Oil Price Rise: Is OPEC really opaque??

Recent sweltering news which is considered as one major factor among various other reasons behind bearish trend of US stock market as well as Indian too; the exceptional rise in Oil Price to record level. I was wondering what could be the possible reason….? "According to normal economic theory, and the history of oil, rising prices have two major effects: they reduce demand and they induce oil supplies," ....But not this time.....!!!
As-

1. OPEC-cartel has plenty of reserve as well as non-OPEC countries like Russia, Norway, Greenland, West Africa etc etc…
2. So it’s not the crisis at supply end due to resource… Demand is increasing at constant rate not exponentially….
3. Apart from US being the world’s largest consumer of oil, consumption in other developing nations (BRIC) is increasing.
4. Therefore demand is not going to reduce due to price rise.
5. “Some Factors” which are driving the OPEC, which is responsible for 75% of reserve to restrain the supply.
6. President of OPEC makes statement that oil prices to remain unstable.
7. Long-term oil futures, dated for 2013, now trade at $108 a barrel, a strong indication that investors see little cause for prices to drop in the next five years - partly because of low expectations about production growth. (In NY mercantile exchange)

Few basics information:

Price of 1 Barrel oil as of today (14-May-2008) = USD 124

Price of 1 Barrel oil in year 2000 = USD 24

1 barrel = 42 gallons

1 barrel = 117 liters (Approx)

In India we get oil at subsidized price.

One of the best texts which I came across to know the background of oil price history and analysis read here

All the above points carry their own significance but the fifth points had gained more attention from me. I gathered some information behind driving force which is leading to restraining of supply. Following is the list, out of which some factors responsible for less supply and subsequently price rise are interdependent:-

1. Monopoly of OPEC: This factor is well known as major pie of reserve is with them.
2. US economy downturn: that’s continuing since quite some time attributed to sub prime and bearish trend of market. Increasing worries that the US downturn will spread globally – with the slump in US employment confirming that the US downturn is likely to spread into consumer spending which in turn will have a big impact on Japanese, European and Asian exports. Ongoing problems in credit markets with the whole securitization process (whereby individual loans are packaged up into securities) that has underpinned a lot of credit growth in recent years now in disarray, and the banks unable to take up the slack.
3. Middle East peace process: Gen. Mansour al-Turki, spokesman for the Saudi Interior Ministry said, "They have recognized that the al-Qaida ideology is an ideology to inflame terrorism rather than trying to set up a new approach for Muslim societies". Apart from that tensions between Iran and the international community (in particular the U.S.)
4. Commodity trading: Due to US downturn in economy, commodity price have increased.. This is also reason for oil price increase… Oil has been traded globally for more than a century, and commodity pricing in the oil sector is well-established. Crude oil prices behave much as any other commodity with wide price swings in times of shortage or oversupply. The crude oil price cycle may extend over several years responding to changes in demand as well as OPEC and non-OPEC supply. There has been a significant increase in paper trading of crude oil on world markets over the last few years (2005 to 2008). While the effects of increased trading activity are hard to quantify, it appears that speculative trading has, at the very least, increased the level of volatility in crude oil prices.
5. Terrorism: This is something much rumored… Story goes like this; a significant portion of money earned through oil trade goes to terrorist organizations. And they keep some money aside for weapon and rest they pump in to stock market. As and when need arise to them they pull the money out from market and its huge sum of money which is sufficient to crash the market….!!
6. Inflation: This factor directly translates to reason for higher price… As soon as world oil prices move up, inflationary expectations take over… :)
7. Cost of production: geographical, political factor along with cost and availability of labor…
8. Government Policy: Most of the Non-OPEC countries they have astringent rules for FDI to set up refineries
9. Increasing consumption: Consumption is increasing, but not at exponential rate, though US blames developing countries for increasing demand…
10. Lack of alternative energy sources: “oil is non-renewable energy source” is well known fact but still no alternative option had been introduced on mass level….
11. USD Depreciation: Significant depreciation of the U.S. currency due in part to credit problems in the sub-prime mortgage market.
12. International politics: I was reading an article which co-related Butto’s assassination and increase in oil price. It says rise in oil prices after the assassination Bhutto is an evidence of the size of the security interdependence between the Gulf States and Pakistan, since the start of the global war on terrorism. The Hariri of Lebanon invested with Nawaz Sharif and later failed to mediate between Pervez Musharraf and Nawaz Sharif last Augustus. Harirri was embarrassed later by the Pakistani reaction saying: they do enjoy a strong relationship with Saudi Arabia, so they do not require mediation by a person exercising political activity in another country.(I am not very sure how much this factor attributes to oil price rise…)
    
    Factors responsible for hindering to bolster production:

• Higher petroleum taxes
• Tougher contract rules
• Scarce manpower
• Swelling costs
• Political wrangling and violence
• 
  Following related stories could be good read:
  1- Bush urges Saudis to boost oil production
  2- Bush Visits U.A.E., Continues Push for Mideast Peace
  3- Oil prices to remain unstable
  4- Behind record oil prices, troubling signs in production
  5- Are high crude oil prices here to stay?
  
  (Lots of thanks to Anureeta, Mr D’Souza, Bond, Niranjan, Aishwarya and pragya to give me valuable inputs …:))