Investing for the 2012 Oil Crunch
Oil and gas investments are taking center stage as forecasters predict $80, $90, and $100 oil. Although prices will fluctuate, more and more analysts are predicting that plain old supply and demand will drive prices into a long-term uptrend. In just five short years, according to the International Energy Agency, the world will experience a painful squeeze in available fuel supplies. “It is possible that the supply crunch could be deferred — but not by much,” said the IEA in its 2007 Medium Term Oil Market Report.
The report cites skyrocketing demand from China and India as significant contributors in the coming crunch. For its part, China is doing its best not to make a liar out of the IEA. This week, Saudi Arabia announced that it will increase oil exports to China by at least 9 percent this year in an effort to keep up with demand, reported Bloomberg. Diminished spare capacity, coupled with increasing demand, is likely to drive prices to record levels as surging demand collides with production limitations.
The IEA, which acts as an energy security advisor to 26 industrialized countries, stated that “Despite four years of high oil prices, this report sees increasing market tightness beyond 2010, with OPEC spare capacity declining to minimal levels by 2012.” Prices are expected to hit new record highs of $90+ per barrel as global demand intensifies and spare capacity margins become razor thin. “Our high-risk scenario is in the $90 to $95 a barrel range,” Golman Sachs investment bank� analyst Jeffrey Currie recently told Fortune Magazine.
Published Wednesday, October 17th, 2007 at 3:06 pm and filed under Industry News.