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Why $120 oil is good
Steve Hargreaves, CNNMoney
Speculators are often blamed for artificially inflating crude prices, but some experts say high prices are needed to cut demand and develop new resources.
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... The fundamental reality of oil - and the thing that makes it so attractive to investors in the first place - is that we are using ever more and finding ever less. High prices are necessary if we are to reduce demand, find new oil, and develop alternative technologies.

"The market is starting to send a signal: You got to get your alternative in line," said Robert Kaufmann, director of Boston University's Center for Energy and Environmental Studies. "Societies that ignore this kind of signal do so at their own peril."

Kaufmann isn't promoting the so-called "peak oil" theory - he doesn't think the world is quickly running out of oil.

... It's become popular to blame speculators - which would include mutual funds, pension funds, some banks, and anyone else who doesn't ultimately take delivery of a barrel of oil - for the run up in price. Congressman have recently spoken of an "orgy of speculation" in the commodities markets, and have held hearings into the matter.

But most analysts say investors are simply looking at these underlying supply and demand trends and buying oil because they see it going up on its own accord.
(8 May 2008)
Related: Goldman Sachs Says Bless The Energy Speculators (Like Us) (CNBC).

Contributor Scott Chisholm Lamont writes:
Manages to dismiss "so-called" peak oil theory in almost the same breath as offering an accurate definition of peak oil in describing the current discovery vs. extraction circumstance.

Iran says $200/barrel oil possible: report
Hashem Kalantari, Zahra Hosseinian, James Jukwey; Reuters
Iran's Oil Minister Gholamhossein Nozari said it would be possible to see a price of $200 per barrel for crude if existing conditions in the market continued, an Iranian news agency reported on Thursday.

Nozari said the reasons behind the surge in oil prices, which this week hit a record high above $123 a barrel, were the weak U.S. dollar and supply concerns from Nigeria.
(8 May 2008)

Where will oil settle after that? Around $100
Ian Mathias, Agora Financial.
... “It’s possible to attribute oil’s meteoric rise since early 2007 to rampant financial speculation,” writes Dan Denning, with an explanation, “But frankly, the oil price is hostage to a number of variables, many of which are not quantifiable. A fear premium definitely exists. Then there is the declining U.S. dollar. And there is the matter of investors treating oil as an asset class and as a ‘safe haven’ from inflation. The creation of sector funds and ETFs correlated to the oil price has made this possible.

“The increase in the oil price between 2001-2006 was a structural revaluation of oil’s value to the global economy. You had the Iraq war driving the geopolitical premium. Since 2003, you’ve had production peaks/declines in large fields in Mexico and Russia, persistent disruptions to Nigerian production and gradually increasing demand from emerging markets.

“And now? Well, like iron ore and coal, the oil price indicates that the emergence of China and India as productive industrial economies with emerging consumer classes is a lot more resource intensive than anyone imagined. [CHART]

“The chart suggests there’s an oil bubble,” Dan says, “and that it has to correct soon. But by ‘correct,’ we mean oil between $95-105.

“In 2003, $40 became the new $20. In 2005, $60 became the new $40. And in 2008…$100 becomes the new $60.”
(7 May 2008)