Oil is a "commodity" that is readily supplied by many countries, and commodities tend to either be in over supply or short supply.
When there is a short supply, prices bid up to the highest that the market sustains. When supply is ample, prices sink to the lowest that producers will accept. There is no happy middle ground.
That is why commodity prices (not only oil, but cocoa, metals, etc.) are "volatile" and why it is so easy to lose your shirt in commodities trading.
So along with traditional supply and demand economic issues, there is also an incredible incentive to manipulate the market for a commodity.
For example, everytime Mahmoud Ahmadinejad shoots off his mouth and talks extinction of Israel, oil prices go up. Iran pursues an atomic bomb and openly announces every milestone in their program, oil prices go up.
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