Originally Posted by The Duke

The psychology of speculation here is interesting. Folks want to believe that speculation is the source of the problem. After all, if it is speculation/weak dollar that is driving the price of oil up, then speculation can change and the dollar can get stonger, the price of oil will come down. This is interesting because this very viewpoint re: oil is speculative in nature. It's just another form of speculation. I could care less what a bunch of economists/market analysts might say about the cost of oil. The fact of the matter is that most of these guys, along w/ the banks, were so far off their forecast re: the future cost of oil, they're reeling now. They were so far off, it's not even funny. But this was to be expected, as many have already pointed out, it is oil that drives the world economy. In order to continuously grow, you've got to have a continuously increasing supply of oil, specifically high-flow easy to extract oil. The market just assumed it would always be there, but most laughable, they always thought it would be cheap. But how could this be w/ a finite resource?

It was the world's geologists who first predicted a spike in oil prices, likely the result of a peak in production. The geologic data is out there. Production amongst almost all of the world's oil producing nations has peaked. That means than no matter how hard you try today to produce what you did yesterday, you'll be unsuccessful. We can increase domestic drilling, best case scenario we're only delaying the inevitable. Domestic drilling will likely have little impact on cost. We'll never produce the amount of oil domestically that we were in the 1950's ('bout 10 million bbl/day). So now we hope the dollar gets stronger. But all evidence is that the dollar will continue to weaken. Even Warren Buffett expects the continued decline of the American dollar, he invests accordingly. I can understand the temptation to want to compare oil prices to the housing bubble. They are not the same thing and differ fundamentally.