Goldman Sachs: Gasoline Not Driving Oil Price - Oil Going to $150-$200

Normally, I don't care for predictions but considering this was the fellow who in 2005 said their could be a "super spike" in crude, let's see what he has to say (I am on record as saying a "World of Shortages" theme combined with Western governments flooding the world with fiat paper can only combine to ultimately create higher prices). These are the first people (along with Cramer - have to give him kudos) who finally are realizing that the world does not revolve around the United States of Subprime; a position I've been advocating for a long while. The quicker we move away from our country-centric views, the better.

• U.S. gasoline is no longer the leading fundamental driving oil markets, according to a report penned by Arjun Murti of Goldman Sachs Tuesday. Murti who famously predicted the dawn of the “super spike” back in March 2005, says this dramatic shift could have meaningful implications for the energy markets.
• As the world’s thirstiest oil market, the health of the U.S. gasoline consumer has traditionally always led oil markets up or down. But Murti’s team, which Tuesday raised oil price targets to between $150-$200 from a $120 for the next 6-24 months, now believes the relationship could be becoming unstuck.
• “Gasoline, at least in the short-run, has traded more like an annoying by-product of crude than as its core fundamental driver,” Goldman’s report said. “Weakness in U.S. gasoline margins is not the surprise… the surprise is that the weakness not only has not mattered to crude oil markets, but if anything, is helping to keep oil supply/demand in balance.”
• Meanwhile Murti says demand for middle distillates, like diesel, gasoil, heating oil and jet fuel and kerosene is racing up.
• Murti attributes that strength to resilient non-OECD demand growth as well as numerous global power problems, all of which have led to increased usage of diesel and gasoil-fired generators. Underpinning that pressure is a lack of adequate supply growth resulting in needed demand rationing in OECD areas and in particular the United States.
• But other oil traders agree with Murti’s analysis. It’s tightness in the so-called middle part of the barrel that is sending oil prices higher. U.S. gasoline consumption patterns are no longer relevant.
• “High crude oil prices despite weak U.S. gasoline cracks is sending the signal that global oil markets do not need or perhaps want the U.S. gasoline consumer to recover,” Goldman’s report writes.
• The soaring price of middle distillates meanwhile picture paints a bleak outlook for the airline industry. [Apr 8: Now on to Airline Inflation]
  

I say this almost every week - we are in a global competition for resources. Our leadership is too busy pointing fingers along political lines or coming up with "gas holidays" instead of treating the root cause. This is par for the course for leadership the past few decades... come up with short term "kick the can" ideas instead of meaningful solutions. It did not hurt so much in earlier eras when we were the sole superpower; but we have a lot of nations moving up in the world who care very little about our backwards policies. We will rot in our own stew if we don't start figuring these things out... read Fareed [Weekend Reading]

As your dollar becomes more worthless, buy those meats now and freeze them, and get those airline tickets bought now before fares really take off, etc etc etc - inflation is not a problem... unless you live and breathe. This is one way to get the US consumer spending again - realizing his peso will be more worthless by the hour.