Baltimore, MD--The tightening oil market has made some analysts change their price forecasts, but one of the latest oil reports is calling for some serious spikes. The question is whether or not we'll be able to avert them.

I need to confess something.

For the last year, I've taken pleasure in reading all those oil predictions that are sent to my inbox. Anyone with an email address knows exactly what I mean. And I'm willing to bet the majority of my readers are guilty of getting some enjoyment from them as well.

How could we not? These guys are reading the same news as we are.

In the beginning of the year, oil prices dropped to $48.20 a barrel. All of a sudden there was a rush of people saying prices would fall to $30 a barrel before they rose back over $55 a barrel. We got a good chuckle out of that. Prices soon rebounded and moved higher.

A few months later, we heard some slightly different projections. Now prices would definitely plunge below $40 a barrel before they reached $65 a barrel. Once again, those people were outraged that oil prices broke the latter price last month.

After that, I read dozens of forecasts that everything is getting better for the oil markets. Refineries are starting to come back online. And don't forget that OPEC can always just start producing more if things get too tight.

You can guess what I heard after that . . .

"We'll never see oil break $75 a barrel. I bet it'll go back down to $50 a barrel before it goes higher." (I didn't have the heart to let them know that the price of Brent crude oil hit $78.40 a barrel last week.)

Well, oil passed $75 a barrel this morning. That put me in a good mood earlier, just before checking my email. I couldn't wait for their next guess.

But then something happened. The first message was from one of my favorite letter writers. He's always said oil would plummet, no matter what news was out. But this time was different. In a nutshell, the guy said oil was going over $85 a barrel before the end of the year.

I checked to make sure it wasn't April First, then reread it. Sure enough, it seemed as if he had completely turned around. Apparently the oil market was tighter than he previously thought.

In their latest report, Goldman Sachs reported that U.S. oil prices may reach $90 a barrel this fall and even increase to $95 a barrel by the end of 2007. Interesting, though, is that the report didn't blame sudden hurricanes or war as the reason.

Rather, it was supply and demand. They noted that a "disappointing output growth" by non-OPEC oil producers and OPEC's refusal to increase production has caused a tighter oil market. Let's not forget that our demand is still higher than a year ago.

What's interesting is that December is typically when oil prices retreat. The summer demand from driving is gone, and winter is always when we see oil prices at their lowest. This report suggested otherwise.

But looking around, I'm not surprised they've taken this stance. OPEC isn't planning to meet until September. If they choose to remain "comfortable" with the oil market, we're going to be in some big trouble.

According to the Goldman Sachs report, ". . . keeping OPEC oil production at current levels and assuming normal weather this coming winter, total petroleum inventories would fall by over 150 million barrels or 6.5 percent by the end of the year, which would push prices to $95 a barrel without a demand response."

The scary thing is that any number of things can go wrong. We're quickly moving into the peak of the hurricane season, which meteorologists are saying is going to be particularly nasty. The geopolitical mess in the Middle East is still heating up, whether it's Iran's debatable nuclear program or Iraq struggling to maintain its oil production. (Iraq's oil exports have fallen to 1.5 million barrels per day.)

And on top all this are the militant groups who are disrupting the world's oil production. Nigeria is the eighth largest oil exporter in the world. Over half a million barrels of oil production per day was shut down due to attacks this year.

Last week, a group in Mexico blew up natural gas pipelines, claiming that this is only the beginning. Mexican oil and gas production was hit hard enough when Cantarell started depleting.

I've said before that oil could easily shoot past $100 per barrel if a few things go wrong. But things would get even worse if OPEC decides to keep the taps turned off.

It makes me wonder how long OPEC can keep up the charade of having the potential oil production they say they do.

Next week, we're going to take a deeper look into exactly how you can take advantage of these record prices, so stay tuned.

Until next time,

Keith Kohl