Current oil prices have absolutely nothing to do with supply and demand, they are skyrocketing almost entirely because of unregulated speculative activity.
For the finance noobs: a "future" is basically a contract to buy goods at some point in the future at a guaranteed price that is set now. This contract allows buyers and sellers to "hedge" their business against the risk of sudden price fluctuations. The contracts themselves can also be bought and sold by "speculators" who treat them as an investment. For example, If the speculator thinks prices are going to increase in a market in the future, they will buy up a bunch of contracts at the currently low price. Once the prices rise, these cheap contracts are suddenly worth a lot more money. The benefit of the speculative activity (aside from a money making opportunity for the speculators), is that it provides extra liquidity to the market. If you are a farmer and have a bunch of corn to sell but no one wants to buy it, a speculator might buy a future contract because he thinks he can make money on it later, allowing you to get money for your corn now. The important part of all this, is that futures markets are heavily regulated - there is a limit to how many futures you can hold at once. This prevents some rich dude from coming in and buying up all the futures to get a stranglehold on the market in order to fix prices, and otherwise prevent wild price fluctuations caused by over-speculation.
~~~~BUT~~~~~ Over the past 20 years, the US government has secretly handed out commodity futures position limit exemptions to several American financial companies, most notably Goldman Sachs. Removing the limit on the number of long positions a bank can hold allows them to continually buy more and more of the futures, but never sell them (they technically do sell them right before the contract date so that oil doesn't actually show up on their doorstep, but immediately re-buy an equal amount of replacement contracts). This creates a huge amount of completely artificial demand, which continually drives the prices up. The fact that the futures have to be sold and replaced before the contract date means that these transactions are happening constantly (especially thanks to electronic banking), which creates almost perfect liquidity, allowing the cycle to continue. The banks fund the whole thing by turning their futures assets into a commodity index, and selling stakes in it as an investment product to every day people. Because only these companies with the exemptions are legally allowed to do this, they can get away with charging hefty service/processing fees, insuring that they come out ahead no matter what happens in the markets. The whole system is basically an incredibly genius way for banks and investors to make money without anyone actually DOING anything. It's really actually somewhat mind boggling.
Unfortunately, even this simplification of whats happening is too complicated for the average retard American, so the media can't report on it without confusing their readers and causing them to lose interest. So all you get to hear is bullshit sensationalist stories about how oil prices are skyrocketing due to conflict in the middle east.
The government absolutely knows what is causing the skyrocketing prices, but there are far too many influential (rich) people making far too much money for anything to be done about it. Politicians arguing about inconsequential things like offshore drilling is pure misdirection.
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