Oil may hit $US200 a barrel

Isn’t it interesting how quickly we all adjust to increased prices? We’ve watched over the last year or two as the price of a barrel of oil has steadily risen to recently set new record highs even allowing for inflation adjustments.

With the price of a barrel of light sweet crude nudging US$110 we are officially confronted with higher oil prices than those reached during the ‘oil crises’ in the 70’s. But, our outrage at the price of oil and its flow-on affect at the pump seems to have flared briefly and dissipated as we all adjust to petrol at $1.40+ per litre.

In Australia at least, V8’s are riding a wave of popularity as are large SUV’s but one wonders how much longer the good times will roll.

A recent report by global investment banking firm Goldman Sachs, has seen them raise their expectation concerning the future price of oil. Their outlook for the period 2008-2012 is now a top end price per barrel of $US135, $US15 higher than they previously predicted and that’s assuming that there are no major disruptions.

Assume major disruptions, (they are inevitable) and Goldman Sachs suggest we could be looking at price spikes of $US150–$US200 a barrel. We all know that our local oil companies react quickly to price spikes by raising the price at the pump, but rarely do we see it return to prior levels when the spike has subsided.

Goldman Sachs suggested that there was a possibility that prices could fall between now and 2012, but for this to happen, current inventory levels would have to be increased - which is kind of a polite way of saying 'good luck'.

[Source: Goldman Sachs via Autoblog]