Europe can't be quite so sublimely uninformed, one would hope.  What to you read there on this looming crisis?  

Only connect.

Oil prices haven't risen 5 fold at the consumer level in the last 6 years.  It's about double at my pump (bad enough).  And crude prices are still below the last peak in 1981 correcting for inflation.  Cherry picking a brief excursion below $10/bbl when Saudi was flooding the market to spank the OPEC cheaters (1998) isn't the right point to start basing comparisons from.  

At least look at the average from 1990 to 2000 which I is more like $18 using refiner inputs (see
http://www.eia.doe.gov/emeu/aer/txt/ptb0521.html ).  WTI would be higher (guessing more like $20).  So far this year we are averaging about $50 so up about 2.5X in nominal terms and less given inflation.

Mogas hasn't been below $4/gallon in Europe since 1985 and yet I've never seen Paris, London, Rome, Madrid or any other European capital without the same traffic jams we have here in the US.  No doubt oil production is peaking.  No doubt oil price is going up.  We're likely to have a recession a la 1980 but the world isn't going to end if the US has to pay $3.50 for gas.

Oil could very well touch $100 at any time  but is that a fair question?  Shouldn't we be concerned if it's going to stay there instead of ramping up and then crashing back down to $40?  I'm much more a believer in a series of ever higher waves rather than a straight move to $100 and no retracement.

The rubber band is very tight especially given all that hedge fund money chasing a play in the futures market.  Forward diesel/heat is where the big bets seem to be being placed.  One real shortfall in a big producer due to strikes or politics or war and up up and away.  $100 is only a 65% increase from here.  But I lived through the last excursion up to that price level and got by.  My V-8 gas guzzler just didn't go out as much as before the price spiked.  And as soon as I had a real paycheck, it went to the junkyard where it belonged after being replaced by a 25 MPG Mazda 626.

Also Saudi Arab Heavy isn't all that much worse than Arab Light.  I can give you the yield curves if you want.  Since virtually every refinery is running full out at these margins, producing more AL is no more useful than producing more AH.  There's already plenty of crude out there relative to capacity to refine and capacity to hoard.  Otherwise, crude prices would be in backwardation rather than the shallow contango you see on the screen.  

There is no real shortage right now.  Only a palpable fear that there will be one.  This could end up very very ugly for the longs if we have a warm winter and/or a Chinese recession for some reason.  The one thing I experienced over and over trading oil is that when everybody thinks they see a sure thing, it prices in instantly and you can get your ass handed to you very quickly.

Or, much more likely, losing it!

True, there's only a fixed amount of oil. However, there's a lot of it still there, and the demand curve is quite elastic. If prices go up, demand can drop quite easily--because oil is mostly used for transportation and there are plenty of ways to reduce consumption with almost zero lifestyle impact. As you know.

A doubling in oil price will take years or decades. We had an artificially low price for the last few years because of the slowdown in the economy, and we needed to make that up, but at this point the cost of oil is pretty stable.

US pump prices have a bit of a disconnect with world oil prices as the refineries are near capacity and demand exceeds this capacity in peak use seasons. Storage and production swithching (so that relative amounts of heating oil and petroleum are stored or produced in relation to demand) helps a little but the price mechanism stkll kicks in and this year could kick in badly as the barrell price is used as an excuse for pump price increases.

A inexorable price rise with the long term prospect of  constinual rises would be good for the enviroment as it would encourage changing from oil based fuels to sustainables and renewables. Investment decisions for these are based on the oil price with $50 often being seen as the point at which these alternatives become economically advantageous. Long term changes like these would of course threaten the producers' economies so it is in their interests for low based but unstable prices.  

It's got a "bathtub" shape that reflects the initial lack of extraction technology, then a long period of gradually declining price (in constant dollars), and then a sharp increase that starts in about 1970. Even ignoring the wild price swings in the 1970s caused by OPEC price manipulation, it looks pretty clear that by then the costs were starting to increase.

http://www.iags.org/iraqpipelinewatch.htm-just kinda interesting to check every few days. There have been over 200 sabotages to oil pipelines in Iraq since US invaded. And I think that only a few times have these attacks on the pipllines even been mentioned in the news when talking about Iraq.

As for the 100 dollars, well as bush would say-I'm going with my gut(although I think my gut is a bit more well read than bush's gut on this subject) and agreeing with Jerome on this.

"People never do evil so throughly and happily as when they do it from moral conviction."-Blaise Pascal