Analysts:Oil prices unlikely to tumble

HOUSTON - Oil's meteoric rise to near $120 a barrel looks like more than just another economic bubble - growing demand and tighter supplies are likely to keep prices high.

Some analysts say even $200 a barrel is possible.

The latest price surge - pushing crude to records in recent weeks, and to nearly double its level a year ago - has some key components of a classic bubble, when market prices climb far above their intrinsic value. The burst comes when investors realize the assets are overvalued.

But several factors - including growing worldwide thirst for crude, in large part from the rapidly developing economies of China and India - mean frustrated consumers probably won't get any relief.

Americans who hoped to ride out temporarily high prices by carpooling or driving less may have to make those habits permanent.

Oil came close to $120 a barrel yesterday on news that a ship under contract to the U.S. Defense Department fired warning shots at two Iranian boats in the Persian Gulf.

The markets also weighed the effects of a pipeline attack in Nigeria and a looming refinery strike in Scotland.

During yesterday's trading, light, sweet crude for June delivery rose to $119.55 a barrel before the contract retreated to settle up $2.46 at $118.52 on the New York Mercantile Exchange.

Retail gas prices rose 2.1 cents yesterday to a record national average of $3.577 a gallon, according to AAA and the Oil Price Information Service.

In the five-county Philadelphia area in Pennsylvania, the average rose two cents yesterday to $3.55 a gallon, according to AAA Mid-Atlantic. In the three suburban Philadelphia counties in South Jersey, the price also was up 2 cents yesterday, to $3.39.

The Organization of Petroleum Exporting Countries - which supplies 40 percent of the world's crude - insists it is supplying more than enough oil.

Widely watched oil-price prognosticator Goldman Sachs has said oil could average $110 a barrel by 2010, up from a previous forecast of $80, and that a spike as high as $200 a barrel is possible in case of a major supply disruption.

Some market-watchers say oil will probably keep rising until demand falls off, which they describe as the market's way of finding fair value for the commodity. For oil, some estimate that price as low as $60 or $70 a barrel.

Demand already has begun to wane in the United States, where fuel prices are causing turmoil in an economy saddled with recession fears, a housing and credit crisis, and dismal retail sales.