut rates like mad. It got us past the credit and solvency crisis, but now we've landed knee deep in inflation, which drives the price of oil up.
3. The Geopolitical scene. The U.S. is saddled with debt with the war, and this upsets other OPEC nations, that control the supply. Then all of a sudden, Nigeria, what was once the model of stability for Africa, just goes nuts (TIA). Venezuela has become more and more biligerant. And the clergy controlled Iran just hates the U.S. with a passion (Notice I did not say Iranians hate us. Just their clergy who run the country)
4. Peak Oil Theory. From Hubert's work, and from the numbers that have been matching this theory in a very remarkable way - we're wondering if we've hit peak. Not for how much oil is left in the world, as much as - what's left in the world? Will it be able to keep up with demand?
There is some inflationary pressure with speculation. But economics teaches us that when you begin to see speculative inflationary pressure, a severe correction in price is usually the result.
All of these factors coalesced together at one time. $135 Oil is the result.
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