Convergence. Also, geopolitical pressure could soften unexpectedly. "What we've had is triple witching hour," says oil industry consultant Michael Lynch. "You've had concerns in Venezuela, Nigeria, Russia, and Saudi Arabia all at the same time. Almost all of these are unconnected, so it's just a coincidence that they all happened at the same time, and it seems unlikely to happen very often." He notes that the opening up of Libya or the easing of tensions in Iraq could suddenly allow supply to catch up with demand.

But ominously, Kuwait's oil minister says OPEC will work in the year ahead to keep prices from sliding. Analysts believe that's a sign the cartel has concluded that the world has done little to curb its demand amid high prices, so why return to the mid-$20 range it once viewed as the most comfortable level for both consumers and producers? Also, because OPEC prices its barrels in U.S. dollars, the producing countries have seen a bite taken out of their revenues as the value of the dollar has fallen precipitously. They'd like to make that money back.

"The first message American consumers need to hear," says A. G. Edwards's O'Grady, "[is] if you think the price of oil and gasoline has been volatile, you ain't seen nothin' yet."

Big Appetites

U.S. demand for oil dwarfs that of other countries, but China is getting thirstier.

Million barrels per day, 2004

United States 20.5

China 6.3

Japan 5.5

Former Soviet Union 3.7

Germany 2.6

India 2.5

Canada 2.3

South Korea 2.2

Brazil 2.2

Mexico 2.0

Sources: International Energy Agency, U.S. Energy Information Administration

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