Oil prices surged almost 10% last week and are widely expected to top $60 a barrel this week. The recent price gains show a sharp turn in the short term market since only a month ago, when reports of steady growth in U.S. oil inventories drove oil down to $46.20 a barrel on May 20.
Meanwhile, even as short term oil prices escalated, the price of the December 2011 oil futures contracts fell, which increased what is referred to as the “backwardation” of oil prices — i.e., when futures prices are below current spot prices.
The mainstream media always seems to struggle with the economic implications of volatility in oil prices, so cruise over to this Econbrowser post, in which University of California at San Diego economics professor James D. Hamilton — an insightful specialist in oil price fluctuations — analyzes the current situation. This earlier post notes Mr. Hamilton’s views on why the current run-up in oil prices is unlike those that occurred during the 1970’s and early 80’s.
Finally, here is an excellent Forbes Magazine graph that shows the real and nominal price of oil over the past century and a half.