- There is ample supply of oil on the market.
2. Unemployment is still too high and the US economy is still weak
The US economy is the largest in the world and consumes the most oil in the world. In other words, we're the oil producer's #1 customer. If our economy is in a recession, which means we're not buying as much oil, then oil producers are not happy. They want our economy strong and unemployment low. When the US is strong and people are driving to work everyday - the more gas/oil we consume. Typically, when oil reaches $130/barrel, the US economy is heading for a recession because things become too expensive for us at this level. The cost of food, utilities, clothing, and everything else skyrockets as gas prices escalates...causing our economy to tumble. As of this writing - oil prices are currently at $112/barrel.
3. Financial speculation/Derivatives
Financial speculation tends to create fear and/or greed (or "noise") in the markets and usually gets the masses frantic enough to do stupid things in reaction to this fear and greed. For example, consider in 2005-2007 when people were jumping to get into real estate by any means necessary (even if they had no money) because they thought "the prices are just going to go higher". Only to be stuck in foreclosure, bankruptcy, or constantly fighting adjustable rates in 2008. Remember how quick financing was available back then? But today, it's very difficult to get financing for anything in real estate.
The same speculation is going on within the oil markets to some degree...where you have investors (institutional and individual) running to invest in oil at these high prices because "it's only going to go higher". Timing is everything, folks. Buying commodities or stocks just because the price is going up is ridiculous. Warren Buffet said it best - "Buy when people are cautious...sell when people are greedy."
These are my reasons as to why the current high gas prices aren't sustainable because of the ample supply, the current unemployment rate, and just plain old speculation in the markets. So don't get too panicky because of the current prices just yet. Do what you can to survive....carpool, telecommute, walk, ride a bike, etc. Prices will soon turn for the better.