I have been gently chided on the internets for not doing any Countdown diaries since the oil prices have started going down. While the giddiness and glee demonstrated by many in the traditional media and elsewhere invites little but ridicule, as demonstrated by this graph below, prepared for the Oil Drum, some serious questions have been raised and deserve answers.

So, beyond the semi-glib answer that nothing much has in fact happened in the oil markets in the past month (after all, the recent decline is still smaller, in percentage terms, than several others in the past couple of years), here are a few points worth making.

An installment of the Countdown to $200 oil series

As you may have heard, oil prices have reached a new high above $140. I can already hear the outcry against speculators and their out-of-control games to enrich themselves at our expense.

Never mind that speculators have been caught shortselling oil (ie betting on a fall in prices) more than a few times in recent months. Never mind that spot oil prices, which require actual physical deliveries of oil at the end of each month, have behaved the same way as paper futures. Never mind that oil storage seems to not be increasing.

Nope, it is just too convenient, too irresistible and, let's say it, too comfortable an excuse that speculators are to blame. It's not our fault, we have our scapegoat. Our price increases are temporary, we'll soon be back to "normal" lower prices, as soon as (take your pick) speculators have been punished/oil companies are taxed for their profiteering/"fundamentals" are left to set prices.

This is just denial.

There are A LOT of good reasons why oil prices are going up. Let me show you just a few.

A Countdown to $200 oil diary

This is another press release about $100 barrel oil. It is fairly similar to the one we sent out in January when oil hit an intraday high of $100 barrel. Feel free to send copies of it to folks you know, and to link to it in your web sites. If you know any newspaper people to send it to, that would be especially good.

Oil Price Closed Above $100 a Barrel; World Leaders Ignore this Signal of Impending Shortages, According to TheOilDrum.com

The price for West Texas Intermediate (WTI) oil closed above $100 for the first time on February 19, 2008. "Rising oil prices have been giving a clear signal of pending shortages for over five years now," according to TheOilDrum.com. By ignoring this signal, world leaders are steering the world toward an energy disaster characterized by shortages, high energy prices, inflation, civil unrest and famine.

Link to data for graph

In an interview with the Financial Times, the Saudi oil minister, Ali Naimi, admits he is powerless in today's market:

We have nothing to do [with] where the price is today. (...) We work very hard and consciously to be sure that whatever actions we take that we are responsible do not dampen economic growth. (...) We are today not producing all our capacity because it is not needed. The demand is not there, the customers are not there.

This was initially posted as Opus 53 of my "Countdown to $100 oil" series on European Tribune.