Oil Analysts Raise 2007 Forecasts as Demand May Outpace Supply (Bloomberg)

[jpak]

http://www.bloomberg.com/apps/news?pid=20601087&sid=aD2mdsplVneY&refer=home

Oct. 3 (Bloomberg) -- Oil analysts are raising their price estimates for next year in anticipation of increased demand that may outpace the development of new deposits.

Crude oil will average $64 a barrel in New York in 2007, according to the median forecast of 29 analysts surveyed by Bloomberg News last week. That's $2 higher than predicted at the end of the second quarter. Analysts failed to predict the rise in oil throughout a five-year rally during which prices tripled.

``We see a very tight market continuing into next year,'' said Kevin Norrish, a director of commodities research for Barclays Capital in London. Barclays expects oil next year to average $76.70 a barrel, the highest forecast in the survey.

``The recent fall in prices is due to short-term factors,'' he said in an interview. ``We're looking for fairly strong global growth, and we don't see capacity expanding by much.''

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[phantom power]

1. These people must understand that this is the future.

This isn't some kind of temporary blip. Nobody is going to swoop down and give us back $30/barrel oil by announcing the discovery of a new 500-billion-barrel deposit of light sweet crude. Ever again. (and from a climate perspective, good riddance)

I mean... they do understand that, right?

[Dogmudgeon]

2. Volatility will also be a major factor

I, for one, don't doubt that we will have episodic cheap oil (or other energy sources). The market will chaotically over-respond to the most trivial economic pressures and news. I think that's what's happening now. Spike-and-trough price swings are more likely than a simple upward crawl in prices. And such a situation will actually be worse.

Even $30/bbl oil is possible, but I don't think such a situation would last for long. The current price drop to $59.95/bbl is just about over -- any pressure to keep the price low to support the Republicans' political power has evaporated with hopes for the party. I suspect that in the oil companies around the country (and the world), the boards are scrambling into "hunker down" mode. While the oil companies are overwhelmingly Republican, they are even more interested in making money than supporting their pet candidates, and won't stick around on the sinking ship. Politics is their hobby; economics is for real.

Chaotic market conditions bring their own fresh new brand of economic hell, and tend to drive up the prices of secondary goods. In the case of the energy economy, "secondary goods" is nearly everything. And of course, an age of golden opportunity is coming for oil industry insiders to reap fantastic profits from short-term trading and speculation.

Stability will return only when we are replacing a significant amount of our energy "infrastructure" -- and have committed money. But the current glacial pace of solar and wind power development (economic, not technical or scientific) isn't helping at all. Nuclear energy is currently better positioned for rapid development, but that could change, too, and I am pessimistic about all of our short-term options. As I've said before (and not being particularly original about it), we need to put some serious effort into this situation, and we haven't had our "wake up call" yet.

What will it take, anyway? "Wake up, O kind and gentle people -- the house is on fire!" -- ?

--p!

[Javaman]

3. Easy way to figure out what demand will be next year...

Figure out the rate at which car sales around the world have grown. If demand exceeds supply, then we are in deep shit.