$80 oil on the way to $100 by the end of 2009

Oil is now flirting with $80 per barrel. In January, while many other analysts were predicting $40 to $60 oil, I predicted that oil would soon be back at $100.

There are obvious and real underlying reasons for the escalating oil prices. But news headlines have ruled the price of oil since at least 2004. There was no real rational economic reason for oil to reach almost $150 (which for people with short memories may seem to have happened last century

The crisis overshadowed a November report by the International Energy Agency which showed that oil production from operating wells has been declining by 9.1% per year. That news should have sent oil prices dramatically higher, perhaps to $200. Even now, there is a lingering possibility that a strike by Israel on Iran could close the Straits of Hormuz and thus shoot the price into the stratosphere overnight.

The headlines started in 2004 and included the Abu Ghraib photographs, which increased enormously the fear factor in the Middle East. There was the re-Sovietization of Russia