30/05/2005
Oil price to drop back to $30 within two years?
The oil prices could fall sharply again over the next two years as new production comes on line, with $30 a barrel likely to serve as a price floor, Daniel Yergin, the chairman of Cambridge Energy Research Associates, has suggested. In an interview, Yergin, also the author of the award wining ‘The Prize’, said the current high prices should lead to an increase in global oil production, which in turn will cool the market. Saudi Arabia alone has said it will boost its oil output capacity by 1.5 million barrels a day by the end of the decade. "I think two years from now, we'll look more with $30 as a floor than what we're looking at today," Yergin said.
Oil prices have risen sharply over the past two years as rising global oil demand has eaten into the spare production capacity needed to cushion supply disruptions. With prices seen remaining relatively high, however, producers are expected to increase investment and boost production an all of that, many analysts believe, should relive pressure on prices.
Some other analysts, however, believe oil prices will progressively make new highs as producers struggle to meet rising demand as Matthew Simmons, president of investment firm Simmons & Co., who spoke on the same program with Yergin, suggested production may have already peaked.
But Yergin questioned the so-called peak oil theory, saying global production is set to rise by as much as 16 million barrels a day over the next decade. "This is about the fifth or sixth time that the world has run out of oil, and at least in our study we see adding about 16 million barrels a day net of oil between now and the end of the decade, which is in fact very big number," Yergin said. |
