Oil at $1,000 per barrel?

[Polerius]

@Lemur866

I’m still not clear what Polerius thinks we should do about this potentially devastating hypothetical crisis of oil at $1000/barrel.

It seems he’s challenging us to guarantee that the price of oil could never get that high, and since we can’t, then something should be done.

But what?

Going back to the OP:

My overall question/concern:
From what I know, I assume it is possible for speculators to drive oil and food prices to very high prices ($1,000 per barrel, wheat at ten times its current price, etc), and this will have a devastating effect on economies and on people around the world.

Is it indeed possible? If not, what is stopping it from happening?
If it is possible, should we reconsider how these goods are traded?

After these couple of pages, it seems the answer is
[list=a]
[li]We could go to $1,000 per barrel but it is highly unlikely[/li][li] Bubbles in commodities markets do occur, but due to the connection of commodities futures to actual goods that must be sold, are not as high as bubbles in less tangible things like stocks.[/li][li]In the rare instance that a huge bubble does occur, the government will most likely temporarily step in, so we don’t need to take proactive measures to stop them from happening, because they would impose a burden on the markets (if they work at all)[/li][/list]
Is this a fair assessment of the consensus in this discussion?

[Alex_Dubinsky]

If you’ve taken microecnomics, you’ll know that price is determined by the crossing point of the curves for supply and demand price sensitivity. These curves chart how consumption or manufacture would rise or fall given a different price. E.g., if the price of apples is really high, a lot of people would be growing them.

With oil, however, the supply and demand are both very inflexible, and this messes up the entire nice econ 101 system. The price of oil has gone up many times, and we’re still producing and consuming it at pretty much the same rates. The “crossing point” is in no clearly identifiable place, and there may exist all sorts of prices for oil where the quantity supplied still equals the quality demanded! I wish I knew the true range for this startling phenomenon, but it is the reason why speculation and uncertainty have such a big influence on a price that at first seems so well grounded in the physical and the present.