Oil Prices: How High Can They Go?

Like baseball and real estate, complaining about energy prices is a national pastime. And while high gasoline prices can certainly make trips to the pump painful, they do not appear to have visited major havoc on the U.S. economyyet. That may have offered some small comfort of late to motorists shelling out more than $60 to fill up their Escalades.

But the comfort zone may be shrinking fast. On July 7, August futures for light sweet crude brushed a record $75.78 per barrel in electronic trading on the NYMEX amid saber rattling from
Iran and
North Korea. Although prices eased later in the day, the fresh strength may signal that elevated energy costs could be a fact of life in America for the foreseeable future.

Keeping Pace.

Phil Flynn, an analyst and trader at the Chicago futures brokerage Alaron, says that oil prices have been rising about $10 per barrel annually. “As long as the economy continues to expand, we will be at $80″ next year, he predicts. For the most part, he says the growing economy has kept pace with or outpaced the price of oil. Energy prices have “slowed the economy a bit but really haven’t stopped it.”

It’s certainly clear that high oil prices aren’t dulling demand for energy products. According to the Energy Dept.’s Energy Information Administration (EIA), U.S. demand for gasoline in June was 9.5 million barrels per day, a record.

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