The New Reality of Oil Prices

Stanley Reed reports for BusinessWeek on the new reality of oil prices:

Everyone knows it: oil prices have gone through the roof. The price of benchmark crude rose 11% this year alone, to about $67 per barrel, before pulling back a little. But many in the industry have always figured that prices would sooner or later simmer down. One indication: Even when short-term prices soared to alarming levels, the futures market had until recently valued oil much more modestly. As new supplies came onstream, traders figured, prices would drift back down to their long-term average, which for years was about $20 per barrel. This thinking still influences the big oil companies, who have held back from investing massively in new projects.

But the futures market is now sending a radically different, and disturbing, message.

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