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Last week, Morgan Stanley economist Ole Slorer made a statement that is cause for celebration: oil will one day fall to $60 a barrel again. However, Slorer warned that crude could hit $150 before the dollar regains value and prices begin to stabilize.

In mid-May, production of oil in Saudi Arabia increased by 300,000 barrels a day, while OPEC nations have upped production by 500,000 barrels a day. Much of the inflation in oil prices is blamed on speculation, driven by panic induced by a weak economy and falling dollar. Although some speculators have eyed oil as a good investment in light of the increase in demand in nations such as India and China, the predicted demand for oil in those nations has not tipped the economic scales enough to warrant fears in the market. According to Phil Flynn, senior market analyst for Alaron Trading, the dollar is looking stronger than ever- good news for Americans. U.S. Treasury Secretary Henry Paulson contends that the price of oil is being driven by supply and demand, not rampant speculation. However, Paulson added that inflation is “under control,” except in regards to food and energy prices, leaving some room for discussion as to the definition of “under control.” The Saudi oil minister was quoted as saying that “supply and demand is in balance,” but today, the Saudis have offered to meet with oil-consuming nations to discuss upping the output of Saudi refineries to meet demand, as now they feel as if the price of oil is higher than it should be.

via: CNN, halife.com

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