JP,

I believe misguided monetary policy is the main issue responsible for high oil.

I subscribe to the peak oil theory in as far as it trickles into economic speculation. Investors think, Ok, this commodity is going to become increasingly scarce in a few more years. I personally don't believe it, but enough people do and investors are taking advantage of it. So again as the USD drops, oil prices go up as oil is denominated in dollars.

Investors are looking, I believe for safe haven as the global economy slows. Oil and other commodities such as wheat, corn, coal, gold, platinum and silver are very high.

As oil goes up, the more inflation will go up, the more it weakens the USD, the more oil looks like a lucrative safe investment and then thrusts oil price up even further. In my opinion, I think rates need to come up rather than go down.

This is especially evident in developing nations where I have done extensive business. Infact, as inflation has increased a few nations have been tinkering with the idea if they should move off the USD as its been a destabilizing and retarding force for their economy. I believe that would be a very poor decision in the long term for them but historically poor nations have continued to lack sound economic policy.

I think oil has gone up slightly 50 percent in Euro and over 60 percent in USD terms last year. So this explains in my opinion, why Europe has not been hit as hard as the US with an increase spread between the Euro and USD however this is going to change if the USD sinks more and contribute to a downward spiral for Europe also.

The spread between the USD and the Euro is at a maximum. If it increases further European business mainly exporters will start to seriously hurt and will contribute to this circle of economic volatility.

Oil supplies are slightly up worldwide and demand is down as the global economy slows and price is still rising? I think this can explain the wave of speculation investment rushing into the market. I would estimate speculation is responsible for 30 percent of the oil price today.

I think speculators may wake up a realize they can find a reality of oversupply and price will fall. Hopefully we will see rates increase at around the same time if not before.

As for the question you asked, yes, CAFE standards have a negative effect but I believe not as much as the weak USD and speculation.

As for limited refinery, well I'm not sure. Its true no new refinery construction has been built in the US for some time now but Exxon has increased the size of its refinery considerbly in Texas over the last decade. It has grown larger than originally built to avoid new regulations and permits to construct a completely new refinery.

Its obviously very murky global economy right now and this is just my opinion as I see it from my vantage point.

EAHINC