Europe is in recession. The U.S. is still struggling economically. Yet oil prices remain stubbornly high:  Brent crude hit a six-month high above $119 a barrel on Wednesday (February 15), while U.S. crude rose to above $102, as the pot continues to bubble in oil-producing nations in the Middle East and Africa.

Both the U.S. Energy Information Agency and the International Energy Agency have terrible track records when it comes to forecasting future oil prices. Shane Lofgren at Seeking Alpha reports he has searched in vain for any explanation of their forecasting methodologies. Given their lousy track record and lack of any transparency, Lofgren looks to the IMF for a more satisfactory approach. Lofgren describes the model used by the IMF as a “straight from undergrad economics”, “business as usual” model – about as far from a “peak oil” model as you can get.

With what results? What does the model have to say about the direction of future prices? Lofgren sums up the results of his calculations:

If we are looking at the Brent, which tends to be more reflective of global supply and demand conditions, then that would be $136 at year end 2012 and then $158 at year end 2013.

That sounds like a great deal, but it is not unthinkable, as prices grew at a faster rate than that from ’03 to ’08. Now, many assumptions from the model could prove wrong. GDP might come in below that, and again and there will likely be stronger price responses at higher prices. Still, this gives an impression of a much more serious potential increase in prices than the IEA has suggested.

Remember, Lofgren isn’t talking about any peak oil impacts here – he’s assuming a supply response to price increases.

Even at current prices, petroleum consumption in the U.S. is falling off a cliff. Mish Shedlock posts this chart showing rolling three-month averages.

Historically, economic growth has been highly correlated to the growth in energy supplies.

With petroleum consumption plummeting, can the “economy” be far behind?

It’s not just oil. Electricity consumption in the U.S. is down, too. Charles Hugh Smith posts these charts at Of Two Minds.

Electricity usage in the U.S. is no longer growing, but rather is now in a downtrend with no historical precedent.

Hopes that debt crises in the U.S. and Europe can be kicked down the road, eventually to be bailed out by a return to business as usual – robust economic growth – are likely to prove to be nothing more than wishful thinking. Maybe it’s time to get over our love affair with oil? As Paul Simon sang, the problem is all in our heads.

You just slip out the back, Jack
Make a new plan, Stan
You don’t need to be coy, Roy
Just get yourself free
Hop on the bus, Gus
You don’t need to discuss much
Just drop off the key, Lee
And get yourself free