After both crude oil in world markets and gasoline at American pumps hit new record highs Monday, a Goldman Sachs analyst said the once-unspeakable $100 a barrel oil will soon look quaint. Oil may trade at $200 a barrel, and soon, Arjun Murti told USA Today.
Oil hit another record Tuesday, edging toward $108 a barrel for light sweet crude. Gasoline hit a nationwide average of $3.225, the highest numerical total, but still under the inflation-adjusted $3.405 in March 1981, according to USA Today.
The weak dollar is a big part of this price run-up, as is conflict in oil-producing nations and long-term peak oil fears. But the biggest factor is greed, as speculators invest heavily in the oil market looking for the next chance to sell at a higher price.
Like the real estate bubble, this bubble affects nearly everyone. If the oil price keeps climbing, it will be good for only a very few people.
The good news in the increased oil price, and a parallel increase in coal prices, is that those fossil fuels will become less lucrative as energy sources. Renewable and clean energy sources become more cost-competitive as the cost of fossil fuels rise. A carbon tax would have a similar effect, but instead of the profits going to speculators, it could go toward environmental remediation and alternative energy research and development. And it would more accurately reflect a true economic cost: To the climate.
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