High crude oil prices could be here to stay

The same is true for the entire U.S. economy. After the oil shocks of the 1970s, big gains in efficiency -– from homeowners insulating their attics to businesses streamlining supply chains to cut shipping costs -– helped make barrel of oil work harder. Today, it takes about half the oil to produce each dollar of U.S. Gross Domestic Product than it did before the oil price spikes of the the 1970s.

But those statistics are only averages. If you're selling digitally-recorded songs over the Internet, higher oil prices have little impact on your bottom line. If you’re a trucking company or an airline, on the other hand, your profits are getting hammered -– despite the increased business that a growing economy is providing.

“For most airlines, I think all the gains that they're seeing on the revenue side are being wiped out by these high fuel costs," Southwest Airlines CEO Gary Kelly said Thursday.

Like many heavy users of fuel, Southwest has hedged in the futures market, buying oil when prices were lower but taking delivery years in the future -- Kelly said the airline has locked in oil deliveries through 2009.

That’s another big reason impact of the rise in oil prices has been blunted -– so far. When headlines describe oil prices at new highs, that price only applies to oil bought today and delivered in 30 days or less. But much of the oil used by industrial users like refiners or manufacturers has already been bought at a lower price.

That means the price of each barrel left unspoken for on the open market -- bought and sold by speculators as well as end users -– is instantly whipsawed by any news that could have an impact on supply or demand. So even as oil today flows smoothly through the system, with relatively strong reserves in storage, the threat of future supply interruptions can send prices spiking today.

And a part of the price spike ends up the pockets of the investors who are on the winning side of each of those trades.

“All the major investment houses in the world are making huge amounts of profit trading oil futures,” said Gheit. “And guess what? There is no shortage of oil today. This is speculation that is driving this higher.”

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