An analyst for Goldman Sachs is warning that crude oil prices could surge to $200 per barrel in the next two years. This is the same analyst who correctly predicted three years ago that the price would reach $100 per barrel.
This latest prediction follows last month's prediction by OPEC president Chakib Khelil who also said that crude oil prices could reach $200 per barrel.
In options trading, the number of contracts betting on crude oil hitting $200 a barrel by the end of 2008 has tripled since the start of this year.
In a completely opposite view on the market, there is a school of thought that says that peak oil is many decades away. These analysts believe that the current prices reflect a bubble waiting to burst. The fundamentals suggest that a weakening economy is leading to lower demand and prices will eventually fall. The higher prices rise, the harder the fall will be when the bubble bursts.
Michael Lynch, President of Strategic Energy & Economic Research Inc., said that oil has become "the mother of all bubbles." He is predicting that prices will fall as low as $80 per barrel this year and as low as $50 in the next several years as more supply comes on line.
The United States had better hope that the "Mother of all Bubbles" scenario happens. They have absolutely no energy policy in place to deal with $200 oil. Rather than a meaningful discussion of what $10 per gallon gas prices would mean, the country is fighting over an 18.4 cents-per-gallon tax holiday for several months. This gimmick may save the average driver $30. Yet as Bloomberg.com (http://www.bloomberg.com/apps/news?pid=20601087&sid=aza2XQB.kk0k&refer=home) reports, "More than 200 economists, including four Nobel prize winners, signed a letter rejecting proposals by presidential candidates Hillary Clinton and John McCain to offer a summertime gas-tax holiday."
Talk about not seeing the forest for the trees.
Which scenario is correct? Time will tell. My money says that peak oil and higher prices are with us for the long term. As I write this posting, crude oil prices are setting all-time records at $128.97 per barrel.
This latest prediction follows last month's prediction by OPEC president Chakib Khelil who also said that crude oil prices could reach $200 per barrel.
In options trading, the number of contracts betting on crude oil hitting $200 a barrel by the end of 2008 has tripled since the start of this year.
In a completely opposite view on the market, there is a school of thought that says that peak oil is many decades away. These analysts believe that the current prices reflect a bubble waiting to burst. The fundamentals suggest that a weakening economy is leading to lower demand and prices will eventually fall. The higher prices rise, the harder the fall will be when the bubble bursts.
Michael Lynch, President of Strategic Energy & Economic Research Inc., said that oil has become "the mother of all bubbles." He is predicting that prices will fall as low as $80 per barrel this year and as low as $50 in the next several years as more supply comes on line.
The United States had better hope that the "Mother of all Bubbles" scenario happens. They have absolutely no energy policy in place to deal with $200 oil. Rather than a meaningful discussion of what $10 per gallon gas prices would mean, the country is fighting over an 18.4 cents-per-gallon tax holiday for several months. This gimmick may save the average driver $30. Yet as Bloomberg.com (http://www.bloomberg.com/apps/news?pid=20601087&sid=aza2XQB.kk0k&refer=home) reports, "More than 200 economists, including four Nobel prize winners, signed a letter rejecting proposals by presidential candidates Hillary Clinton and John McCain to offer a summertime gas-tax holiday."
Talk about not seeing the forest for the trees.
Which scenario is correct? Time will tell. My money says that peak oil and higher prices are with us for the long term. As I write this posting, crude oil prices are setting all-time records at $128.97 per barrel.