There's a couple places where the price of oil is determined. First is the futures market, which can be seen
here. Here's how this works. You put in a buy order at any price you want. If somebody wants to sell their oil at that price, they'll buy your future at your price and you're good to go. That's how the market works. I know, you'd rather believe that BOR knows what he's talking about.... but then there are always those pesky facts lying around to trip over.
Another place that determines the price of oil is the owner/seller of the oil. For example, Hugo Chavez. He can sell V's oil at any price he wants to. He could sell it for a dollar a barrel directly to you if he wanted. The House of Saud could sell us oil at ten bucks a barrel if they wanted to. They charge as much as they can get 'cause why shouldn't they? If oil becomes too expensive, somebody will come up with an alternative that's more attractive, right?
One more is the oil companies. They need to operate at a profit, so they're going to buy it and spend money transporting it here, refining it, and delivering it to gas stations. So... they need to charge you more for that gas than they spent in that process, and they determine their margins.
And that, my friend, is in a very general way how the price of oil is determined.