$200-a-barrel oil scenario? That's so 2008

COLUMBUS, Ohio — As oil prices zoomed toward an unheard of $147 a barrel this summer, it seemed every analyst prediction that oil would approach $200 was a self-fulfilling prophecy, until suddenly it was not.

Instead of $200 oil, oil is now $80. Instead of going up, the United States has seen the greatest destruction in demand since the oil-shocked 1970s. Drivers have dramatically cut down on driving since November.

Soaring prices for oil and other commodities this summer have turned out to be nothing short of another classic bubble and the bursting might not be over, one analyst said Monday.

"It's just amazing that the market gets suckered into this," said analyst Stephen Schork of the Schork Report, who called the idea of $150 a barrel oil "an obscene number, a perverted, illogical number."

Oil prices did rebound from a 13-month low Monday, pushing above $81 a barrel after the dollar weakened and investors trickled back into financial markets on hopes that a globally coordinated rescue plan will stave off an economic crisis.

But also Monday, Goldman Sachs, among those predicting $200 a barrel oil, cut its year-end forecast of oil to $70 from $115 and lowered its price outlook for the end of 2009 from $107 a barrel from $125 to reflect weak global economy.

"We clearly underestimated the depth and duration of the global financial crisis and its implications on economic growth and commodity demand," analyst Jeffrey Currie said in a report.

David Fyfe, an analyst with the International Energy Agency in Paris, was a bit less critical

"To be fair, there is always a tendency in parts of the analyst community to look at short-turn trends and assume it's something that will continue in perpetuity," he said.

The run-up began about a year ago as the dollar went into a free fall and speculators sold dollars to buy oil and other commodities, sending prices higher.

Then, heavy hitters such as Goldman touted long-term bullish views that oil demand was going to increase and would exceed growth in supply, creating a "buying frenzy," according to Schork. That pushed oil prices much higher even though Americans were driving less.

Prices began to break in July when the dollar bottomed out. Hedge funds and investment banks, battered by the subprime housing mess, the decline in home prices and frozen credit markets, then began to sell-off positions in commodities, Schork said.

The swoon in oil prices paused only briefly during a conflict in the oil-rich Caucasus region involving Russia, and after two hurricanes shut down oil production in the Gulf of Mexico for weeks.

That, Schork said, should have been a clear signal that a bubble had burst.