Could we see $300+/barrel oil in an economic recovery?

[KillCapitalism]

I was speaking with someone yesterday who is an energy analyst & I do take this guy somewhat seriously since he predicted oil prices of $150/barrel in 2008. I was asking him about recent crude price hikes, and he said the reason for it is that there are signs of an economic recovery. He explained that if we have an economic recovery that is fairly strong, such as a 6% increase in GDP, that we could see extreme hyperinflation in energy markets. I asked him what he meant when he said extreme hyperinflation, and he told me that $300/barrel oil would not be out of the question due to "highly increased demand."

If this is the case, a lot of people would be worse off in a recovery than they were in the current recession. Could we see oil prices like that, or is he just really off on this one?

[MrModerate]

1. 1) Sure, you betcha, and 2) It wouldn't necessarily be a bad thing . . .

Fossil fuels are the leading cause of climate change. They are also (at $50/barrel) less expensive than other forms of energy. Raise the price of oil and you drive money to non-fossil fuel development. This was already shaping up as a sea change (pun intended) before the current crisis hit. The tide will turn (wink-wink) and money will become more redily available to alternative energy developments.

[Lyric]

11. Yeah, and the poor, rural people

who won't be able to get to their jobs between the time that the hyperinflation starts and the advent of an affordable alternative source of energy...well, they'll just go into stasis or something. They won't starve, or freeze, or suffer because they can't get to a grocery store or a health clinic. The closest cities will surely jump all over themselves to dish out the cash for regular public transportation out into the middle of nowhere. And if that doesn't happen, why, all those poor people can just move to the cities! I'm sure that they won't mind giving up their entire lives to go eke out an existence working at Mickey D's in the city and living in the shitty apartments that the recently-foreclosed homeowners-turned-renters didn't already take.

Why didn't we think of this brilliant idea before!

[Javaman]

12. Oil is running out. It will get very expensive.

it will effect the poor the most. But wishing it wasn't so doesn't change a thing.

push for alt fuels and power now so the transition won't be crippling.

The price of oil will go up as the economy "improves" because the US dollar is based on oil. Hence the term petrodollar.

it's going to happen.

I worry about it every day. I'm far from being middle class.

[MrModerate]

14. Ahhh, c'mon now. None of this is new . . .

And there are far greater stresses on the rural poor than expensive gasoline. Will government and society have to respond if your nightmare scenario comes true? Yes.

Ultimately, investment in alternative energy sources will reduce the per-erg cost for everybody.

[Union Yes]

2. If we don't reign in demand via better MPG standards, then yes.

Conservation would go a long way too.

Better transit options would help break our addiction.

[Hannah Bell]

3. Let's see, economic activity down 6-10%, but oil prices down 67%.

Global increase in demand during the bubble was about 1-2%, but supposedly it was enough to raise prices about 200%.

Nope, I don't buy it.

Your friend says if the world economy comes back oil goes up to $300/bb, that would be about 500% increase. Will there be even a 100% increase in production or consumption?

If you go back & look at BPs yearly oil reports, you find nothing like that's ever happened. Year-to-year increases in demand are under 5%, I think around 1-2 on average if i remember right.

The price may go to $300, but not because of "demand".

Because of dirty shenanigans, same as all the other oil bubbles.

[Truth2Tell]

4. You could even see it without the recovery part. nt

[grantcart]

5. No

Once oil prices reach a certain point they substantially undermind the foundations of economic activity and causes a substantial decline in supply. Because there is not a lot of elasticity and the oil producing economies include countries that require constant sales to faciliate servicing debt production remains high when prices fall. This cycle was proved when $ 4 per gallon gas triggered the other weaknesses in the economy.

There was a general consensus in the industry that oil would peak at $ 150 in 2008.

Finally when oil goes over $ 100 a barrel significant alternatives start to increase production. The results of the $ 150 per barrel has led to massive successful exploration of mammoth off shore oil fields in Brazil is one example, returning to less efficient wells is another, and finally if it ever reached $ 200 a barrel it would trigger massive investment of non oil production alternative sources, which is precisely why OPEC does not want it to go too high, it would incentivize a cheaper and more effective long term production of solar and wind production.

[KillCapitalism]

6. Related article:

http://finance.yahoo.com/news/Oil-rises-to-sixmonth-high-apf-15160848.html

[TexasObserver]

7. If we do, unemployment will be at 5%. I'll take that.

At $300 a barrel, alternative fuels and renewable fuels all become economically much more viable and mandated. Cars will have to be more fuel efficient.

$300 a barrel will mean demand for production is off the charts, and that's a good thing.

I don't believe we will see $300 a barrel for at least five years, however.

[Baby Snooks]

8. Imagine your light bill though in Texas...

Your light bill in Texas, and most states, is based on the price of natural gas. If we went completely to coal or nuclear, the rates would still be based on the price of natural gas. "Just because." Just because of the obvious.

And that of course is what drives up prices of oil. Just because. Just because people will pay what they have to pay. Although one of the things that started the collapse of our economy last year was the price of oil and when it went up to $140 a barrel everything else went up too and suddenly no one could afford much of anything. Particularly $4 a gallon gasoline on top of 20 cent a kilowatt hour electricity and $5 a gallon milk and $10 a pound chicken thighs.

We live in a "just because" world filled with crooks who will rip you off "just because they can." Including Congress.

Most expected demand would increase when oil dropped to $40 a barrel. It didn't. The Saudis want $70 a barrel. They will probably get it in a month. And demand will probably decrease even more.

Wall Street may be recovering. The rest of us aren't. And the rest of us are watching what little we have and not wasting it at the gas pump.

The best thing that could happen to us would be sudden depletion. You would see how fast the government would pull all sorts of "alternative energy" rabbits out of the hat.

[notesdev]

9. Economic recovery is a small factor in the equation

the bigger factor is, what is the dollar going to be worth when the Bernanke/Geithner/Paulson/Goldman Sachs crew get done with it?

[jdp349]

10. It's possible

but it's generally unpredictable.

Holding technology constant (not a good assumption) oil prices will rise due to more predictable market forces.

[Juche]

13. I've heard that all raw materials may shoot up in the recovery

The reason is that supply is being cut to match the lack of demand, so when demand goes back up it'll take time for supply to catch up too. So there may be a period when raw materials are too expensive before the higher demand causes us to produce more.

[depakid]

15. Yep- commodities will rise just as they plunged