Earlier this year, the media trotted out story after story of high gas price hardship as oil climbed to a record-high $147 a barrel back in July. One analyst even predicted in May that oil would reach $300 a barrel.
But, now that a financial mess has struck the markets, oil has fallen from $140 to right around $90 a barrel on Oct. 7. During months leading up to its peak, many were forecasting oil in excess of $200 by the end of 2008 and even $300 within five years. But the economic slowdown has caused the rally in commodity markets to cease, as Equidex President Phillip Gotthelf pointed out on Bloomberg TV on Oct. 7.
"I think that the commodities really outlived their useful rallies because they've exceeded the elasticity of the consumer," Gotthelf said. "Commodities are consumables, they're not investments. They're speculative equals sometimes, but they're certainly not investments."
According to Gotthelf, those commodities include oil, which is poised to go to $40 a barrel or lower in the wake of the global economic turmoil.
"I'm somewhat amused. Goldman Sachs (NYSE:GS) was forecasting $200 a barrel for oil," Gotthelf said. "I see that their forecasts are getting more and more conservative. I said $200 a barrel was ridiculous. Even $150 I thought was ridiculous. We were looking at $24 a barrel in 2004. Everybody is now making comparisons in the financial sector to the implosion of stocks in 2002, 2003 - the last stock recession. Why shouldn't we see oil return to $40, even below $40 a barrel?"