Energy Business

With Oil At Record Highs, Talk Of $200 A Barrel

24/7 Wall St. has run three or four pieces recently that suggested there are strong cases for $100 a barrel oil. With the $80 mark reached last week, some oil industry experts do not discount the possibility that crude make get close to $100 this year. Jeff Currie, head of commodity research at Goldman Sachs, describes it as “a cyclical bull market for oil”. “There is a risk that the oil price will spike to $95 per barrel by the end of this year if the market remains in significant deficit,” he told The Telegraph.

Now part of the debate has begun to move to whether oil prices could hit $200. CNN Money recently ran a piece looks at a growing school of thought driven by analysts “who generally believe oil production has either topped out or will do so in the next couple of years.”

One expert summarizes the case for CNN: The world will have to produce 118 million barrels of oil a day, up from its current 85 million barrels per day, just to satisfy projected demand by 2030, according to the Energy Information Agency. “That’s never going to happen,” said Richard Heinberg, a research fellow at the Post Carbon Institute and author of three books on peak oil.

To justify projecting oil at $200, Wall St. would have to believe that oil production will not grow after the end of this decade. Oil companies and oil-producing countries tend to push statistics which say that there is much more oil in the ground. This means supplies will be abundant over the years to come.

If there is not a a growing imbalance between supply and demand, it is hard to justify the 8x increase in the price of oil over the last 10 years.

And, sometimes the past is prolog.

Douglas A. McIntyre