Oil prices topped $150 a barrel last summer, but they're headed much lower -- to around $20, then to a "long-term equilibrium" of around $35, argues hedge-fund manager Jacques Mechelany of Bank of China (Suisse). That probably means gasoline will stay in the $1-and-change, good for consumers and business users, while frustrating solar and alternative-power investors.

"Crude oil prices could fall as low as $20 a barrel in 2009 as falling U.S. demand outstrips Chinese growth," Mechelany told the Reuters news service, via the Guardian newspaper, in this story.

"The forecast may seem excessively bearish, but Mechelany is used to sticking his neck out. His $50 target for 2008 must have seemed equally ambitious in early July 2008, when oil prices were peaking at almost three times that level.
'Prices tend to overshoot both on the upside and on the downside. In the context of the latest movement $20 is only one standard deviation from $35, which I consider to be the long-term equilibrium price,' said Mechelany."
Why are oil prices going up and down so much? It was the speculators - not "peak oil" or a final drop in world supply, the manager told Reuters. "The commodities bubble that burst earlier this year was an accident waiting to happen... It was fuelled by upbeat research reports and overactive trading desks. 'The whole speculation in commodities has been driven by a few houses who have been trading their books at the same time,' said Mechelany."