?Although it may sound fantastic, at least one economist has postulated that $250 oil is a hypothetical extreme that might be required to shock oil consumers.


This grim scenario is based on the history of the last super-surge in oil prices that took place in the 1970s and early 1980s when nominal West Texas Intermediate (WTI) prices rose by a factor of 10, from $3.50 per barrel to $35.


“If we take 2000-03 as a starting point, (during which time there was) a nominal WTI price of $25 per barrel, then it could be argued that $250 oil in 2010-13 may be required to have the same shock impact on oil users,” contends Adam Sieminski, chief energy economist for Deutsche Bank global markets commodities research in Washington.


This, however, isn’t the economist’s forecast. “Fundamentally, we believe the oil markets can justify $75 per barrel on the low side to $150 on the high side,” he says.


However, the economist cautions there is a huge risk that the price of oil will continue to escalate until it gets to some level— ?perhaps as much as $200 per barrel—when demand finally collapses because ordinary people can no longer afford to burn as much energy as they do now.


On the other hand, he believes there may be some supply-side miracle that will occur—biofuels, wind, solar, nuclear, and carbon capture and sequestration that makes coal work.


Nonetheless, these solutions may be at least a decade away, and in some cases “we are already witnessing the negative effects of their scale-up, such as the (cost) impact of biofuels on food, water and land that make alternatives difficult,” Sieminski says.


He notes that recently oil prices have been driven by a spate of highly bullish fundamental supply and demand issues, both short and long term.


For instance, the economist observes that, while oil demand in the U.S. is definitely slowing, demand growth thus far in the other OECD (Organization for Economic Cooperation and Development) nations remains strong, with 2008 OECD oil consumption expected to average 49 million barrels per day.


Meanwhile, growth in oil supply from non-OPEC countries is struggling. “We have seen very weak supply data from Mexico and Norway, a lack of growth in Russia, and labor strikes in France and the U.K.,” he says. This comes at a time when OPEC has been cautious with its production policies and when the Saudis have indicated that, long term, their peak oil supply will only be 12.5 million barrels per day.


Concurrently, “while world oil reserves are not alarmingly low, investment in reserves development is lagging.”


Against this supply/demand backdrop, Sieminski for the moment is maintaining a $102.50-per-barrel average WTI and Brent oil-price forecast for 2009.


This oil-price outlook isn’t too far afield from those of Goldman Sachs energy researchers who are now forecasting average global oil prices of $95 per barrel for 2008, $105 for 2009 and $110 for 2010. However, they also see the potential for crude prices rising much higher—to $200—should there be a major supply disruption.


That latter prediction shouldn’t be taken lightly. In 2005, Goldman Sachs energy analyst Arjun Murti was laughingly dismissed by many in the oil and gas industry when he forecast a high of $105 oil before the end of this decade. Well, in early May, the price of oil closed at around $126 on the Nymex.


Separately, in April, Chakib Khelil, Algeria’s energy minister and the president of OPEC, cautioned that oil prices could surge to $200 per barrel and that the cartel could do little to ward off that eventuality.


Khelil blamed spiraling oil prices on the weak U.S. dollar and geopolitical insecurity. He noted that each time the dollar falls 1%, the price of a barrel of oil rises by $4.