The oil companies know the true value of a barrel of oil. Whenever a new oil field is discovered or new innovations in drilling are perfected, the oil companies do a cost/benefit analysis to determine where and how to drill. If it will be profiable they drill. If not they don't. They are currently basing their R&D and exploration decisions on $50 per barrel oil. They know that $140 oil could go away with the stroke of a pen.
The oil companies know the true value of a barrel of oil.
Easy answer: Whatever someone is willing to pay.
These guys are in business to (gasp!) make money. So they charge as much as they possibly can.
Oil is highly price-inelastic in the short term. A small gap between supply and demand results in large price movements. In the medium and longer term; supply and demand reach equilibrium (well they approach it anyhow) — just like any other good or service.
In a normal market, high prices would induce greater supply, and smaller demand. The Democrats, and self-anoited “environmental” organizations are working overtime to prevent the supply side of the market from responding as it should. In the absence of regulatory barriers these are some of the ways that supply would be increasing, in response to the price signals now in the market: drilling off-shore and in ANWR; digging in the oil shales; digging in the coal fields; pouring concrete for nuclear plants; erecting wind farms in Chesapeake Bay (Ted Kennedy's ocean view).
Since U.S. supply cannot be increased; you've been left with two alternatives: ask other oil producers to step up production (to do the drilling you won't do); and reduce demand.
Canada is doing its bit — we're busy trying to double production from the Alberta oil sands. Meanwhile, U.S. mayors, environmental organizations, and Presidential wannabes are busy trying to shut down the oil sands.
That leaves reducing demand — which is what the eco-fascists really want you do do. Get on a bicycle; ride the bus; move into a small apartment; eat granola. To most people $5.00/gallon gasoline is the problem — to the “environmentalists” it's part of the solution.
Democrats and their fellow travelers want you to blame speculators — so that you won't blame them.
Demand has to double to cause the price to double? Where did you learn that math?