Oil prices were extremely high in mid 2008, and finally dropped drastically in late 2008. In the midst of a recession, it is common to have cheap prices for oil and gasoline; that is not the current scenario. Although oil prices have not reached what they were in 2008, they have climbed steadily over the last several months. The Law of Demand suggests that when supply is high and demand is low, the price will be low to force the market back to equilibrium. If this is true, then why are oil prices continuing to rise?
Speculation is believed to be the main cause for the high prices. Continuous decreases in sales should keep the prices low, but traders are relying on the fact that they believe the worst of the recession is over. Speculations of recovery from this recession are driving the prices rather than actual proof of recovery. Many believe that the price of oil is dictated too heavily by speculation which explains why the prices of oil are not what the Law of Demand would suggest they should be.