Nothing could have possibly stunned the street any more than a call by Goldman Sachs for $150 to $200 a barrel oil within the next two years.  The bank suggested that strong demand and weakening supplies would be reason enough to send prices upward, no doubt about that.

The problem with high oil prices is that it will affect US businesses more than other countries.  Since 2003, the US dollar has lost 50% of its value against the Euro.  Even with rising oil prices in dollars, the rest of the world is still able to buy cheap oil, largely because of a cheap dollar.  This increases the price for oil in dollars but for the rest of the world, particularly the Eurozone, prices stay moderate.  What is $120 in USD is 80 Euros, not much of a change from a few years ago.

Wall Street was a bit uneasy about the $200 prediction but was very quick to waive it off.  The Dow started in the red early but rose to close up 50 points.  While the market was unaffected by oil prices today, the premise of $200 should start frightening some investors.

Automakers and airlines have the most to lose or gain from oil prices.   GM and Ford, two struggling US automakers, have been losing more money on their top lines because of MPG ratings.  Gm once had a very profitable SUV wing that has since fell to the wayside as oil prices rose.  Airlines have it equally tough, the passenger airline business has very few opportunities to profit.  Small profit margins and greater expenses due to security measures make the cost of oil very important.  Though some airlines remained hedged, the price of oil will eventually come to terms with the profitability of the airline sector.

Now that a new bar has been set, look for traders to complete it.  Though oil seems to be stuck at $120 in recent weeks, a tightening supply this fall might push oil prices even higher.  Last hurricane season sent oil prices sky-high as refineries were taken off the pipes and shipments slowed.