Oil pricing is a complicated affair, driven mostly by speculation. Nevertheless, several factors are impacting it to drive prices ever higher, and those factors are not going to go away. First, the US dollar is tanking. Oil futures are historically priced in dollars - where petroleum purchases are dollar funded, the sharply declining exchange rate of the dollar against such currencies as the Euro, and the yuan (in real market terms, not gov't fiat exchange rates).
Second is profiteering. Look at what has happened to gasoline prices here each year of the last 5 or more. Gasoline begins the year at an average price, which increases by 20-30% just in time for the first major travel event of the year, Memorial Day. It then slides back slightly over the course of the major travel season, which encourages the short-sighted to think - oh, I CAN afford that vacation trip we planned, if we are careful. Then, it spikes back higher than the Memorial Day prices as Labor Day (2nd biggest travel holiday of the yr) approaches, and post holiday it slides back again. Over the course of the year, it increases by between 20% to 30%. Every year.
Well, in that same period, the dollar has gone from being worth more than the euro, to being worth about 60% of the euro. In real market terms, the value of the yuan against the dollar has nearly quintupled over the same period, due to the huge imbalance of trade between the nations.
Thirdly, alternative fuels - notably biofuels derived from food grains and soy, are net energy users to produce and deliver, commercially. There are good alternatives which do not utilize feed grains for fermentation - the most immediately viable here is switchgrass, which delivers over 5 times the energy in fuel that it takes to grow, process, and distribute. The first large-scale biofuels production facility in the nation which uses switchgrass has recently begun production, and the acreage planted to switch grass is going up, exponentially. Best part of that is that switchgrass is a native north american prairie grass, and is VERY economical to produce in large quantity, using land not best suited to feed grain production.
Given current economic trends, US foreign policy and economic policy, and our consumer culture, gasoline will likely hit $5- $7/gallon by years end, and by 2012 (or much sooner, if the oncoming PRIME mortgage market collapse hits as hugely as expected) you can expect $15 - $20/gallon gasoline. Potentially, vastly more if the credit collapse drives a really vicious inflationary spiral here.
The US spent over two hundred years building the vastest, most productive industrial economy in history. We've spent the last 25 years dismembering that industrial base, until virtually nothing is actually made here anymore, except weapons and agricultural products. We, in effect, have liquidated in my adult lifetime, the accumulated wealth of 2+ centuries labors. Our society has been the profligate playboy heir of hardworking, frugal parents, and the end is in sight. It isn't pretty.