What about the “long crude estimates” – those stating what the price will be years from now?
Peak Oil is beginning to make an impact there, as well. The price has surged in the past few days, and we’re looking at USD140/barrel in 2016. As these long prices are always very conservative compared to the trading prices (well, almost always) they’re taking some time to catch up to the reality on the ground.

Check out Bloomberg for the details:
http://www.bloomberg.com/apps/news?pid=20601087&sid=a_jM0ghSxR.s&refer=home

Oil is priced in US Dollars (for the most part) worldwide (the exception being Iraq just before it was invaded, and recently Iran – possibly just before being blasted out of existance).

US dollars have lost 70% of their value between 1979 and 2007.

Other currencies have retained more of their value compared to the US dollar, especially recently, and therefore it is AMERICANS who are feeling the highest price increases for oil, worldwide (except for countries which have currencies directly pegged to the US Dollar such as Panama, Belize, etc.)

For example, the Euro started out at a value of about 85 US cents when it was created (if memory serves me right) and is now at $1.56 (approximately). Therefore, due to the Euro buying nearly twice as many dollars as it did a few years ago, the tripled price of oil is not felt as acutely by the Euro zone, but the full force of the 300% price increase in oil is felt by Americans.

Look at this chart. And the comments below it.

http://bespokeinvest.typepad.com/bespoke/2008/03/golddollar-rati.html

Now, mentally turn the chart “upside down” and you’ll see that the value of the dollar vs. gold is plummeting.

So – let’s recap briefly (because I’ve got to get to bed and get up and go to work).

Historically, for decades, when talking in US Dollars (the recent worldwide currency of choice),

-Canadians paid 150% to 200% of what Americans did for gasoline

-Britons and Europeans paid 300% to 400% of what Americans did for gasoline

Much of the difference in price was taxation, still is.

Now,

-Canadians pay about 20% more than Americans

-Britons and Europeans pay about 100%-120% more than Americans

See? Much of the price increase is actually aimed at Americans (possibly to try to reduce the amount of energy we use, in order for the rest of the world to have a better chance of getting in on the action/improving their standard of living).

OPEC just said that oil “will be” $200 a barrel.

So I guess, it will be-soon.

http://news.xinhuanet.com/english/2008-04/29/content_8075648.htm

You can read some about Chinese oil consumption. Recent years going up at 7.5% per year. More than that so far in 2008. Far more.

US oil consumption is something like 20 million barrels/day. Chinese is maybe 8 million barrels/day. But even at the 7.5% increase per year they will use nearly as much as the USA in 10 years. The USA uses maybe 25% of the worlds oil. As you can see world consumption is going up quite a bit with likely little or no increase in supply.

I don’t know the full cause of a bubble on current oil prices. I suspect some of it is increasingly widespread consideration of what the above facts will mean. So maybe the speculative bubble is pre-mature and some are using it to their advantage for profit. Even so, I don’t see how the above facts mean anything other than increased oil prices in the next couple of decades.

One of the links above mentions that China has 90 times more cars than in 1990. This has been coming for a decade or more now. It just has reached beyond the knee of the curve to become obvious what is happening. Oil prices have gone up more than simple supply/demand would warrant right yet. But it likely isn’t off for near future conditions.

You link to the article I referred to, from William Montgomery? Proving what?
In the comments for that article I have linked to Krugman stating something quite different.

Go to theoildrum.com if you want statistics, you can swim in them. But I would seriously recommend that you read The Hirsch Report, for the official, government authorized and approved version of what’s happening to the US energy supply. There’s a reason why The Pentagon is paying think-tanks to ponder the make-up of Post Petroleum USA.

http://en.wikipedia.org/wiki/Hirsch_report
You’ll find the link to the report itself at the bottom.

And for Pentagon’s view on this, and the actual military writings, check this out. Then let’s talk:
http://www.energybulletin.net/18056.html
The literature listing at the bottom of the link is comprehensive, and once you’re through reading that, your hair should have a slightly greyer shade.
Excerpt, from a study by the US Army Corps of Engineers, famous for their “the sky is falling” attitude to reality:
“The doubling of oil prices from 2003-2005 is not an anomaly, but a picture of the future. Oil production is approaching its peak; low growth in availability can be expected for the next 5 to 10 years.”

The report depicts the likely shape of future geopolitics: “In conclusion, we are clearly entering a very different period for global energy markets and relations. We shall continue to face geopolitical risks and uncertainties and concerns around energy security will continue to rise. Petroleum will remain the most strategic and political energy commodity with natural gas running a close second. .…The roles of leading actors in the global energy system will also change as the center of gravity for oil production shifts back towards the Middle East and Central Asia….Oil wars are certainly not out of the question.”

You should also try to get a back-issue of this copy of Defense Technology International: The Military and the End of Oil, May/June, 2006 issue.
http://photos1.blogger.com/blogger/1705/1331/400/Slide1.2.jpg

Why does this God-complex persist?

It’s possible to link to just about any viewpoint on the net. Case in point, William Montgomery here, in an editorial, and Paul Krugman over at the NYTimes, are diametrically opposed on the topic of whether oil prices are the result of speculation or not. William states he “doesn’t agree with Krugman.” Which is a perfectly honorable position. Both are stating their chosen facts to support their arguments.

Your linking to an article proves nothing. Oil is a finite resource. M King Hubbert’s predictions are on track. The price is rising – that’s my set of base beliefs. :-)

Lets say I sell widgets. I produce 100/day and my cost is $1/widget. I sell them for $2 and my profit is $100/day. I am not greedy and only need $100/day to be satisfied.

Now I raise the price to $4/widget and still sell 100/day. Now my profit is $300/day.

Now I raise the price to $6/widget and now sell 90/day. My profits is $450/day.

But I see this is the point of elasticity in demand and since i am not greedy lower the price to $5/widget. Now I only need to produce 25 widgets/day to maintain my desired profit of $100/day. I produce those widgets before noon, close shop, have some wine and life is good.

Sorry for the pedantic rant but I think what we are seeing is smart producers learning the price at which decrease in demand means the price has peaked. If I were that producer I would then cut production to maintain that price.

I realize that the price of oil is not that simplistic and that speculation and pricing in a devalued currency plays a significant role but I do believe that for the first time since WW2 the true price of what developed economies are willing to pay for oil is being tested.

Reduction in demand will occur but it will trail current price rises significantly (probably by several years) and in the meantime real economic pain (in the form of inflation and changing lifestyle) will be felt by societies highly dependant on oil.

This is the poster child of self-serving statements.

ANd if there’s anyone out there who doesn’t think that Mr. Pickens is betting on a rapid fall from that lofty number at some point in the not-too-distant future knows very little about how the world works.

The fundamentals of supply and demand CANNOT POSSIBLY account for a 400% increase in the price of Oil over the past 3 years. CANNOT. 400% inflation becuause of a supply that is very high and a demand which is falling?

Please explain how rising supply, falling demand = 400% inflation. It does not. What is going on here is Katrina opened the eyes of investors and hedge funds to the profit in the oil commodities market. They are playing the market like a fiddle and have driven the price using fear, tiny margins and futures contracts manipulation.

The world is not experiencing an oil glut – it’s going through a contraction in supply, and demand is still rising, though abating somewhat as economies are cooling off. (The high cost of transportation being one factor in that.)

Even with a price correction due to a slackening in demand, there’s no point in hoping for a significant reduction. There’s just not enough new production happening, and existing sources are all (seriously – ALL) delivering below expectations, due to overoptimistic prognostication of available reserves.

Not one – not a single one – not one major oil company has reported greater finds during 2007 than what was produced. This is a first. But expect it to become a constant.

I can only smile at the polyanna statement from AR in the first post. It’s that kind of irreality that is turning this into a “why the hell did we build a village under that promontory” situation. We better face up to the fact that our strategies no longer fit the landscape.

It appears you already have formulated the answer to your question, then.

However, there must be an equilibrium point somewhere… or not.

I don’t see the reasons for such a spike either. Think however that China’s demand has a lot to do.

World is very complicated, politics and in some cases at war in many oil producing zones, so that also forces the prices up.

And as commented before, to barely understand this, a big homework has to be made.

ppellico, I’d be the last person to profess to know what’s going on regarding oil prices. My blogging the news does not make me an authority.

However, given that the article you provided the link to begins with “In My Opinion,” I’m hard pressed to see how that makes it the only possible “truth.”

Just as William C Montgomery’s editorial on the subject is one man’s opinion.

There’s a lot of emotion wrapped up in all of this; I’ve no idea who’s right, who’s wrong, or even if there are any black and white answers. And that’s the truth.