Crude oil rose above $89 a barrel for the first time this week as the US dollar declined to a record low against the euro. Analysts say the market is reacting to concerns over Turkish military incursions into northern Iraq. On Oct. 15, prices passed the previous all-time inflation-adjusted record reached in 1981 when Iran cut oil exports. The cost of oil used by US refiners averaged $37.48 a barrel in March 1981, according to the Energy Department, or $84.73 in today's dollars. (Bloomberg, Oct. 18) Prices fell to about $87.30 a barrel after the government reported a larger than expected increase in overall crude and gasoline inventories—but shot back up to over $88 a barrel on Oct. 17, when an explosion halted operations at the ExxonMobil refinery in Lockwood, MT. (AP, Oct. 17) The fire continues to burn at the refinery outside Billings. The explosion created a fireball that shook surrounding homes and businesses—and, writes AP, "exacerbated growing concerns about the adequacy of crude oil supplies." (AP, Oct. 18)

Recall that a year ago, when oil prices were falling in the prelude to the mid-term elections, we noted the widespread speculation that the White House and its pals in the industry were manipulating the price down for political ends. Acknowledging that this is a real possibility, we added the following caveat, which now seems somewhat vindicated:

We also predict that prices will rise again right after the elections. And not only because the White House is playing us like a violin, and hopes to pull the same trick again before the 2008 elections. But because (as we argued as early as 2001, when prices were low and going down) Bush and his petro-oligarch cronies ultimately want high prices, and have consciously contrived to inflate them. And not only because it simply means bigger profits, but because their entire global project is predicated on it: high prices, war and expansion of the industry all fuel each other.

See our last post on the global struggle for control of oil.