by Paul Simoes

Created on: April 22, 2008

Why are oil prices so high? Traditionally oil behaves like any other commodity with large price swings in times of shortage and oversupply. However I am not going to run down the history of price fluctuations of crude oil on the world markets. It is true that every time there is a crisis oil shoots up in price. But what is the current crisis?

It is interesting to note that the increase in oil started back in 2003 with the liberation of Iraq. In 2003 the average barrel of crude was $28.42, and by 2004 the price had jumped to $54.93 a barrel, a 93% increase from the year before. Since that time oil prices have steadily increased to hit current highs of over $100 per barrel. But why would oil increase so drastically?

The truth is that the price of oil is headed on the way up, not because there is not enough oil, but because of oil production. Our OPEC friends (which are predominantly Muslim nations) have refused to increase production to help drive down oil prices; they blame the weak dollar for oils rise. The result has been that oil is headed toward $120 per barrel. Why would our friends do this to us?

Mostly my belief is that it is opportunistic greed, everyone wants to capitalize on the profits that are being currently reaped, and who could blame them, after all the cost of producing the oil has not gone up. Even non OPEC nations have jumped on the band wagon and cut production to help drive prices higher. But could there be another motive?

I do believe that there is a hidden political motive as well. This being an election year and the fact that George Bush will not be returning as President has given those opposed to the war in the Middle East a golden opportunity. By crippling the west with high oil costs, causing a downturn in the economy because of increased manufacturing costs, the tide of popular opinion will shift away from Iraq and onto domestic items. Clinton and Obama already oppose the war effort and have platforms that center on fixing America's problems, especially the economy. What needs to be done?

My final though is that we are being pushed out of Iraq by OPEC and that we will not see relief in oil prices unless the Democrats take office and withdraw our troops from Iraq. Well America we need to make a decision. We have to decide between a little economic pain or showing the world that we do not have what it takes to follow through on commitments. We lose either way, if we continue the war we will suffer greatly economically, if we stop the war we will prove to other nations that we do not have the fortitude to continue with something and that we can be pressured into defeat. All I have to say is thank God the Second World War didn't go on a little longer.

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