Canuck Economist

World Series of Crude Oil: Winner Decides Winter Gasoline Prices

William Dav said:

"you will get use to $5, $6 and even $7, we have in Europe a long time ago. As there are no really good alternatives"

True we would get used to it - IF this was driven by the taxation wedge, as it has been in Europe. However, if this is driven by supply an demand, we will then have the supply and demand responses that we have observed - witness the huge investments in Canadian Oilsands and the humongous response in carbuying patterns for which the American car industry was so disastrously prepared for. The transition costs of a fast adjustment are huge! The economy will just fall apart, and we have had but a little taste of it in the past year. Sustained high oil prices will engender sustained or worsening economic slowdown.

Regarding the article itself, not sure that I see Goldman Sachs is actually manipulating prices towards $100/bbl, much less succeeding in doing that.

The supposition here is that the company can manipulate public opinion and that will impact the market for oil for a month or two. Hardly believable! The crude oil market cannot be manipulated by Goldman or the "texan oil barons" for more than a few days; only some very select middle-eastern producer countries are able to keep the market under-supplied for a time (but why should they collaborate with Goldman, when they might be better to bet against them - and their big ugly bonuses).

The question is can world economies stand oil prices greater than about $70bbl? I think not. Middle-eastern countries with influence in OPEC have already signaled that they do not believe this and will aim to keep prices $30 lower than the $100/bbl advocated by the author. Current prices will come down!