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Oil Prices: Should They Go Higher To "Help" Energy Landscape?

Tuesday, 6 May 2008 | 2:58 PM ET

This post is from CNBC energy producer Judy Gee.

Super Spike oil
Super Spike oil

Oil prices hit another new all-time high on the momentum ignited by two, very alarming words: Super Spike.

In its latest report, Goldman Sachs predicted the possibility of oil reaching $150-$200 over the next 6-24 months. Remember, it was Goldman that ignited a firestorm in 2005 when Arjun Murti's team predicted oil would reach a then-outrageous and unimaginable/unthinkable $105 per barrel when prices were trading in the $50-range.

But no one's laughing now. In fact, everyone's all ears.

The report stated that current prices are fundamentally justified on limited supply growth (an increasingly dominating school of thought that is underscored by the EIA moving its price forecast today) and went on to dissect the general misconception and role of the "big, bad speculator." Speculators--who have undeniably bid up commodity prices--are not the problem. They may actually be the solution.

By taking prices to new record after record, speculators are playing a critical role in solving the energy crisis by speeding up the process of gaining greater energy efficiency. Higher oil prices incentivize "higher capital spending on a wide range of energy projects while at the same time encouraging lower levels of demand by energy users."

That is a needed reaction and attempts to alleviate the current crisis, such as the gas-tax holiday, would make things worse. I'm certainly in the group that is against the holiday and other measures to alleviate the energy crisis with band-aid solutions. While I would certainly appreciate lower gas prices this summer, a momentary break may only serve to mute that reaction. It is unfortunate, but the price of oil needs to become economically unviable for the current energy landscape to change.

Questions? Comments? energysource@cnbc.com