You need to quantify generalities like "sky high," and watch the straw men -- yes, gas lines and rationing have occurred in cases of extreme shortage, such as those in the 1970's, but the absence of them is not good evidence of adequate supply.
there has been no indication of shortage of supply, no problems with supply anywhere.
That assertion is not supported by anything you say. Make a case -- don't just make pronouncements. In fact, there's a strong case to the contrary.
Now. Demand for oil is a
rate. Roughly 85 million barrels per day. It increases every year, on an average of 1.5%.
Supply is also a rate, and in order to avoid a shortfall, it must match or exceed the rate of demand. It turns out that the rate of oil production -- supply -- has been flat, not increasing, since 2004. In fact, it has been slipping a little, the difference being made up by reserves and "stunt" liquids -- condensates, syncrude, ethanol, etc.
Read all about it.
Check the EIA. Numbers are your friends. If you know any sources with numbers you think are better, then by all means share them with us.
So -- we've got some numbers saying that oil supply is flat (at best), creating a situation where supply does not expand in response to price increases. Meanwhile, demand is growing at 1.5%. Something's got to give in order to restore equilibrium.
That's where
demand destruction comes in. The price goes up enough to make people use less.
Crucial question: how much is "enough?" It turns out that the answer is not just a matter of opinion or guesswork. Economists quantify it with a factor known as
price elasticity. The
price elasticity for oil is around -.07, which means that it will take a 100% price increase to reduce demand by seven percent. Fully double the price for a mere seven percent reduction in demand -- oil is very inelastic.
We can leave it as an exercise for the student to calculate the "proper" price for oil, given the data on supply, demand and elasticity. Yes, you will find that it's somewhat under this week's price. The rest is undoubtedly trader shenannigans. A few percentage points' worth of ill-gotten gains, yes, but that's not the main story.
The main story is this: worldwide decline of oil supplies. Permanently. We've got a major habit that we're having to kick. Get used to it. Good luck.