What 404 says is just his opinion - it does happen to be an opinion that I share and he is far more experienced in these matters than most.
If someone can give me an economic reason why oil should be twice what it was a year ago or 10 times what it was a decade ago I would love to hear it. Has demand doubled in the last year? Has demand gone up 10 fold in the last decade. My favourite argument is the one that goes "they aren't making any more oil". Well, I heard that argument used to explain Aussie coastal real estate going up a few years ago....funny thing was they haven't been making new coastline for 1,000s of years and suddenly, on the same day, every Aussie realised that and coastal real estate doubled in two years.
Every bubble climbs on sophistic reasoning....this one will be no different.
By the way - gold is triple what it was five years ago and yet many gold miners have gone bust - want to know why? They over hedged at lower price levels than what it got to. Price of gold triples and they go broke because it went up too much! If CX hedged 100% of its oil for 2009 and the oil price dropped to half what it is, then CX would make a massive loss as it would no longer be able to charge a fuel surcharge and would have to price competitively vs other unhedged carriers. When a cost of production has risen to what is generally perceived to be exceptional and unsustainable highs, the best bet is to hedge nothing and wait. If it stays up at current levels all other airlines that hedged at this level are no better off than those that didn't hedge. If it falls, those that hedged get burned. If it climbs those that hedged win. But remember, hedging is about finance whereas airlines are about moving people and freight. Many big companies have gone broke in the past from paying more attention to hedging than to their primary business!
Liam, as to your request, a lot lower than what it is today - probably around 50 - 80. As to when - it will fall on a Tuesday - but possibly a Wednesday! ;-) No one can predict the future....all I know is that the fundamentals don't justify the levels we are at now. But that does not mean it can't go much higher....just remember the dot com when we went from astronomical PE ratios to astronomical Price to Sales ratios....anything is possible in a bubble.
As to the current correlation between Oil and the USD - it hasn't existed for most of the last decade...it is only in the last few months that there has been any high correlation. There used to be a correlation between which conference team won the superbowl and whether the DJIA was up or down that year - cause and effect or stochastic?