Oil is... complicated. We are touching on several of its points, but most likely not all of it....
For example, oil prices seem high, but that's because our weak dollar is adjusted into that price. So, there's an inflationary factor.
Oil is high because of growing consumer demand in Asia. So, there's a global demand factor.
Oil is also high because supply is more or less dictated by our suppliers in the Middle East.... Supply control is also a factor.
Oil is also highly speculated right now. Speculation is yet another factor.
Personally, I do like oil. I really wanted to get into ExxonMobile back during the start of the second Gulf War.
However, because getting into it requires such a premium NOW, I just don't see why I should. Even with great companies and a product that sells itself, you can still lose money if you buy in at a time that may be overvalued from all the speculation frenzy.
There are reasons why oil is legitimately high, and that will likely remain so for the foreseeable future. However, there are also reasons why oil shouldn't be THIS high, and investors should be careful of a rising bubble.
As for oil being an economic indicator.... Yeah, I would agree that it's an important one. However, I don't think it's as good as the S&P for example.... Oil is only one (key) component in the supply-side process, and many other factors are involved in determining productivity. Contrast this with the S&P, which only measures the end result....
It's also worth mentioning that the United States is still far from "fuel-efficient" as an overall country. UK, for example, has been paying $5/gallon for quite some time now, and though they're not any happier about it, they're much more fuel-efficient than we are. So, there's an adaptation factor as well. Chances are good that our country, in the near term, can adapt to the oil prices by becoming more fuel-efficient as well. Some have already converted from SUVs to sedans....
I guess one final comment is I don't think oil moves quite the same way as precious metals.... However, I'm rambling from hunger now, and starting to lose my train of thought.
So, instead, I'll refer you to a basic chart to help illustrate my point:
