Even at $100 a barrel, oil is still cheaper than a Starbucks latte.

We've moved from a supply-led market to a demand-led one. In the past, the world has relied on OPEC's spare capacity, which in 1985 was 10 million barrels per day. Today that number is about 2.5 million barrels a day. We no longer have a safety margin to ensure price stability in the face of supply interruptions and demand spikes. Right now it's hard to see any relief in sight. Then there's demand. About 50 percent of oil demand is for transportation, and auto ownership in the developing countries is growing swiftly, especially in India and China. Goldman Sachs estimates that by 2050, they could have 1.1 billion cars on the road, up from just 20 million three years ago. That's an overwhelming increase in the need for automotive fuel. Put those two things together—limited supply and increasing demand—and you get high oil prices.