Okay, let's say I own some oil. I can sell it or hold it.
If I sell it now, I get cash. If I hold it, I get cash at the future price of oil when I sell it (and there's lots of new customers demanding oil) so I hold it. Supply and demand sends the price up.
Now, do I think I can do better with cash and the interest it gains and hold, or do I think oil will rise in price more and sell?
That's the simplistic view.
If there was commitment and the will to drill offshore Florida and California, develop Utah and North Dakota, ANWR and others, maybe just the threat would lessen my desire to hold onto the oil, and the price would drop IMMEDIATELY, because the futures price would drop!
The rats tell us we can't drill out of this problem. Well, we don't have to.
The downside is that the desire and will aren't there. Congress and this president have sold us down the river, much to the oil companies joy. Sorry, there just isn't room to blame the rats for this, because the pubs had both sides of congress and the white house for years and accomplished nada in terms of our energy self-sufficiency.
The rats have suckled up to the environs, who are funded by the members of the boards of the oil companies.
And... we work all week to pay them for this. Enjoy, here it comes...
And yet, the Ostrich Brigade still won't face facts.
Ooohh, so the price goes up based on what the price will be in the future (hence the term; futures), which increases the current price because people are holding on to the oil based on what they will make later on.
Wow, it all seems so smoke and mirrors. Thanks for explaining that. Very simplistic and easy to understand. I appreciate it.