What we've got is very simple. Commodity scammers have learned how to rile up the Peak Oilers who then sow fear of shortages and "the end of affordable oil." On top of this, additional fear is sown about "possible terror attacks in Saudi Arabia" or even, the 18 wheeler towing oil that flipped over on the interstate or any of the typical fires that happen from time to time at refineries. This causes artificial price inflation. Small time investors flock to the market. The price goes up even more due to speculation. Then, inevitably, the market does respond, albeit slowly, since there is reluctance to risk major capital outlays on anything but the surest thing, because the memory of the 1980s oil bust is long and painful, especially in places like Houston and California. As this slow increase in supply happens, the market inevitably starts to soften. Those who got in too late panic - they take to the web, hoping to crank up the fear and worry that initially caused a rise in price. There starts to be a series of dead cat bounces, as the tension between actual supply and demand dynamics versus emotional investing and speculation, becomes more intense. Some of these bounces are remarkable and result in new all time high prices. But lo and behold: At some point, the froth can no longer be sustained. Woe to the late arrivals in this market.
Some say that the Saudi fields' production has been pushed beyond sustainable levels for some time now, and as a result production could suddenly collapse, perhaps by the end of this year. The OPEC countries have been reporting essentially constant reserves since 1990, despite extracting significant quantities of the stuff. Since their quotas are based on their reserves, there is a good chance that they are misreported.
There are lots of real world signs that connected decision makers are aware of the reserves/production problem, and have made their investment decisions accordingly.
There are other things that don't make sense, for instance, why do crude prices go up when a refinery stops? One would expect the price of crude (the input to the refinery) would go down, and only the products, gas, kerosene, etc. would increase in price. That is curious, and probably a second degree affect from ill informed "investors".
The ME has always been an unstable area, an investor would discount current uncertainty against the historic backdrop.
How much would you pay for a gallon of gas? It's real world value is much higher than the price we pay, is it not? Demand is relatively inelastic, and growing due to economic expansion in US and China.
Discoveries of large deposits of oil are rare, and the last one was a long time ago in Saudi Arabia, despite lots of people looking. The some 30 major fields of Saudi Arabia are 20-30 years old. But despite large extractions of oil, Saudi Arabia says its reserves are about the same as they were some 15 years ago - believe that? They say they have huge reserves, but are tapping them at a very low rate. Believe that? (In 2003, Russia had 4x the production rate per reserves, the UK some 13x).