Oil prices soared to new highs ($138, up $11) as brokerage firm Morgan Stanley predicted that oil will hit $150 a barrel by July 4th and Israel suggested it might attack Iran. Needless to say, stocks got clobbered (with the exception of ExxonMobil).
In case you haven't been watching CNBC lately, there's a Great Oil Debate going on. On one side is the "Peak Oil" crowd, who believe that the world has now reached its maximum daily oil output and that increasing demand--which is already outpacing supply--will now drive oil prices into the stratosphere.
On the other side are those who blame the problem on "Evil Speculators", and argue that big energy traders are "gaming" the energy markets and adding at least a $30-$40 speculation premium to each barrel (Michigan Rep. Bart Stupak is in this camp).
Who's right? No one knows for certain (and anyone who says they do is fooling themselves). Part of the problem is that no one knows exactly how much oil the world is producing, or what the world's actual daily consumption is. What's more, no one knows what the "intrinsic" value is of a barrel of oil (other than what someone will pay for it--which brings you back to the beginning of the argument again).
But still, it's a fascinating debate, with smart folks (and morons) on both sides. Below are some short articles that lay out the "peak oil" and "speculation" cases. For what it's worth, my answer is that the current crisis is a combination of both influences: a short-term spike driven by sentiment, money flows into commodity funds, and supply/demand concerns...riding on top of a long-term upward trend.
JUST A SPECULATIVE BUBBLE: