With oil prices touching new highs above $88 a barrel Tuesday, the financial markets and the economy seem to be largely unfazed — at least so far. And despite the rapid run-up in the cost of crude from about $60 just two months ago, motorists have been watching pump prices fall. What’s going on here?
The question is all the more puzzling because, while strong demand and limited production have kept oil supplies tight for much of the decade, current inventories appear to be adequate to keep the market supplied. U.S. inventories have been falling recently but remain above the five-year average level for this time of year.
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