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New America Voices

Happy New $100 Oil!

Oil went to $100 this morning, although apparently only one actual trade happened at that price. Likewise, the supposed boogeyman of $100 oil turns out to be a bit anticlimactic.

Remember those "try your strength" games at the carnival where you swung a hammer as hard as you could to ring a bell? I never got past the "wimp" or "pipsqueak" rating no matter how hard I swung, but the bell always beckoned at the very top of the scale.

Today, we are very close to that bell : $102.81 (in current dollars) is the highest price paid for oil, in 1980, after the Iranian Revolution. We could potentially ring the bell tomorrow, and then what? For the past several years analysts have been expecting that high prices would give way to lower prices by increasing supply and encouraging conservation but the price of oil has risen from $10 in 1997 to around $25 in 2002 to $100 now while demand continues to dog supply.

So my guess is that once we ring the bell, we'll just keep raising that bell, to $105, $110, until we actually feel pain and start conserving. And that eventual number could be a lot scarier than $100 oil. If you measure oil price by a more experiential Richter-type measure, you know that the price of oil doesn't feel as bad as it did in 1980, and that feeling is actually somewhat accurate. CAFE standards have made vehicles more efficient so that gas costs are a smaller part of middle class incomes than in the 1970's--which means they don't hurt as much as they used to.

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