When you see in the new oil prices, what you see quoted is the price for a barrel of Light, Sweet crude for delivery in the upcoming month. That is, what you see in the news is the price for the August 2005 future. I believe it's for the future and not the option. The future is a commitment to buy. The option is the option to buy, not an obligation. As you can imagine, those 2 differences alone can affect pricing. Options only go 36 months out. Futures, the commitment to purchase the oil, go out 84 months (7 years!). Plus, keep in mind, that not all oil pumped is of as good as quality as Brent crude. So it's likely fetching less / barrel because it's more expensive to refine. A quick scan at futures prices show a bit of an uptick. Aug 05 delivery is $60.75/barrell (as contrast, the same contract for Brent is going for $59.25 / barrel). Jan 06 is the peak at $63.46. That's a bit of a jump. But if you assume 3% inflation, in terms of real dollars, it's a tad smaller. What's interesting is looking out into the future. For example, Dec 07 futures are at $60.65. A slight drop from today right? Well, assuming 3% inflation, in terms of real dollars that's almost a drop of about $4/ barrel from today's 30 day contract prices. Or go out to the end to the Dec 2011 futures. They're priced at $58.60 right now. Again, assuming 3% inflation that's $48.16/ barrell in today's dollars. Now this is just what the market is deciding today. Things can change. Markets are run by humans and prone to bubbles and other temporarily "irrational" behaviors. On the other hand, they reflect that there are people out there putting their butts on the line either in terms of their own money or their jobs cuz it's someone else's money. And markets do show the collective answer for a large group of people. I point this point this out for a couple reasons. Mainly it's all the attention the peak oil theory has been getting lately. Apparently the markets don't forsee that the peak has been reached. That doesn't mean the markets are right but one has to wonder why the big gap. If peak oil is really so close, wouldn't that in some way be reflected in pricing 7 years out from now? And if the markets are going to be wrong, wouldnt' they tend to be wrong in the short term on the side of the hype? That is, when tech stocks were the rage, they had silly valuations for crap companies like buy.com (was ran so that they didn't make money on the products they sold; they were going to make their profit from advertising with selling goods driving the traffic for the advertising). Likewise, with everything going on, the current tight oil supplies, China and India booming, Iraq and Afghanistan seeming to at best keeping things just as messed up in the Middle East as they have been, oil companies recently slashing their future reserves, and such, wouldn't all of this be causing the hype to put pricing pressures up? And it just for the next 6 months to year. But why does it drop off? Why are the peak oil folks so sure of one extreme while the people putting their money on the line buying and selling oil go the other way?