Neil King Jr. and Spencer Swartz, Wall Street Journal
A growing number of oil-market watchers say voters riled by soaring
fuel costs may face far worse this summer, as factors ranging from
unrest in Nigeria to slumping production in Russia could shove
benchmark oil prices over $150 a barrel.
.... Oil's seemingly unstoppable surge has led some analysts to issue
gloomier price outlooks. Goldman Sachs Group Inc., which predicted the
latest run-up, says the world may face a "super-spike" in which crude
ranges from $150 to $200 a barrel as early as October, up from just
over $120 now.
"That would put oil at unprecedented price levels, even going back to
just after the Civil War," said Stephen Brown, an energy economist at
the Dallas Federal Reserve Bank.
.... Even more unusual is that oil has maintained its upward momentum
in the face of sharply diminished U.S. demand, which fell in February
to 19.7 million barrels a day. That was down a million barrels a day
from the 2007 average.
.... "It's not that the genie is out of the bottle -- it's that 100
genies are out of the bottle," said Daniel Yergin, chairman of
Cambridge Energy Research Associates. Normally known for optimistic
forecasts of lowering oil prices, Mr. Yergin's firm now says the price
could rise to $150 a barrel this year.
The world's diminished spare production capacity remains the strongest
single catalyst for high prices, Mr. Yergin says. The world's safety
cushion -- the amount of readily available oil that could be pumped in
a moment of crisis -- is now around two million barrels a day,
according to most estimates. That's just 2.3% of daily demand, and
nearly all of the safety cushion is in one country, Saudi Arabia.
Everyone else is pretty much pumping all they can, which makes the
world vulnerable to political or other shocks.
(7 May 2008)
Kevin Drum at Washington Monthly comments:
Saying Daniel Yergin is an optimist is like saying Chris Matthews
is annoying. Yergin basically thinks peak oil is Luddite crankery and
that new technology will allow us to continue increasing production
for at least the next several decades. He's the Pollyanna of the oil
patch.
Now, I'm sure he'd say that his current pessimism is based not on
a fundamental reevaluation of recoverable reserves, but instead on
"aboveground" issues: political instability, terrorism, lack of
investment, and so forth. Still, if even Daniel Yergin thinks oil
prices are headed upward, it's a pretty good guess that oil prices are
headed upward.
Nesa Subrahmaniyan, Bloomberg
Crude oil may rise to between $150 and $200 a barrel by October as
growth in supply fails to keep pace with increased demand from
developing nations, Goldman Sachs Group Inc. analysts led by Arjun N.
Murti said in a report.
New York-based Murti first wrote of a ``super spike'' in March 2005,
when he said oil prices could range between $50 and $105 a barrel
through 2009. The price of crude traded in New York averaged $56.71 in
2005, $66.23 in 2006 and $72.36 in 2007. Oil rose to an intraday
record of $122.49 today on speculation demand will rise during the
peak U.S. summer driving season.
(6 May 2008)
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