The Oil Boom Is Just Beginning - Expect the Price of Oil to Go Up, Up, Up

If you haven't been paying attention over the past few months, you may not have noticed that you're

at the pump. Where I live, the price of gas is back up to more than $3.00 per gallon. This is a surprising turn of events since gas prices typically peak during the summer. While everyone was watching

go north of $1,300 per ounce, crude oil prices quietly rose to over $85 per barrel. And in my opinion, this is just the beginning. Now is the time to add some oil to your 

. Here are a few reasons why the price of oil will keep rising.

Inflation is a general rise in the price of goods or services. Every economist knows that, as soon as the economy fully recovers, we are in for a period of

. Interest rates are near historic lows and the government has been pumping trillions of dollars into the financial sector to stimulate the economy. While this may have prevented another Great Depression, it will also lead to a period of hyper inflation. When too many dollars are chasing too few goods, inflation will occur. Commodities like oil are the big beneficiaries during periods of high inflation. As the economy keeps improving, the price of oil should keep rising.

America is still the largest consumer of foreign oil, but other countries are rapidly gaining on us. The level of oil being used by developed countries has remained relatively stable in recent years. However, the amount of oil being used by emerging nations is rising. Brazil, Saudi Arabia, India, and China are consuming much more oil than they have in the past. These countries are seeing an uptake in the number of automobiles and machines used, which means a rising demand for crude oil. This is also affecting the seasonality aspect of oil prices. These countries are seeing a heavy demand for oil in the first and second quarters, leading to prices staying high during the off seasons in developed countries.

There has long been a dispute over whether speculation can affect the price of commodities or not. The last oil bubble showed the power of speculators in the oil market. It is clear that oil speculators at investment firms like Goldman Sachs

have a direct impact on the price of commodities. Speculators fueled the oil boom of 2007 to 2008 and will likely do the same again. For example, look at how speculators have bid up the price of wheat and agricultural products. Food prices have risen more than 40% due to speculation in these markets. Oil speculators fled the market during the financial crisis and are slowly returning to place bets on the prices of the commodities in the future. Unless there is some sort of governmental regulation to curb speculation in the oil market, you should expect speculators, along with demand, to drive oil to record highs once again.

The stars are definitely aligning for oil prices to continue to rise. The improving economy, fat with government bail out money, along with increasing demand for oil from developing countries, and the self fulfilling prophecies of speculators, all point in the same direction. Oil should easily take out $100 and then the commodity will be off to the races. Do you agree that oil prices will continue to rise? Share your thoughts in the comments below!