ROBERT SIEGEL, host:
From NPR News, it's ALL THINGS CONSIDERED. I'm Robert Siegel.
MELISSA BLOCK, host:
And I'm Melissa Block.
Every day we hear about drivers angry about the high price of gasoline. Everyone's mad. But if you're filling up your tank, whom should you be cursing at? Whose fault is it that prices are so high?
The head of OPEC says it's not his fault. He and others say you should blame the U.S. and its weak dollar.
NPR's Adam Davidson is on the case to see if that's true.
ADAM DAVIDSON: This would be the moment when I would love to tell you, in plain English, exactly why oil prices are so ridiculously high. Yup, that would be awesome. It's not going to happen. Nobody has cracked the code. Plenty of analysts and economists are serving up theories, but those theories contradict each other or are built on weak evidence.
JPMorgan economist, David Hensley, gets paid to explain this oil price spike, and even he throws up his hands.
Mr. DAVID HENSLEY (Director of Global Economic Coordination, JPMorgan Chase): The problem is that no one seems to be able to put together a coherent story that is commonly agreed upon right now about why commodity's prices are as high as they are. So we're all left, you know, fumbling around trying to put one together on our own.
DAVIDSON: So that's the caveat - nobody really knows for sure who is to blame for high oil prices. But the head of OPEC has come out and said it's all the fault of the United States and our weak dollar. He's certainly at least partially right. By definition, the weaker the dollar is, the less a dollar buys. That's what a weak dollar means. The dollar has lost around 10 percent of its value in the world over the last year. So a dollar should buy about 10 percent less oil than it did a year ago. But oil didn't go up 10 percent in the last year; oil prices are up 85 percent. Another thing that puzzles David Hensley.
Mr. HENSLEY: It must be the case that something else is going on here that extends way beyond, you know, the decline of the dollar.
DAVIDSON: So if it's not just the weak dollars sending oil prices up, maybe it's supply and demand. Maybe supplies are lower than last year, or demand is higher. Hensley says this might seem like an easy question to answer, if we knew what supply and demands were. But strange as it may seem, nobody knows how much oil the world actually demands each year.
Mr. HENSLEY: At the same time, we don't know for sure exactly what the supply is at any, you know, point in time.
DAVIDSON: So, he says, we guess what the supply is and what the demand is. And the best guess tells us that supply has not gone down enough, and demand has not gone up enough over the last year to account for the huge run-up in fuel prices.
Jim Williams, oil economist with Wtrg.com, says he's got a theory.
Mr. JIM WILLIAMS (President, WTRG Economics): Investors are looking for a place to make money, and the only thing that seems to be going up is the price of crude oil.
DAVIDSON: Investors, of course, are always looking for a place to make money. But last year, Williams says, there was subprime housing, the stock market; oil was one option among many. Now, it looks like the only option.
Mr. WILLIAMS: But here's the problem that's created: You got that good idea because you saw oil going up and nothing else going up. Well, so did the whole bunch of other people. Well, what happens if a whole bunch of people want something that they didn't want before? The price of it usually goes up.
DAVIDSON: This is called speculative investment, people buying oil not because they want oil but because they are speculating that oil will keep going up. Now, here's what's interesting. The weaker the dollar, the more this happens. Investors turn away from U.S. investments - Apple Computer, say, or Treasury bonds, because the dollar keeps losing value. They don't want dollars. That makes oil even more attractive, which sends the price of oil up even higher, which weakens the U.S. economy. And that sends the dollar lower. It's a viscous circle.
So, it's not just the head of OPEC saying it, many believe that a weak dollar can push oil up far higher than seems to make sense.
Adam Davidson, NPR News.