The price of oil

Here's the latest bee in my bonnet (metaphorically speaking.)
For you conspiracy theorists who think it's all about "Big Oil" making George Bush and Dick Cheney filthy rich you might want to go somewhere else. Unfortunately it isn't that simple. I see it as a multi-dimensional problem and a perfect storm of events. They are in order of relevence and priority:

The Global Supply and Demand Problem (the first is a well written article that outlines most of the fundamental problems driving up the cost of oil)
http://biz.yahoo.com/ap/080520/oil_prices.html?.v=8
http://www.energyandcapital.com/articles/domestic-oil-production/617

The Devalued Dollar Problem
http://www.washingtonpost.com/wp-dyn/content/article/2007/11/12/AR2007111201075.html
http://www.fundmasteryblog.com/2007/09/29/how-far-has-the-dollar-fallen-and-why/

The International Relations/Geopolitical Stability Problem
Saudi Arabia
http://www.nypost.com/seven/05052008/postopinion/opedcolumnists/saudi_stick_up_109492.htm
Venezuela
http://www.time.com/time/world/article/0,8599,1807217,00.html?imw=Y
Nigeria
http://allafrica.com/stories/200805200165.html

The Speculation Problem (for those of you who don't understand Futures - here's an intro to the fundamentals)
http://auto.howstuffworks.com/gas-price.htm
http://www.investopedia.com/university/futures/

So let's review.

• The US is dealing with a supply problem due to increased global demand supported by Asia's demand for diesel including China's apparent stocking up for the Summer Olympics. We're also dealing with a short term shock as China's demand for diesel has increased during earthquake recovery efforts.
• The relative weakness of the dollar (versus other international currency) due to (what I believe are artificially) low short term interest rates which the Federal Reserve has used to try and keep the economy growing. Of course this means our dollar today buys less oil than last year.
• The Saudi's refusal to increase supply for defying them regarding Iraq
• Geopolitical instability in Venezuela, Africa and Mexico
• All of these factors are fueling speculation on high demand versus supply which drives the value of futures contracts for oil higher and higher with every little bit of negative news in any of the areas listed above.

There you have it. Do I have any solutions? No, not really. The short easy answer is increase domestic supply. Unfortunately is isn't that easy for a host of reasons and it would likely be years before we saw the benefits. Alternative fuels aren't viable alternatives for a lot of reasons right now - from delivery infrastructure to supply. We're just scratching the surface of alternative technologies at this point in time - the biggest issue is and has always been power source. The battery technology just isn't there and even if it were available tomorrow we're still likely looking at 20-30+ years of weaning ourselves off of our existing petroleum based infrastructure (cars, trucks, boats, etc.) Bottom line, big oil isn't our problem.

That's all for now. More later maybe.