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Johannesburg - Geopolitical tensions pushed New York crude contracts for November delivery to a record high of US$89 a barrel on Tuesday night.
This prompted market watchers to revise their price forecasts, and some are even predicting a leap to US$300 a barrel should the US invade Iran.
Gary White, who writes a column published by Fleet Street Publications in the UK, said while he doesn't believe that US$300 a barrel was likely in the short- or even medium-term, he said that he does not think that oil is particularly expensive at the moment, despite it being at historic nominal highs.
"I expect the price to rise - we should easily see US$100 a barrel next year... maybe even this year should the White House warmongers hit the red Iran button," White wrote.
He added that if one adjusted for inflation, the oil price peak at the start of 1981 was in excess of US$100.
"We are still below that figure. But this is not why I believe that the current oil price is cheap," he said.
To demonstrate, he started with the question: how much crude is there in a barrel of oil? One barrel of oil officially contains 42 US gallons...this converts into 35 imperial gallons...and there are 8 pints in a gallon.
That means one barrel of oil contains 280 pints. With crude futures at, say, about US$87 a barrel that means one pint of crude oil costs 31UScents, or 15pence in real money, White said.
"The truth is that oil is NOT extortionately priced and it is almost inevitable that the price is going to rise," White warned.
He said it was also worth noting that in 1981, when oil hit its peak price because of the Iran-Iraq war, a pint of milk cost 17p - which is more expensive than a pint of crude costs today, and that is without even taking inflation into consideration.
According to US government forecasts, world petroleum liquids consumption is expected to increases from 83 million barrels per day in 2004 to 118 million barrels per day in 2030.
That's an increase of almost 30% and there are not enough new oil reserves to meet this demand.
"The price of oil has to increase otherwise it would be betraying the laws of economics," said White.
"I bet that in 10 year's time after the Asian population has boomed and gentrified and peak oil has hit home hard, you will have to agree with me that oil at US$87 a barrel was cheap, cheap, cheap," he said.
- I-Net Bridge