Get real!

Oil's Gains Are Due to Fundamentals, Not Speculation

Junkyarddog thinks that $200/barrel oil means $10/gallon gas, and thinks "it's ludricous to think the economy can support a $200 oil barrel." Don't you remember that just a year ago, everyone thought it was ludicrous to think the economy could support $100 per barrel oil? And back in 2001, the first peak oil book I read predicted that oil at $40 per barrel would destroy the economy and lead to "demand destruction." Well, it turned out that $100/barrel oil barely caused a hiccup in demand, because in industrial (or industrializing) nations, oil is as much of a necessity as water. Here in NJ, the roads are just as clogged with SUVs as ever with gas at $4/gallon. Now there is even more traffic congestion with gas at $4 than there were when gas was $0.75 ! It turns out that gas demand is not elastic over the short term (meaning the 10 year lifetime of an SUV), and neither is heating oil demand.

As even Bush admitted, "We are addicted to oil," and when your pusher doubles the price of a fix, an addict sacrifices everything else to pay for that fix. If oil rose to $200, gasoline might hit $6 per barrel (not $10, see below), and Americans would cough up the $6, and sacrifice in other areas, because we're all addicts (except the Amish).

Your second mistake is assuming that if oil prices nearly doubled (from $135 to $200), then gasoline prices would actually double. FYI, even if it actually doubled (which would mean $270/barrel oil), gasoline prices would not double, because the price of oil is only one part of the cost of gasoline. Other parts include refining costs, pipeline costs, tanker costs, gas station overhead, federal taxes, and state taxes (which do not double when oil prices double, because voters would not allow it, so instead, taxes would actually fall by 50% as a percentage of the gasoline price).