Explaining the price of #oil

By Fareed Mohamedi – Special to CNN

Confused by shifts in oil prices and the geopolitics of oil production?  Here’s an explanation.
Financial markets speculate as usual, Asia grows and the Middle East gets riskier
As we entered 2011, expectations of an economic recovery in the industrialized world started to push oil prices up.  Then came the dual shocks of “revolutions” in the Middle East and the disaster that struck Japan.  These catapulted oil prices into the $120 dollars per barrel range for crude oil.  This in turn led to $4 per gallon gasoline in parts of U.S. But while the twin shocks made dramatic headlines, they actually had only a small impact on the actual supply or demand of crude oil. So what happened?
Financial markets created exaggerated moves up and down for the price of oil without much basis in reality.  Sound familiar?
(See CNN’s article: High gasoline prices prompt justice department to eye energy industry)
But while the financial markets contribute to greater volatility in the price of oil, they do not necessarily account for the upward direction.

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