The Latest Factor to Boost Oil Prices: Cold Weather

Further, in addition to heating oil price increases, crude's latest lurch will push up the average U.S. price for regular unleaded gasoline, currently $2.67 per gallon, according to AAA data.

But don't misunderstand: while a frigid winter increases demand for oil and its products, there is no shortage of crude globally. Inventories are high. So why haven't prices fallen? For more than two years oil's price has been boosted by non-oil-use buyers, primarily investors and speculators, due to oil's attractiveness as an alternative asset, as an inflation hedge, and, to a lesser degree, as a hedge against a potentially weaker U.S. dollar. Oil's price also has been boosted by the prospect of rising demand in emerging markets as the global economic recovery strengthens in 2010.

Energy Analysis: The bulls rule in the oil pits. To be sure, a weaker dollar has added $10-25 to oil's price, depending on the economic model one uses, but one can only imagine what's going to happen to the price of oil when the U.S. economy starts to add jobs, all other factors being equal. All of the above price increases have occurred amid the loss of more than 7.6 million jobs in the U.S. Add 100,000-150,000 people joining the U.S. workforce each month, on a net basis, and the outlook for oil and gasoline prices is not pleasant, from a consumer/business expense standpoint.