I would not be surprised to see oil prices of $100/bbl and gas prices above $4 a gallon later this year. Here is why:
1: Oil companies control the horizontal and vertical. After promised shipments, they can produce just the amount that makes them the most money. The fracking in the US can only last for so long, and from what I've read, most of the oil fields that fracking is used on are either depleted, or almost so. So, Saudi Arabia will be back to the top spot for oil production.
2: It doesn't take much in the way of newsworthy incidents to spike prices and keep them spiked. Remember the Iran-Iraq war with Iran deciding to mine a strait in the Persian Gulf? Someone even making a threat on a refinery will get prices up in a heartbeat.
3: China is a quite thirsty country, and they are just ramping up projects that make the Great Wall look small. Every gallon of gas we don't use, they will use.
4: There isn't anything that keeps Saudi Arabia and OPEC countries from doing another oil embargo like what happened in 1972. If they sell to China, I'm sure they would get the PLA to garrison troops as a deterrent to seizing wells by force. Same with Venezuela, where China is their main customer... which is why China is cutting a new canal in Nicaragua just so they can get oil from there.
5: The US has shifted to the red side. This means that any alternative energy funding now gets the kibosh, with Big Oil friendly politicos in office. Keystone XL is going to happen even if it requires a Constitutional amendment. So are amendments allowing US oil on the global market to the detriment of prices domestically.
To sum up, we passed peak oil, so supply is more expensive per barrel of oil than it was the last. Demand is up since China is doing a major infrastructure buildup that makes even the interstate highway system here in the US look like a toy train set. It is only going to go up from here.
This dip in oil prices is just temporary (as in diesel prices up to the $4 range by Memorial Day), and with people thinking they can go buy Hummer H2-like vehicles just because... they will be hurting in the pocketbook when prices do go up. Peak oil has long since passed, and it is only going to go up from here.
