Morgan Stanley Oil Prediction: Tail Wags Dog

I'm getting fed up with these crazy oil predictions that actually end up causing oil prices to rise.

Prices pushed sharply higher Friday after Morgan Stanley analyst Ole Slorer predicted strong demand in Asia could drive prices to $150 by Independence Day, when millions of Americans are expected to take to the roads. Slorer said shipments from the Middle East are mimicking patterns seen in the third quarter last year, when Morgan Stanley based an oil price spike prediction on falling supplies in the Atlantic.

What demand are they talking about? From what I have read Indian Oil Demand is murky and hard to pin down. This fact if very interesting however:

First, and most unusually, the price of diesel in India is considerably below (25% less) the price of petrol; the world prices diesel at 20 per cent above the price of petrol. Second, the consumer price of petrol in India is more than that in the US (at $4.40 a gallon), and among the highest in the developing world. In China, petrol is priced at only 74 cents a litre, compared to the average Indian price of $1.17 a litre.

So we have growing demand from a country whose per capita income is $774? I mean their income is growing fast but can Indians actually afford to drive that many miles on gas prices at $4.40 a gallon? We can barely afford gas that expensive with our per capita income of $34,000? It is just common sense that Indians are cutting back on their gas use as prices go up.

Also Chinese demand for actual crude oil is only 2.5% higher then last year with most of the demand growth coming from diesel fuel and other oil products. I would bet that most of that diesel growth was because of Olympics prep work and stockpiling so their won't be a shortage come August.

Another thing is I'm pretty sure Americans will not be "hitting the roads" by the millions if gas is $4.50 or $5.00 a gallon. They will probably have vacations close to home if they even travel to their vacations at all. So this millions of phantom Americans hitting the roads is a strait-up myth that has already been disproved by the massive slowdown in driving this past Memorial Day Holiday.

Finally, the Dollar only dropped against the Euro by $0.10 cents this week from $0.645 to $0.635 in total and was actually much weaker at $0.625 in April. There is no way a $.10 move lower in dollar can justify a +11% move in 2 days. I think it is pure bubble speculation and the price is not reflected in the supply/demand fundamentals at all. I think this Ole Slorer is just pulling prices out of a hat and the speculators are following it in lock-step driving things higher.