What I believe is that the old rules of supply & demand don't apply when oil company czars (with a wink & nod from an administration with "one of the boys" at the top) have every reason to believe that their illegal conspiring to fix pricing will go unpunished (worse uninvestigated) by a Justice Dept run by & totaly politicized by the White House.
We all know what happens to US Attys who go after the wrong targets....don't we?
Oil is traded on the futures market, so if XYZ heating oil company is looking to buy 200,000 barrels for a December delivery, they go to the market and buy a 200 contracts at the current market price or place a limited bid at a price they are willing to pay. If oil drops, their contract may be fulfilled, if the price does not drop, they don't get a contract and instead have to buy at market price if they want to stay in business. Lots of times smaller companies buy from a larger supplier who takes the risk on the futures market and the smaller company is pretty much subject to whatever the larger supplier charges. In a crisis, like a hurricane that hits the Gulf, company owned gas stations like Herb's Gas Stations Inc. (non producers) may be making a bundle because they purchased at a lower price, or they may later be losing their arse if they bought a later contract at an inflated cost but have to meet current retail market prices. It is all pretty complicated because you also have midlevel traders and speculators buyers going short, long, as well as buying puts & calls, which also have an impact on the long term price of oil, but that is more or less how it works. It is a blast to trade futures, but it will raise your blood pressure in a heart beat, especially if you do it on pure speculation. I traded commodities on my own many years ago and did pretty well until I got a major hammering on sugar. After that I had to stop because I have employees that I have to pay and taking a large hammering on commodities is not the same as losing the cash you have in stocks. The potential loss is much greater than the amount of money you have in the actual market. Scariest words I have ever heard are "margin call"!!
So, supply and demand does come into play but at the local level market correction seldom reflects the actual price of oil today.
Here is a pretty good site describing how the futures market works and what part all the parties play in the futures market. At first you may think speculators are bad for the market, but they actually have an integral role in regulating prices as well. Take a look, it is quite interesting. http://tfc-charts.w2d.com/tafm/