If oil prices don't soon ease on down to $70's and $60's, then the ensuing recession will cause an oil crash that could drop oil to the $30s and even $20's.
We have an oil (fossil fuel) based economy. We use oil VERY frivolously and our frivolous use of oil keeps our economy humming. This is all made possible by cheap oil (cheap fossil fuel) prices. But when oil prices get too expensive, we EASILY cut our frivolous usage of oil, and that cuts jobs in frivolous industries, and that causes a chain reaction that sends our economy nose-diving into recession.
Recession = far less use of oil(and other commodities) = crashing demand = MUCH LOWER COMMODITY PRICES.
Probably 80% of our oil/fossil fuel usage is frivolous and is EASILY cut (with painful outcomes). You may think that driving to work isn't a very frivolous use of oil, but look how many folks have jobs in frivolous industries (or jobs that support those frivolous industries):
Golf course employees
Fitness club employees
Generating power for frivolous use
The entire city of Las Vegas
The Airline Industry
The toy industry
The fashion industry
The vacation industry
The ski/boarding industry
The Junk food industry
The hotel industry (most of it)
The restaurant industry (most of it)
The entire state of Hawaii
The sports industry
The motor boating industry
All of those things are nice frivolities that can be easily reduced/cut when oil prices rise. We could cut our oil/fossil fuel usage by a HUGE percentage and still keep ourselves minimally fed, clothed, and housed. Our current economy can't afford oil above about $60-$70. If speculators don't bring prices down the easy way, then the coming recession will bring prices down the hard way (via recession)... and that could result in oil prices hitting $30, just like they did 4 years ago in the last recession (that also sank gold to $700 and silver to $8)
Yes, we could have a temporary (crisis-caused) spike in oil prices, but that spike would last about 2 weeks before we'd see the economy crash and see demand PLUMMET, and see HUGE JOB LOSSES. Oil prices above $90 are NOT sustainable even in the best of times. Currently, oil prices above about $60- $70 are NOT sustainable. But a recession will likely cause us to overshoot to the downside with oil hitting $40-$55. If it gets really bad, we could see oil drop to $20-$30 (That would push the US dollar MUCH higher and send gold and silver prices plunging).
Why did you leave out the automotive industry which employs directly or indirectly about almost a third of all Americans? Oil is expected to remain in the 90's for a while this year before falling later in year to a seasonally adjusted price possibly falling under $80.
ext4r, you make a good case. But I disagree about gold. It will not follow oil into the pits. If things should roll out as you suggest there would be tremendous pressure on the words' fiat currencies. Yes, industrial demand for gold would fall too, along with everything else, but it is still the worlds' "default" currency and fiat currency weakness would continue to boost gold prices IMO.