Here we go again–yet more they say/we say stuff on the price of oil, although now that oil has surpassed $122/barrel, I suspect we’ll see a matching rise in the volume, frequency, and sometimes the silliness of such conversations.

Oil passes $122 on $200 oil prediction, supply concerns:

Oil futures blasted to a new record over $122 a barrel Tuesday, gaining momentum as investors bought on a forecast of much higher prices and on any news hinting at supply shortages. Retail gas prices edged lower, but appear poised to rise to new records of their own in coming weeks.

A new Goldman Sachs prediction that oil prices could rise to $150 to $200 within two years seemed to motivate much of Tuesday’s buying, although a falling dollar and increasing concerns about declining crude production in Mexico and Russia contributed, analysts say.

Light, sweet crude for June delivery jumped to a new record of $122.47 a barrel before retreating slightly to trade up $1.29 at $122.26 on the New York Mercantile Exchange.

Oil prices have nearly doubled from about $62 a barrel a year ago, which Goldman sees as a sign that the world is in the midst of a “super spike” in oil prices. Analyst Arjun Murti said in a research note released Monday that prices would ultimately force demand to fall sharply.

Not everyone shares Goldman’s view. Tim Evans, an analyst at Citigroup Inc., countered Goldman’s analysis with a note predicting that crude prices could as easily fall to $40 a barrel as rise to $200 over the next two years because supplies are, as Evans put it, comfortable.

…

At the pump, meanwhile, the national average price of a gallon of regular gas slipped 0.1 cent overnight to $3.61, according to AAA and the Oil Price Information Service. Analysts are split over how high gas will go; while prices have slipped lower since May 1, leading some analysts to say gas is close to peaking, others predict the fuel will follow oil’s upward surge.

“You’re going to see new highs for gas prices, probably for the weekend,” said Cordier, who predicts an average price of $4 a gallon in the coming weeks.

In other Nymex trading Tuesday, June gasoline futures rose 5.58 cents to $3.1087 a gallon after earlier setting a new trading record of $3.1163. June heating oil futures rose 5.32 cents to $3.3597 a gallon after rising to their own trading record of $3.3634, and June natural gas futures rose 16 cents to $11.338 per 1,000 cubic feet.

See Goldman’s Murti Says Oil `Likely’ to Reach $150-$200 for more on the latest Goldman prediction, which still apparently holds out hope that this “upcycle” is just a temporary phenomenon.

A few points seemingly in need of being sharpened here, yet again:

• Oil and gasoline price predictions are often little more than throw darts while blindfolded. There’s almost no end to the “surprises” that can erupt and cause havoc with the most insightfully and carefully crafted scenarios. (As bad as making believe such things can’t or won’t happen is trying to assess them. The biggest acts of prognosticatorial hubris arise when people try to determine what the price of oil would be if terrorists blow up some critical piece of the oil infrastructure in the Persian Gulf or the US attacks Iran or another hurricane rips through the Gulf of Mexico. Anyone who tries to hang a specific number on one of those scenarios should have his/her spreadsheet privileges revoked for a year.)
• We’re so desperate to know What the Price of Oil Will Do, as if it were an immense, oafish beast, drunk on fermented berries and stomping through our little village, leaving a meandering trail of crushed innocents, that we’re willing to read any set of tea leaves available as if it were the Oracle at Delphi. Airlines need to make decisions about hedging their fuel costs, consumers need to know how much weight to give fuel efficiency when buying a new vehicle, school districts need to allocate budget funds for bus fuel, venture capitalists and other investors need to gauge the viability of new projects, etc.
• If nothing else, OPEC’s newfound clout as a cartel, as seen in their mantra lately about how “the oil market is well supplied” should make it clear that they’re in the driver’s seat and can very easily ensure that oil won’t drop very far. If American consumers showed even half the willpower and singlemindedness in conserving oil as OPEC spokespeople do in their message discipline, we’d be in far better shape.
• The fact that Goldman nailed the original $105 “superspike” prediction is indeed impressive, but we shouldn’t get carried away, if for no other reason than that they failed to see $120+ oil so soon.
• Similarly, we should also recognize that $150 to $200 within two years is quite a large spread. As the article mentions, oil prices have essentially doubled in the last year, but rising from today’s $120/barrel to $150/barrel in the next 24 months (25% in two years) would be a far slower rate of increase than we’ve experienced recently.
• Never forget the timing aspect of this marketplace tango; oil prices rising now mean that gasoline prices will indeed rise, but it will take at least a little while for those prices to completely work through the system. As I often point out, one of the most important quick-and-dirty measures of how the oil and gasoline prices are doing is displayed on the AAA fuel prices page. Yes, it gives you daily updates on prices, but the real gem is the line chart on that page that shows the retail and wholesale prices of gasoline and the price of crude oil, all in dollars/gallon and on the same set of axes. When the wholesale gasoline number and the oil number get very close, which they are as I type this, then you can be sure gasoline prices will be rising unless oil prices drop suddenly and significantly.
• American drivers who are feeling squeezed by current prices are right to feel victimized, in a narrow sense: The rules of the game changed after they made very long-lived decisions about homes and vehicles and even careers. But they should stop whining about it, start paying attention (which partially explains how so many of them got into this fix in the first place) and get smart about conservation, if only to keep our friends in Europe from clutching at their chest and staggering around the room like Fred Sanford “having the big one”.

Every time I write about oil prices and toss rocks at prognosticators, I get e-mail from readers who want to know what I “really think” oil and gasoline prices will do. I’m sure they find it disappointing, but even in those “private” conversations I don’t resort to a PIDOOMA (pulled it directly out of my a**) and reach for false specifics. I’ll tell you all now what I always tell those closet correspondents: Oil and gasoline prices will generally keep rising for years, no doubt with some dips, whether due to the usual cycles in usage or the combined effects of a slight growth in world oil supply and the rising interest in and practice of conservation.

Could oil hit $200/barrel within two years, even without a kicker from a new war or other above-ground factor? Sure. And it could go a lot higher and even result in outright US gasoline shortages with such an event stirring the pot. That’s not being alarmist, but merely recognizing that all the pieces in orbit around and influencing each other in this witheringly complex worldwide oil market have a pronounced bias towards higher prices for a long, long time to come.