For years I have heard people claim that oil companies are manipulating the price of gasoline because gasoline seems to increase in price quickly and drop in price slowly as the price of oil changes. I have always claimed that these people didn’t understand how oil was traded, and they never took into account their on perceptions.

Oil is traded as a futures contract which means that the oil that is traded on the market today is not going to be delivered to refineries for more than four weeks; on top of that, it takes time for oil to be refined into gasoline and to be delivered to your local service station. If you look back 4-8 weeks (basically the month of October) and consider the current price of gasoline to the price of oil futures then you will see how fair the current price of gasoline is.

Currently, Oil is about $40 per barrel which makes it inexpensive by recent history. If the price of oil increased by $5 to $10 per week how long would it be before it started to make the news and for people to pay attention to it? I expect it would be $80 before people started to comment on it. This means that there is a 1 to 2 month lead time from oil prices starting to increase and people noticing it, which means they don’t start noticing the price increase in oil until it starts translating into gas price increases. In contrast, when oil was above $100 per barrel we got daily updates on the price of oil and people complained when the price of gasoline didn’t change directly with the price change in oil.

To me the real conspiracy to me is how the price of sweet crude plummeted 60% when the general NA population finally started looking into alternative energy and demanding greater efficiency when such solutions became more economically palatable then the record gaz prices.

OPEC has certainly done questionable things in the past, and anyone who denies that is simply ignoring reality.

It was as much the ridiculous speculation on the futures market that drove up the price of oil as anything alongside the excuse of instability in the Middle East (since it isn't like the Middle East is magically safer than it was a few months ago, just look at the attacks in Mumbai). The oil companies didn't even need to do anything dishonest, since speculators were doing it for them.

It used to be illegal for anyone to get involved in many aspects of the oil futures market unless they actually intended to use the oil, but we can thank deregulators that this is not longer the case. At least the artificial demand collapsed and is now back at realistic levels.

Speculation was a driving factor in the price of oil getting so out of hand, and the loss of credit (the lifeblood of speculators) and the fears about the world wide economy (and the speculative short selling from that) has driven the price of oil far below an appropriate level. As we have seen from the commodities markets and the realestate market, Speculation (generally speaking) takes care of itself; a handful of people who get in early make a killing, while the majority of speculators stay in too long and get eaten alive when the market changes direction. On top of this, speculators often provide a necessary service in a market and take the other side of a hedge ... this enables oil companies to protect themself from oil dropping too far too quickly, and transportation companies to protect themself from oil rising too far too quickly

OPEC does try to manipulate prices, but (like most cartels) doesn't really have much power because the member countries became used to the spending that the high price of oil justified and the only way to maintain their standard of living is to pump out oil as fast as they can.

As far as alternative energy sources go ... There are several cultures within oil companies, those companies who see themself as a resource company (and have investments in other natural resources), companies that see themself as a chemical manufacturer, and companies that see themself as an energy company (and often have a lot of research towards alternative fuel sources). All of these companies have plans for what they will do as the world no longer needs oil, and in most cases there is really no need to stop alternative energy sources from comming.