Do you want to know why the price of oil is going up? Well, at least it was until a few days ago, but that's another matter. Oil is going up because the dollar is falling. Simple as that. Yes, there are other smaller factors, but the falling value of the dollar is the overriding cause.
Does anyone think it's just a coincidence that the price of oil began it's abrupt rise just when the dollar began to precipitous decline? If you had a lemonaid stand and the people who used to buy a cup of your lemonaid for $1.00 are now offering you only 50 cents, would you accept that? Neither are the OPEC countries. Because that's essentially what we're asking them to do since the dollar has fallen in value. If we're not willing to adjust what we pay to make up for that decline, were asking them take a drastic cut for something they used to get substantially more for. They'll be damned if they're going to take 50 cents for something they used to get for a dollar.
Why the sudden decline in the dollar? Because of the 'Mortgage Meltdown'. In 2003, interest rates for home loans fell to something like a 40 year low. The lure of the tens of thousands of dollars (and more depending on the size of the loan) that could be saved on those loans was overwhelming to countless homebuyers. While most still continue making their payments as usual, a huge number discovered later that they couldn't. That, coupled with a lot of shady real estate deals deliberately made to poor quality applicants in the hopes of reaquiring those homes down the line, led to the enormous defaults in loan payments to the tune of hundreds of billions of dollars.
The loss of all that capital was such that has nearly depleted the federal reserve as it has attempted to shore up the many lending companies teetering on the edge of bankruptcy. And where does the fed get all that money? They're printing it. Since we abandoned the Gold Standard (meaning a dollar is worth a comparable amount of gold) in 1971, there is nothing that actually backs the dollar but the good faith promise of the government to make good on its loans. That's been a promise that they have been able to keep with an aggressive tax agency. But the sheer number of defaults has overwhelmed the government and it's left with no choice but to print more money to cover those defaults. Every time we print more money, we lower the value of the dollar by a cooresponding amount.
Thus, the falling value of the dollar. If it's worth only half today of what it was 5 years ago (and I'm just throwing out a number here) then we're essentially asking OPEC to accept half of what we used to pay for the same amount of oil. Obviously, that's not going to happen. Thus the increase in the price at the pump. Raise the value of the dollar and the price of oil will fall.
I think something else ought to be said about the huge number of defaults on home loans. Yes, many homebuyers simply got in over their heads, were tricked by some lenders or just got a little greedy. But many of these defaults are from people who've just decided that they don't want to pay for those loans, especially when they hear that bailouts are coming. I mean, why would John continue to pay $300,000 for a loan on a home that's now worth only $200,000 when Stacy across the street hasn't made a payment in over 3 months because she thinks the fed is going to substantially lower her payments? C'mon.