Goldman Sachs (NYSE:GS) said today that there will be crude oil shortages as supply won't be able to keep up with demand, signifying higher oil prices in 2010 and 2011.
Projections from Goldman Sachs are the demand for oil will return to pre-recession levels, while production for oil will be down, causing the shortages and resultant oil price increases as a result.
There is probably more optimism in Goldman Sachs' report than among most others watching the industry, who believe oil demand will in fact remain down for some time to come, as the so-called recovery, for the most part, really isn't one.
Consider that jobs aren't being created and businesses aren't hiring. Goldman is saying that those working will start traveling more and spending on transportation, which I personally don't see happening, as I don't even begin to believe the recession is ended, let alone that we're in a period of recovery.
Nothing points to that being what is happening at this time, and I think Goldman Sachs is wrong here and we're going to continue to see consumers and businesses keep things tight as far as spending goes.
Consequently, I think oil prices will probably remain relatively level, although I'm sure there will be occasional spikes in oil prices over the next couple of years.
I don't doubt the production side being possibly challenged, just that the demand will remain low and so lower oil production won't cause significant oil price increases because of lower demand.
Of course the wild card in all of this is the state of the consumer in China, India and Brazil. If they take on a new role of consuming much more oil, then it could cause some price increases. But as far as it relates to the American consumer, I don't see them being a price driver of oil any time soon.