Oil futures soar to new high

Anyone hoping that the surge might have reached its peak is in for a rude awakening.

Analysts say that $110 a barrel or higher is possible given that the usual rules of supply and demand aren't driving the oil-price party train. And the Goldman Sachs Group Inc. analyst who predicted the seemingly impossible $105-a-barrel "super spike" way back in 2005 has offered an update: oil as high as $200 a barrel.

Given that the original prediction came true last week during an extremely weak period for the U.S. economy and without geopolitical turmoil on a mass scale, "a future rebound in U.S. gross domestic product growth or a major oil supply disruption could lead to $150-$200 a barrel oil prices," wrote Goldman analyst Arjun Murti, along with coauthors Kelvin Koh and Michele della Vigna.

Others offered less daring predictions and even the Goldman team acknowledged that oil futures could go sharply lower if rising prices lead to a global reduction in demand. Still, there are fundamental differences from past run-ups in the oil markets, analysts said.

"This is not a normal year," said Tom Kloza, chief oil analyst for Oil Price Information Service, an energy price tracker based in New Jersey.

Instead of runaway demand or a hurricane, war or other supply disruption, oil is responding to the weakening U.S. dollar, the currency in which oil is traded. Investors desperate for havens in a deep housing market slump are buying up all kinds of commodities, including oil. In addition, a weak dollar makes oil cheaper in foreign nations.

"The money managers are not thinking independently," Kloza said. "They are playing this by investing heavily in oil futures, and this is all going to end very badly."

Gasoline and diesel prices have followed oil higher. Analysts say the situation was much different in 2007, when a spate of gasoline refinery problems and tight supplies caused an unusual spike in retail gas prices weeks before the traditional Memorial Day weekend start of the summer driving season.

"Gas prices are usually driven by supply and demand," said Phil Flynn, vice president and senior market analyst for Alaron Trading Corp. in Chicago. "This time it's all about the cost of oil even though gasoline supplies are pretty ample. It's rewriting the rule book."