There's not enough oil for demand at $75/bbl. So oil is at $130 to kill off a (thin) slice of that demand to ensure that markets balance out.

In the long run, we're all dead. John Maynard Keynes

Insight: Oil will move higher

The declining dollar, the rhetoric of energy independence, increased energy consumption in oil producing countries, and power shortages in the Gulf States that are enouraging "private generation" are key factors that will push oil prices to new records. Add political instability in some oil producing countries, natural disasters, and technical difficulties around the world, and we are looking at an energy crisis in full bloom, with no end in sight.

This is more than a small quote, but it's very noteworthy:

Dollar devaluation reduces oil supplies and increases the demand for oil. The result is a steady increase in oil prices. A prolonged decline in the dollar reduces the purchasing power of oil producing countries and increases the costs of international oil companies. As a result, the amount of money allocated for reinvestment in oil production declines. A decline in the dollar increases the demand for oil in countries with appreciating currencies and reduces the negative impact of rising oil prices on their economies.

■ Most Republicans in the US link oil to terrorism and call for energy independence. Democrats link oil to global warming and call for energy independence. Others link oil to dictatorship and call for energy independence.

The oil-producing countries would have ignored this silly rhetoric had it not led to billions of dollars in research grants and direct subsidies for corn ethanol, soy biodiesel, and other energy sources. The explicit intent of these policies is to replace oil, the life blood of these countries. Thus oil producing countries take the rhetoric of energy independence seriously. They are redirecting investment from the oil industry to energy intensive industries and other projects to export oil embedded in various industrial products. The effect is clear: slow expansion in oil production capacity and an increase in domestic energy consumption. Inevitably oil and gas exports will decline and world oil prices will increase.

■ Energy consumption in the Gulf region has exceeded all expectations. This massive and unpredicted growth has led to energy shortages. Almost all of the natural gas in most of the oil producing countries, including gas from unfinished projects, has been allocated to petrochemicals, production of electricity for local consumption, and various industrial uses. Since fuel oil supplies are also limited, u*se of crude oil in power generation has become an objective of policy makers* who decided to subsidise heavy oil to make it competitive with natural gas in power generation. This trend means that the use of crude oil will increase over time. This increase will be at the expense of excess capacity and exports.

In the long run, we're all dead. John Maynard Keynes

I suspect supply contracts of distilled products ay be pegged to oil futures like natural gas is, so quite possibly.

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes

the price of crude represents about half of the price of gas in the US (the rest being refining, distribution costs and taxes), and about a qurter in Europe.

Distribution costs and taxes are more or less constant; refining costs can vary a bit more (in a mostly uncorrelated to oil way), so a doubling of oil prices would, all otehr things equal, lead to an increase of about 50% from today's levels.

But $4 gas does not quite fully reflect $130 oil yes, so you should expect gas to be around $7, probably, with $250 oil.

In Europe, gas is around €1.50/l now, so oil at $250 would presumably put gas at about €2/l.

In the long run, we're all dead. John Maynard Keynes

has long been the biggest excuse to do nothing, with their cornucopian forecasts, but they have steadily moved closer to being "strident" (see my various articles in the Countdown series), and are now in a year-long campaign to leak the fact that their November Outlook Report will be substantially different and will flag, essentially, that the party is over and that we will never have the volumes of oil that everybody seems to be expecting in the next decade.

So it is that movement that needs to be listened to.

In the long run, we're all dead. John Maynard Keynes