The oil party is finally over

[bemildred]

By GWYNNE DYER

LONDON -- Welcome to the world of $ 70-per-barrel oil. That's if there is no crisis in the Persian Gulf over Iran's nuclear ambitions. If there is, then get ready for $ 140 a barrel. Oil briefly breached the $ 70 barrier eight months ago, but this time it is going up for good.

Exactly one year ago the investment bank Goldman Sachs put out a paper suggesting that the "new range" within which oil prices will fluctuate is $ 50-$ 105 per barrel. (The old range, still used by most of the oil industry when deciding if a given investment will be profitable, was $ 20-$ 30.) The price could surge well past the upper end of the Goldman Sachs range if the United States actually does launch military strikes against Iran, but it's going up permanently anyway.

Whatever his longer-term plans, U.S. President George W. Bush is unlikely to attack Iran before the mid-term Congressional elections in November, for three of the last four global recessions were triggered by a sharp rise in the oil price. But even without a Persian Gulf crisis, the oil price will only stabilize at a price a good deal higher than now, because the major players in the market understand the long-term trends.

Transient events like the Iran crisis and the political unrest in Nigeria (which has cut that country's exports by a quarter) drive the daily movements in the oil price, but the underlying supply situation is so tight that oil would stay high even if Nigeria turned into Switzerland and Iran opted for unilateral disarmament. "On production, there is nothing we can do. (OPEC, the Organization of Petroleum Exporting Countries, is) already producing at maximum output," said Abdullah al-Attiyah, Qatar's oil minister.

The Japan Times

[katty]

1. it sure is!! $70.? ! it will go higher than that by '07

[playkate]

2. You'd better hope the oil's not.

Unless your car runs on grape juice...