Time to check in with various experts in the field of petroleum economics and how it is affected by world events. These sages pronouncements date from as far back as 2002, to just last month.
Let's see if these fellows are earning their paychecks.
Even if the H3 redresses the Hummer's image as a gas-guzzling eco-enemy, the announcement feels a little damp when the issue of oil price hikes hit the headlines at the same time. We perhaps didn't need to be reminded about the steep price of crude but BP's Chief Executive Lord Brown made that one of his key remarks at a conference in Shanghai. Taking a similar view to Alan Greenspan, he said that prices had in fact become "unsustainably high," which meant they were bound to dip as consumers sought cheaper energy sources.
Maintaining his reputation as the dour optimist, Alan Greenspan has put a damper on the worrying issue of skyrocketing energy prices.
Speaking to business leaders as part of his two-day excursion to Japan, the Federal Reserve chairman took an assured view on global growth. The shutdown of Gulf Coast production had been "an accident waiting to happen" he said. Pointing to the resulting impact on global GDP, he conceded that the boosted energy prices would be a "drag from now on."
But the aging prognosticator went on to assure his audience that things wouldn't be as bad as with the 1970s oil shocks, when prices surged as a result of the Arab embargo. With today's advanced technology, he explained, the world has become far more energy efficient, and able to adapt to changing conditions.
Crude oil could drop to $57 a barrel by 2016 (in 2006 dollars), as expanded investment in exploration and development brings new supplies to the world market, says the U.S. Energy Information Administration - but by 2030, look for prices of $113 a barrel or more ($70 a barrel in 2006 dollars.)
Pumping millions of additional barrels of oil into the world market everyday would cause world oil prices to plummet. It is very unlikely that key OPEC members would agree to cut their own oil income by accepting significant cuts in their production. OPEC could plunge into a death spiral.
Under a free market, oil prices would probably fall to between $8 and $12 per barrel over the next 10 years -- down dramatically from today's price of about $25 per barrel. At current prices, the United States is sending about $90 billion per year to OPEC members and other oil exporting countries. Globally, about $350 billion per year moves from oil importers to oil exporters. With free-market oil prices, these huge transfers of wealth would drop by at least half and possibly as much as two-thirds.
An unencumbered flow of Iraqi oil would be likely to provide a more constant supply of oil to the global market, which would dampen price fluctuations, ensuring stable oil prices in the world market in a price range lower than the current $25 to $30 a barrel. Eventually, this will be a win--win game: Iraq will emerge with a more viable oil industry, while the world will benefit from a more stable and abundant oil supply.
It is hard to say what impact this might have on oil prices, but markets clearly expect lower prices. On the eve of hostilities, oil was selling for about $37 per barrel. At this price, Americans would be paying $270 billion per year for oil. But once it became clear that Iraq’s liberation was at hand, the price quickly dropped to about $28 per barrel, cutting our annual oil bill by $70 billion. With full Iraqi production, the price might drop to $20 per barrel or less, giving us the equivalent of an annual tax cut of about $120 billion per year. And this is a tax cut the entire world benefits from.
The recent sharp drop in the global price of crude oil could mark the start of a massive sell-off that returns gasoline prices to lows not seen since the late 1990s — perhaps as low as $1.15 a gallon.
"All the hurricane flags are flying" in oil markets, said Philip Verleger, a noted energy consultant who was a lone voice several years ago in warning that oil prices would soar. Now, he says, they appear to be poised for a dramatic plunge.
After correctly predicting oil's climb to more than $100 a barrel, legendary oilman Boone Pickens said Thursday he is shorting both the oil and natural gas markets in the belief that oil will stage a short-term pullback.
"The weakest quarter is the second quarter. We'll drop $10 or $15 a barrel in the second quarter. I think we'll be back above $100 in the second half of the year."
To look at oil prices-which, in recent weeks, have been more than $60 a barrel-some might suspect one reason to be that oil supplies have been depleted, perhaps for good. Moreover, the rate of new exploration and production seen after the oil shocks (and rising prices at the gas pump) of the 1970s does not seem to be occurring in this century. Not so, according to a new report by Cambridge Energy Research Associates (CERA). In fact, global oil production capacity is actually set to increase dramatically over the rest of this decade. As a result, supply could exceed demand by as much as 6.0 to 7.5 million barrels per day (MBD) later in the decade, a marked contrast to the high demand and tight supply that has resulted in today's current record-high oil prices.
Don't sell that SUV just yet. Oil, at a recent $66.50 a barrel, will fall to $45 by mid-2007 and could dip briefly into the 20s in 2008. Sometime next year you are going to see a $1.95 price on a gas pump.
So says Michael C. Lynch, 51, president of Strategic Energy & Economic Research in Amherst, Mass. He swears he hasn't been inhaling fumes. His reasoning: New supply, coming online from all corners of the world, is more than ample to satisfy growth in demand and sufficient even to withstand an embargo against Iran, which produces 3.75 million barrels of oil a day. Lynch argues that the threat of disruptions--nuclear brinkmanship, war, terrorism, hurricanes, pipeline corrosion--has larded oil prices with a $20-a-barrel risk premium. As these perils recede, oil prices will fall.
"We continue to believe oil prices will fall hard," Bear Stearns analyst Frederick Leuffer wrote in a note to clients this week. "We forecast an average ... oil price of $25 per barrel in 2005."
And here is my absolute favorite:
Something similar will happen this time. World oil prices probably will rise further as war with Iraq appears to be more certain. However, if the first few days indicate that Saddam will be decisively and quickly defeated, as is highly probable, then oil prices will fall sharply as the "war premium" disappears and uncertainty about world oil production diminishes.
After a defeat of Saddam, a friendlier and more democratic Iraqi government is likely to be installed. Oil prices would then fall further than they did after the Desert Storm cease-fire, since that government would be released from the oil-embargo restrictions that were imposed on Iraq under the previous regime. A new government would also look for oil revenue to help rebuild an Iraqi economy that has deteriorated so greatly under Saddam. Since Iraq has the world's second-largest oil reserves, it has considerable potential for greatly increased production.
Saddam Hussein is a cruel dictator, and I believe he would be extremely dangerous to the world if left unchecked. Other issues are also relevant in determining whether to go to war against his reign. But fear of a sharp and prolonged rise in oil prices should not be one of them, for the most likely scenario is that oil prices will fall significantly and remain low after his regime is toppled.
Let's whip a little reality on Mr. Becker's prognosticatory expostulations, shall we?
Oil Prices (2008 dollars)
2001 - $27
2002 - $27 Unchanged
2003 - $32 +18.5%
2004 - $42 +32.2%
2005 - $54 +28.5%
2006 - $61 +12.9%
2007 - $66 +8.2%
2008 - $108 +63.6%
For a nice round 400% price increase.
Perhaps Mr. Becker has a different definition of "sky-high" than I do?