"As the world's largest importer of crude, all of a sudden prospects for the once hot U.S. economy doesn't look so hot anymore," said CIBC World Markets Chief Economist Jeff Rubin.
"And just as suddenly, the hundreds of basis points of central bank tightening that investors had braced their portfolios for are rapidly being priced out of the market. Instead of losing momentum along an arduous march to higher interest rates, the North American economy will soon be feeling the brake of soaring energy prices," Rubin added.
CIBC World Markets said it expects burgeoning Asian demand coupled with conventional supply depletion will keep oil prices above $50 per barrel for at least the next three quarters, and possibly longer depending on how long it takes sharply rising energy prices to quell world growth.
This means hard strapped for cash homeowners in the Northeast may be forced tolive in the cold as the price of home heating oil knocks down their door at over $2 a gallon.
In fact Federal Reserve Board Chairman Alan Greenspan is slated to speak on oil in an Oct. 15 speech to be delivered to a National Italian-American Foundation event in Washington.
Greenspan appearing before the House Financial Services Committee on July 21 called the run-up in oil a temporary factor and said the U.S. central bank aims to continue raising interest rates at a gradual clip over the next 18 months.
But, the Fed's chairman won't be taking questions after the speech.
Gregory Mankiw, chairman of President George W. Bush's Council of Economic Advisors, addressed the economic impact of rising oil prices during an appearance at the Cato Institute, on Oct. 7 saying the increases will hamper the U.S. economy but won't derail it.
He said he believes each $10-a-barrel increase in the price of oil will shave about one-third to one-half of a percentage point off annual gross domestic product.
"The run-up in oil prices is neither benign nor temporary," said Rubin. "With OPEC spare capacity at record lows and world crude demand growing at three times its long-run average, $50 per barrel crude prices are here to stay, at least as long as the U.S. and Chinese economies continue to power robust growth."
Meanwhile, consumers will see their natural gas bills rise 15 percent this winter compared to last year, and pay 28 percent more to warm their homes with heating oil and 22 percent more to heat with propane, the Energy Information Administration said in its annual winter forecast.
"This winter, tight global oil markets and elevated crude oil prices are expected to result in higher heating oil, natural gas and propane prices," the EIA said.
The average household will pay a total of $1,003 to heat with natural gas this winter, up from $870 last winter.
The average heating oil bill is forecast to jump to $1,223 from $953 last winter, and propane costs will increase to $1,396 from $1,147.
Demand for natural gas is forecast to be up 1.5 percent this winter, but heating oil use is projected to be "slightly below" last winter, EIA said. Demand for propane is expected to rise 1 percent.
Not only is the typical residential and commercial customer expected to increase natural gas consumption during this heating season compared to last winter, but the number of such customers is expected to increase as well," the agency said.
The average price for natural gas is projected to be $6.04 per thousand cubic feet this winter, way up from last winter's average of $4.92, and the residential price will be almost double that level, EIA said.
The Energy Department's analytical arm said it expects U.S. winter oil prices to decline from this week's record $51 a barrel, but still average $46.43 in the current quarter and $44.71 in the first quarter of next year.
EIA said below-normal oil inventories in the United States and other industrial countries have raised concerns about the adequacy of supply to meet growing oil demand, and as a result the average monthly U.S. oil price is not expected to fall below $40 a barrel until the end of 2005.
The U.S. is facing a critical five-year bridge period in which there is a significant risk of higher, more volatile natural gas and electric power prices, job losses, demand destruction and industry relocations, a veteran energy observer said in testimony before the Congress in early October.
Cambridge Energy Research Associates, Chairman Daniel Yergin told the Joint Economic Committee of the U.S. Congress that without measures to boost supply or temper demand, the nation's energy markets are locked in a strong price environment.
"Natural gas prices today have spiked to triple the average of the 1990s, and that is signaling what is ahead."
And, Lehman Brothers weighed in, predicting U.S. natural gas supply dropping by 1.8 percent in 2004, causing more demand destruction as prices go higher.
Lehman sees third quarter production in the U.S. dropping by 3.8 percent, partially mitigated by a 1.4 percent rise in Canadian output. Overall North American production is expected to be 2.4 percent lower versus the same quarter a year earlier.
The EIA said 2005 domestic production is projected to grow by 1.4 percent.
Celebrity Couples of 2014 [PHOTOS]