NEW YORK (CNN/Money) - Like a junkie in need of a fix, the entire world, from consumers to policymakers, has been begging for more oil. Even the finance chiefs from the world's richest nations this weekend said OPEC must provide more oil to make sure that rising energy costs don't strangle the global economy.
And it worked! At least for awhile. Oil prices pulled back after Saudia Arabia said it will produce as much oil as necessary to keep prices from moving even higher, even if it means producing at full capacity. This was a follow-up on Friday's announcement that it's ready and willing to pump more oil. In fact, oil prices pulled back some more early today. Unfortunately, prices are trading higher again as traders bet that this may not be enough to change the underlying fundamentals.
For one thing, most experts say the Saudis are already so close to pumping out as much as they can that the trend in oil prices is still heading higher. And no matter how much more they pump, gasoline refinery limitations in the U.S. will still keep gas prices high here. Right now rising gas prices are like the tail wagging the dog, because they are helping to push crude oil prices higher in global markets, along with some hot and heavy speculators.
The bigger problem of course is that even if we get our fix of cheaper oil for awhile, we are still hooked. We are still a gas-guzzling nation. We are still at the mercy of geopolitics and geology when it comes to our oil habit. We are the world's biggest consumer and we don't show any signs of slowing down. China's consumption is growing and India's is expected to grow too as they keep developing a more modern, stronger economy.
Last week an oil trader told me that $20 a barrel oil is a thing of the past. The new range he said is $30 to $40 a barrel, so we just get better used to it. So we can beg, we can moan, but until we insist on more fuel efficient cars -- yes, even SUV's -- and until we get more serious about developing new energy sources, we are going to pay more.
Can the world afford it? Can the U.S. economy stand up to it? That's the big question. A lot may depend on how willing the Federal Reserve is to not raise rates aggressively even as prices stay high and worries about inflation seem to be a bigger deal now than worries about an oil-induced slowdown.
Kathleen Hays anchors CNN Money Morning and The FlipSide, airing Monday to Friday on CNNfn. As part of CNN's Business News team, she also contributes to Lou Dobbs Tonight.
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