Crude Oil Prices & its impact

What Causes High Oil Prices?:
Like most of the things you buy, oil prices are affected by supply and demand. However, oil prices are also affected by oil price futures, which are traded on the commodities futures exchange. These prices fluctuate daily, depending on what investors think the price of oil will be in the future.
What Affects Oil Supply?:
OPEC is an organization of oil-producing countries that control most of the world's oil. In 1960, they formed an alliance to regulate the supply, and to some extent, the price of oil.
These countries realize that they have a non-renewable resource, and if they competed with each other, the price of oil would be so low that they would run out sooner than if oil prices were higher.
OPEC's goal is to keep the price of oil at around $70 per barrel. If it is much higher, than other countries would have the incentive to drill new fields which are too expensive to open when prices are low.
The U.S. stores 700 million barrels of oil in the Strategic Petroleum Reserves. This can be used to increase supply when necessary, such as after Hurricane Katrina. It is also used to ward off the possibility of political threats from oil-producing nations.
What Affects Oil Demand?:
The U.S. uses 20% of the world's oil. Two-thirds of this is for transportation. This is a result of the country's vast network of Federal highways leading to suburbs built in the 1950's. This decentralization was in response to the threat of nuclear attack, which was a great concern in the 1950's. Unfortunately, the consequence is that the country has not developed the infrastructure for mass transit, and is dependent upon imported oil.
The EU is the next biggest user, also at 25%. China only uses 10%, but its use has grown rapidly. (Source: BP Statistical Review of World Energy, CIA World Factbook)
What Affects Oil Price Futures?:
Oil futures, or futures contracts, are an agreement to buy or sell oil at a specific date in the future at a specific price. Traders in oil futures bid on the price of oil based on what they think oil will trade at. They look at projected supply and demand to determine the price. However, if traders think the price of oil will be high, they will actually create a self-fulfilling prophecy by bidding up oil prices. This can create high oil prices even when there is plenty of supply on hand. Once this starts, then other investors will bid on oil prices just like any other commodity, such as gold, and create a bubble.
How Do Oil Prices Affect Gasoline Prices?:
Crude oil accounts for 55% of the price of gasoline, while distribution and taxes influence the remaining 45%. Usually, distribution and taxes are stable, so that the daily change in the price of gasoline accurately reflects oil price fluctuations. Occasionally, however, distribution lines are disrupted or are down for maintenance, which can increase the price of gasoline even when oil prices are down.