"Is this thing on?"
Its a case of too many dollars chasing a limited market. All E/P hedgers have lost money because none hedged their production at today’s all-time highs. Large oil companies like BP, XON, CVX do not hedge their production. Therefore all natural sellers of physical crude are out of the market. On the demand side you have ETF buyers (like USO, DBC), index buyers (GSCI, CRB) and banks, specs and hedge funds going long.
The actual physcial supply and demand situation is extremely tight causing higher prices. Pricing is further aggravated by strong financial demand and low financial supply. So the combination of a near equilibrium in physical supply/demand with “skewed” financial supply/demand has caused super spikey prices. On top of that you have those who believe the weak dollar leads to stronger commodity prices (which oil is a proxy).On top of that it wouldn’t surprise me in the least if the sovereign wealth funds were in the market pushing up the prices with rumors and actual buying through brokers or hedge funds. Why should Russia, Iran, Venezuela fight the US, they can just buy a 25,000 lots of WTI crude on the NYMEX or Brent on ICE.
What can the US do to limit this rampant speculation? 1) Unload 5% or 35MM barrels from the SPR. 2) Tax energy trading to reduce volatility (even today if you qualify as a trader 60% of your earnings get LT capital gain treatment). 3) Re-allocated future war expenditures (so far around $600Bn) to energy alternatives ASAP. 4) Open ANWR to drilling. It might only produce 250,000bbl/day; but that is larger than all but 2 or 3 oil finds in the past 5 years. 5) Expedite CAFE standards, why wait until 2020 (its because of Dingell and his Michigan cronies). What is good for GM, F, Chrysler is no longer good for the nation. 6) Provide major tax incentives for increasing fuel standards by having a gasoline tax. 7)Get serious about nuclear. Do something you do-nothing Congress.