Goldman Sachs predicts $150-$200 a barrel oil in six months

As the price of oil began steadily climbing two years ago The Fueling Station has consistently predicted that it was unlikely to go back down, contrary to what some analysts were confidently predicting. So, it comes as no surprise that a new report by Goldman Sachs says the price of crude oil could soar to $200 a barrel in as little as six months, as supply continues to struggle to meet demand.

This comes as US light crude passed the $126 mark for the first time.

Oil prices have now risen by 25% in the last four months and 400% since 2001.

I am not an oil expert. But the current problem is not about oil itself, which is why so many of the "experts" have gotten it wrong. It's about the geo-politics of oil. If you pay attention to political events around the globe it's not hard to see why the price of oil is rising. The signals are not hard to find. The volatile situation in the Middle East, as well as corruption and rebel activity in Nigeria, coupled with fast-rising demand from the emerging economies of India and China, falling production in Mexico and Venezuela, and tight refining capacity in the United States, was bound to disrupt the oil industry. Add commodity speculators into that mix, and you have the answer to rising oil prices.

- David Adams

We have featured all of this aspects of the oil industry on our blog, which has helped me put together the big picture in my mind of where we are right now. I have no idea if oil will reach $200 in the next six months. But Goldman Sachs was one of the institutions that got it right two years ago, so I wouldn't be at all surprised if they are proved right again.

The next question is whether rise oil prices is altogether a bad thing. Just as Barack Obama argued successfully last week, lifting the gas tax doesn't really help anyone in the long run. Higher gas prices will in fact probably help teach us to conserve our fuel better, increase consumer demand for fuel efficient cars, and speed up the next generation of alternative fuel vehicles.

While it may be an uncomfortable transition for Americans who depend on their car for work and getting kids to and from school, they should take a moment and ask how it is that Europeans manage to cope even though they pay the equivalent of $10 a gallon for gas. We really shouldn't be complaining about $4 a gallon.

If politicians were thinking sensibly about this they might consider taking some kind of measure to help truck drivers who are being hit especially hard right now. Maybe the government could offer them some kind of extra tax break on their gasoline and diesel bills.

Click here to read more about Arjun Murti's Goldman Sachs report.

Comments

[melissa]

Well if MCcain gets in you can guarantee the oil/ gas prices will continue to rise. The war will never end and we will continue to go further into a recession. Let's get a Democrat in and at least have a chance on maybe something changing... Same ol' hat is just that!

[Steve]

Wow, melissa you are dumb. Get back on the couch and wait until oprah is on before you speak again.

[melissa]

Steve,

First off I don't watch Oprah and I am not on the couch. Maybe you might want to do some research.Get off your Redneck butt stop watching Nascar... and maybe turn CNN on... wait do you even know what CNN is??

[Scott]

Oil and gas has not gotten more expensive, houses don't cost twice as much, food isn't more expensive,.... THE DOLLAR IS JUST WORTH HALF AS MUCH!

[Scott]

Oil and gas has not gotten more expensive, houses don't cost twice as much, food isn't more expensive,.... THE DOLLAR IS JUST WORTH HALF AS MUCH!

so-called "republican managerial expertise" is going to bankrupt all of us, except of course for the corporate elites which it loves so dearly.

[terry]

Lets see...stock market bubble...bust...rich get richer...housing bubble...bust...rich get richer...oil price bubble...no bust yet...but rich getting richer...I think I see a pattern here! :0((

[Bob]

It's not *just* oil that's leading this country to economic ruin. It's the twin deficits - the trade deficit and the budget deficit. It's the fact that we have a negative savings rate. It's the fact that some countries are considering trading for oil based on the euro, not the dollar. It's the fact that we are no longer a manufacturing nation. The financial services sector has grown tremendously, but we're not *creating* wealth anymore, we're just shuffling it around.

In a couple decades or so, China will be the world's number one economy, Europe second, and the U.S. third. We are fast becoming Rome...

[k]

Terry gets it. Post-oil bubble likely grain, alt-energy and mass transit. See GE, Bombardier, CSX. Notice all the rail positioning lately?

[kitty]

Europeans aren't paying much higher prices than they have been paying for years. With the exception of Iran & Venezuela (?), all oil nations trade in dollars. The dollar has sunk to less than half of its value in 5 years vs. the Euro. So, $10 a gallon, is €6.45 at today's exchange rate. When I left Europe in '04, gasoline was $5.70 a gallon. Europe has seen an average 75 cent per gallon increase in 4 years.

[Ray]

I do think as we get closer to the election that Cheney will lower the oli prices somewhat to keep at least a veto proof congress for the Republicans.

Whether Cheney is helping McCain or not remains to be seen.

400% increase since the Cheney/Bush administration started - they made more money than any administration in history.

[Jose]

If Marxist barack gets in, expect crippling tax hikes, socialized medicine, higher oil prices because the liberal cause panders to enviromentalists and global warming nuts who are worried that drilling in the U.S. may harm carribou. People get with it. Global warming far from a proven science.

[cltsig]

I hope oil does go to $200/barrel so I can see whether or not the big gas guzzling SUVs on US19 still drag race to the next red light. "Congratulations, you got there first."

[WALTER]

A few months ago one of the automobile mags reported that General Motors had fuel cell versions of the Chevrolet Equinox working, that they would soon offer them to 1000 people to be chosen by lottery in certain areas of the US and that they planned to spend $200 million to build supporting infrastructure. A couple of weeks ago I saw an interview with the Chairmen of Shell Oil and Autonation. During said interview the Shell Oil guy said that fuel cell vehicles were 20 to 25 years away. The Autonation guy said he thought it would be 15 to 20 years. Shortly thereafter GM announced shelving the fuel cell program to concentrate on electric power plants which would power at least one 2010 model.
Is there a connection here????
And, does anyone besides me remember the mega oil company mergers? After the mergers they closed several refinerys because of excess capacity. Now they say we are using so much gasoline they can't keep up with supply without importing gasoline!

[Bad]

This is getting ridiculous. Bush made his money from oil before bring president, he is making it while he is the president and he is going to make when he is out.
That is why he is protecting these people now, For his future not ours.

[kitty]

Jose, it must suck to be as ill-informed and afraid as you are.

[Jorge Pinon]

About a couple of weeks ago...$115 or there about...I searched Reuters-Energy and Bloomberg-Energy news from twelve months ago when the price of oil was about $65.00 per barrel and found that the issues in the market place then were the same as of today...Iran's nuclear reactor, Venezuela's belligerence, Nigeria's social conflicts, China's demand, etc. World oil balance still at the same equilibrium level of app. 86 mmbd of a year ago. The only factor is the dollar $1.29 to $1.58 today...my calculation about $14/16.00 worth. I accept a geo-political premium of $20 per barrel...so I accept $100 per barrel; but today's $125.00, or for that matter $200.00 because of the anticipation of an event that has not materialized?? come on, you must be kidding. Particularly with an economic recession which is going to impact future demand, and with Saudi Arabia sitting on 1.0-1.5 mmbd of spare producing capacity which could impact supply as soon as they announce that they are opening the valves...I believe that we are about to see a bubble burst. The only caveat is gasoline inventories going into the summer months and hurricane season. By the way it would not surprise me to see the Saudis increasing production sometime in the fall if prices continue this way ... they owe Bush a few IOU's...Iran, Venezuela and other members of OPEC are not going to be happy about this but who knows...JP

[Simon]

Let's remember who is really at fault here. It is those people driving Hummers, Expeditions, Escalades and other 9 mpg vehicles. Sure, this is FL and some people need to tow boats and need an SUV to do so, or they have a lawn care or moving business and they need the towing capacity, but it is a fact that 90% of SUVs never leave the road. They are status symbols so one soccer mom can show another soccer mom how many homes she sold last quarter. I know, I know. You wouldn't have bought it if your couldn't afford it. The fact is those drivers burn three times the amount of gas they need, thereby increasing demand, thereby increasing price.

[cltsig]

Simon - You're right, they are status symbols except now they're symbols that the driver is a (insert your derogatory term here, analogous to: short-sighted, greedy, unintelligent, same-people-who-have-HELOCs-out-the-wazoo,
debt-laden, non-readers, etc).

[Biff]

I'm rich, so I don't care about this.

[Tino]

You can boo-hoo-hoo and point fingers on a blog all day, or you can put your money where your mouth is. Unlike housing prices, oil prices can be easily hedged by owning a few shares of oil company stocks. Then, when you are filling up, you are literally paying yourself.

It's not rocket surgery.

[Leo]

First Obama was a Muslim, now he is a Marxist. You cannot be both (its like calling someone a Christian-Athiest); shows how stuipdly ignorant some people are.
Back to oil, I heard something interesting the other day. A man I worked with quit his job (cost too much to drive so far), and got a lesser paying job closer to home. I talked with him a few days ago, and he said that he has never been happier. He spends more time with his kids, tehy eat dinner together, and he is less stressed now that he drives A LOT LESS. Imagine that.

[Marc]

Large SUVs are using 3 times more gasoline than an equivalent car. Here are some facts about the ultimate POS gas-guzzler:

The H2 is a gas guzzler. Because it has a gross vehicle weight rating over 8500 lbs, the US government does not require it to meet federal fuel efficiency regulations. Hummer isn't even required to publish its fuel economy (owners indicate that they get around 10 mpg for normal use). So while our brothers and sisters are off in the Middle East risking their lives to secure America's fossil fuel future, H2 drivers are pissing away our "spoils of victory" during each trip to the grocery store.

The H2 is a polluter. Based on G.M.'s optimistic claim that it gets13 mpg, an H2 will produce 3.4 metric tons of carbon emissions in a typical year, nearly double that of G.M.'s Chevrolet Malibu sedan.

The H2 is a death machine. You'd better hope that you don't collide with an H2 in your economy car. You can kiss your ass goodbye thanks to the H2's massive weight and raised bumpers. Too bad you couldn't afford an urban assault vehicle of your own. Or could you...?

and the most disgusting part of these monster SUVs is that the Bush administration still gives you a HUGE tax incentive to buy one:

The H2 is a tax loophole. Under the current tax laws, business owners can deduct nearly half the cost of their H2s. If you are in the highest tax bracket, that's a tax savings of nearly $10,000! The government rewards you more savings for buying an H2 than you'd get for buying an electric car.

My car is a Pontiac Vibe, I am averaging 28.2 MPG in Pinellas County city driving and I have as much interior and storage room as a mid-sized SUV...get real folks, sell those POS SUVs and save a fellow soldiers life! No more Blood for Oil!

[TJ]

Sure, let the democrats in so we can watch our taxes go up too! Then we will have high gas prices and high taxes! It's more than just the war in Iraq. I blame the greedy oil companies huge profits at the expense of us poor schmoes! They can afford to take a cut but they won't. Almighty dollar!

[rich]

the oil prices are just a political tool in an election year.. the countries top two are big oil from way back... you wait and see come close to election time.. the price will fall.. and the republicans will take full credit for it.. and it will buy them votes.. since they solved the oil crisis they created... wake up people.. this administration is lie after lie.. and the propaganda to go with it..