Economics
The Contrarian Case for $50 Oil
Despite all the bad news, oil never hit $80, and demand in the energy-hogging U.S. is likely to slow
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Just a few weeks ago traders were taking for granted that the price of oil would shoot through $80 a barrel. Economic forecasters and pundits were talking about the consequences of $100 oil, which might have cut 50 basis points from gross domestic product growth, according to some (see BusinessWeek.com, 7/26/06, "Would $100 Slam the Global Economy?"). Perhaps they should have been contemplating the prospect of $50 oil instead.
Yes, $100 oil is still possible and in the long term maybe inevitable. A geopolitical crisis, in Iran or elsewhere, or events like 2005's double whammy of Hurricanes Rita and Katrina, could bring it on sooner.