Re: that's al fine and dandy

If I'm not mistaken, the "crude price" you refer to is the commodities (spot-market) price that the news pundits are always yacking about. This is the price traded on the commodities markets and paid by anyone buying oil on the spot market, but it is not the price at which all oil is sold.

The reason it looks like Big Oil is manipulating the oil prices for advantage is because they are large enough to have vertically integrated operations that both produce and use much of their own oil (or buy from national companies under long-term contracts), or even put surplus onto the spot market -- while the smaller companies and independents are simultaneously driven down or out of business because they don't produce all that they use and have to buy substantial quantities of crude at the spot price.

Moreover, as the spot price increases, it becomes economical to bring more sources online and then use or sell the surplus into the spot market. (i.e., Saudi Arabia will always have a market because they produce light sweet crude at an extraction cost of around $15/barrel, whereas US resources cost more like $40/barrel on average to extract, and Siberian oil comes out of the ground as a thick, pitch-like substance that requires extensive refining. Refining also creates distribution and allocation issues that monkey with things -- Venezuelan crude, for example, is very sour, and at present only a limited number of US refineries can even deal with it.) If the price stays up for a while and there is demand available to absorb a substantial amount of production increase, the producers will increase production from the more expensive sources, thereby increasing their operating revenue and profits disproprotionately.

The spot price, however, isn't being set by the oil companies themselves, but the commodities markets. The resulting prices are nominally determined by commodities traders reacting to supply and demand, and keep in mind that net global demand is up relative to production, way up, because of rapid economic growth in China and India. The current equilibrium point is necessarily much higher than the run at $17 and brief dive to $9 we experienced in the late 1990s -- but it also appears the market was operating in a speculative bubble concurrent to the housing market, hence the $40/barrel crash in the past few weeks.

It's not that there aren't ways that people could be manipulating this to some degree (and more than a few are probably trying), merely that it is a very complex system and simplistic conspiracy theories are inadequate to explain it.