Supplies, not Gouging drive gas prices higher

Although politicians are seeking to score political points off of rising gas prices, it is supply and demand which are driving up the cost of oil.

It took the worst hurricane season in official memory to drive oil prices last year to new heights.

Last week, without a storm in sight, price records tipped over like an oil rig in Category 5 winds.

This time, petroleum markets are being buffeted by the fear that world oil production might be disrupted. And the rally is being fed by investment funds seeking hefty gains.

In Iran, the world's fourth-largest oil exporter, a nuclear development program is drawing the West's ire. In Nigeria, rebels have forced a 25% reduction in crude output and are threatening more. On the Gulf Coast, oil pumping and fuel refining still haven't recovered from hurricane damage.

At the same time, worldwide demand for all things petroleum shows little sign of weakening after the last few years of torrid growth. Neither does the interest of investors such as hedge funds and mutual funds, which have been funneling billions of dollars into oil and other commodities.

Taken separately, these and other market undercurrents lack the dramatic punch of nature's force. But together, said John Kilduff, senior vice president of energy risk management at New York commodities trader Fimat USA Inc., "It's a parade of horribles … both real and imagined."