Gas prices have doubled in the past year. For the first time, the national average for a gallon of gas raised above $4. Oil prices spiked $11 on Friday alone. And, as always, OPEC refused to do anything to curb the meteoric rise. They're riding a wave of unparalleled revenue and know they could see a collapse as quickly as the rise has been.
If OPEC raises production, they could saturate the market which could cause a quick decline in prices. If OPEC doesn't raise production, they maintain prices where they are now which could lead to a decline in the demand for oil and lower prices. That's why Saudi Arabia is refusing to increase production and is calling for a correction in the market. They want prices to decrease slightly while maintaining levels that keep demand high.
It's a very difficult situation because prices could continue to increase out of control and put the world economic market in recession (which would eventually lower demand and damage OPEC). And if you want to know what would happen is there was a complete price collapse in the oil market, look at the US housing market.
I believe prices are somewhat artificially high. Obvious demand is high but the weak dollar is also to blame for the outrageous prices. The dollar will eventually turn, hopefully sooner than later, and the high prices will dampen the consumption a bit. It may be 2009 before we see any real relief but I just can't believe these oil prices can continue to rise. Of course I called for a collapse in prices several months ago and it still hasn't happened so I may be completely offbase. I sure hope not though because I'm not sure how much more the economy can take.