[paddycakes]

Sorry, if it's no doubt been mentioned before, but I need to know this:

What's the counter-argument for the idea that oil can't hit, say, $200 a barrel, because if oil gets too high, no one will be able to buy it.

I'm talking short term here (next 5 years).

It's kinda like housing. Housing prices soar out of the reach of your average buyer, and housing prices correct.

Thanks!

[Homesteader]

One big hurricane headed for the GOM.

Israeli or USAF over Iran.

When it becomes crystal clear that KSA is in decline.

[f2tornado]

Recent high housing prices originally created from natural demand provided incentive to build new dwellings in and out of the core city at various price points. Speculators are quick to jump on any rising boat which leads to bubbles. Eventually the market reaches supersaturation and the house of cards (no pun intended) falls down. You can build lots of new homes in short order but the earth is making very little new oil.

Oil is still affordable, albeit quite painful, to much of the current mass using it should the commodity hit the $200 price point. I'm certain oil could have even higher price points and still be profitable for some industries to utilize even during recession. There probably is some price cap as an economy cannot put 100% GDP into energy and of course people will flock to available alternatives as oil reaches various price points.

[smallpoxgirl]

Obviously as prices rise, some people will be unable to buy for certain uses. There is not a clear line where no one can afford to buy. At what price would you just park your car? Depends on how much money you have and what other transportation options are available. It's pretty clear that some people would still be buying at $20 per gallon or more. At what point would you stop using plastics? Depends on the application, but for many things the price would have to go up ten times or more. Realistically for most things you wouldn't just stop using, you would reduce your usage. That's what allows supply and demand to work. There's a limited amount of oil around and it's incredibly useful stuff. Everybody wants some. If you're the average Haitian you may not have the bidding power to get much of it. If you're the average American, you'll be able to afford some.

[Daniel_Plainview]

$this->bbcode_second_pass_quote('paddycakes', '
')I'm talking short term here (next 5 years).

[jdumars]

The counter argument is simple:

We cannot sustain 6 billion people without it.

Think of it like an auction where the item up for bids is enough food to eat for a day. If you don't win the auction, you don't eat. There are 10 of these meals and say 60 people of varying income/savings levels bidding. That means bare minimum that 50 people will go hungry. Now, the interesting part of this little mental exercise is when you consider who gets the 10 meals. It depends on the finances of the top 10 wealthiest people -- and their greediness. Imagine that the most wealthy person in the room wants all 10. If he is sufficiently rich, he can do this. But if the top 10 are all closely matched, the bidding could reach exorbitant highs, but be more evenly distributed. If this scheme went on for a month, who do you think would be left at the end?