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Financial Crisis Eases, Energy Shortage Ahead

June 4, 2009

This is certainly not unexpected, and yet one has to wonder what impact the higher oil prices will have on the frail economic recovery both here and abroad.

Goldman Sachs Group Inc. raised its forecast for U.S. benchmark oil by 31 percent to $85 a barrel for the end of 2009 and predicted further gains next year as demand recovers and supplies shrink.

“As the financial crisis eases, an energy shortage lies ahead,” Goldman analysts Jeffrey Currie in London and David Greely in New York said in a report e-mailed today. The bank set a 12-month price target of $90 a barrel for West Texas Intermediate crude, up from $70, and introduced a forecast of $95 for the end of 2010.

Oil posted its biggest monthly gain in a decade in May, and this month traded above $69 a barrel for the first time since November on speculation a global economic recovery will trigger a rebound in demand. A decline in the value of the dollar has also drawn investors to crude and other commodities as an inflation hedge.

The rally has been driven by the “unwinding of pricing dislocations caused by the credit crisis,” Goldman said in the report dated June 3. It’s a “prologue” to a price recovery in the second half of the year as the global economy stabilizes and crude inventories decline, the bank said.

2 Comments
  1. day4night permalink
    June 15, 2009 4:19 PM

    No Solly, it’s not speculators or market manipulation that are causing the problem. The world simply isn’t producing enough liquid fuels to meet demand in a global expansion. During a recession prices fall as demand is cut. “Speculators”do play a role, but it’s nothing compared to the major problem of there not being enough oil produced. We may have entered a period when it becomes increasing difficult to even maintain our old levels of oil production. So prices rise. The market knows this, generally, and so signs of economic recovery are naturally accompanied by oil prices rising.

  2. Solly permalink
    June 9, 2009 1:36 PM

    so in all of the years that consumers have gotten ripped-off, under both democrats and republicans, nothing gets done about rampant speculation and manipulation in the oil markets.

    When Bill Clinton was in office and prices spiked, Republican in the state legislature were passing resolutions and writing letters, blaming it on reformulated (botique) gas needed for air quality. When George Bush was in office, Democrats were calling for investigations and issuing press releases, but guess what, nothing got done.

    Ever notice there’s always a reason, mostly lame, for the price jumps? A couple oil engineers were kidnapped in Nigeria, a refinery fire kept it out of production for a week, and of course some that are more legit, like high tensions in the Mid-East or huricanes.

    Obama and the Dem majorities had better produce. One of the causes for oil price jumps is speculation by people who don’t have to put any money down to gamble on what the price will be a month or a year from now, and then sell at a profit with no investment. That could be ended tomorrow.

    Not that I want a dollar a gallon gas again. The American people are too stoopid to deal with that without being wasteful. There was a story on local TV news after the price went down, and they showed this idget as she was filling up her mini-van, “It’s so nice now, we used to have to plan every trip because gas was $4.00 a gallon, and now we can just go.” Yes, Mulva, and how about we get a bigger SUV?

    Duh!

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