Oil production in the U.S. is up, demand for oil is down. Yet, the average price at the pump hit $3.80 last week after 27 consecutive days of gains. Contradicting the law of supply and demand are high global prices, and the U.S. oil transportation and refining industry. Tensions in the Middle East and Iran’s threat to block a vital maritime passage to the oil industry have sent the pricing benchmark for crude oil traded in Europe above $100 per barrel. That lifted the U.S. price from $80 per barrel in 2010 to above $100 per barrel several times in 2011 for a final average around $90. Crude is flowing out of the expanding productions in North Dakota’s Bakken formation and Canada’s oil sands, but the oil hub in Cushing, Okla., is not equipped to process heavy crude like refineries on the Gulf. Reversing the pipeline from the Gulf to Cushing should ease the glut within weeks. The bigger question is Iran.

Read the story.