Prediction: Sub-$100 Oil
Is the drop in oil prices this week a trend? Will motorists get to stop spending the grocery money to fill their tanks?
One thing is sure and that is that oil prices are in a bubble. I wrote a story on this topic for the issue of Business Week that came out today.
It's a profile on Ed Morse, chief energy economist for Lehman Brothers, who has spent much of the last several months explaining why the year-long runup in oil prices is temporary, and will ease starting in the fall. Next year, he says, the average will be $93 a barrel, which would drop prices at the pump considerably. The on-line version includes a fascinating video of Morse.
Morse's basic argument is that there is no shortage of oil. The market is going to notice a buildup of stored oil around the world starting in the fall. And a plummet in prices will follow.
He makes a convincing case. I myself think that any plunge could end up being a dip, with prices rising again as Chinese and Indian demand go back up. As written previously on O and G, Christophe de Margerie, the chairman of France's Total, seems the most sensible voice on the state of Big Oil.
One thing is sure and that is that oil prices are in a bubble. I wrote a story on this topic for the issue of Business Week that came out today.
It's a profile on Ed Morse, chief energy economist for Lehman Brothers, who has spent much of the last several months explaining why the year-long runup in oil prices is temporary, and will ease starting in the fall. Next year, he says, the average will be $93 a barrel, which would drop prices at the pump considerably. The on-line version includes a fascinating video of Morse.
Morse's basic argument is that there is no shortage of oil. The market is going to notice a buildup of stored oil around the world starting in the fall. And a plummet in prices will follow.
He makes a convincing case. I myself think that any plunge could end up being a dip, with prices rising again as Chinese and Indian demand go back up. As written previously on O and G, Christophe de Margerie, the chairman of France's Total, seems the most sensible voice on the state of Big Oil.
Labels: ed morse, gasoline prices, oil and the glory, oil prices, peak oil, putin's labyrinth, steve levine
4 Comments:
I fully agree that prices will dip over the next year. The weak dollar and sluggish US economy is already dampening consumer demand for Asian goods. This will lead to lower economic growth in China and India, which will flow through to lower oil demand. Meanwhile, energy efficiency in the US coupled with a dramatic shift to natural gas will lead to reduced US demand for crude oil. A 10% reduction in US demand will place an additional 2 mmbbl on the market, which is a significant amount for a market priced on the margin... and China won't be ready to gobble it up this time.
Hey folks, this is great -- as an intro for those who do not know him, Matt is an oil expert (and a pretty good motorcyclist too). Matt, you said 'dip.' So do you agree that it drops then rises again?
I do agree it will dip and then rise again... but the dip could last a long time. A likely scenario is that the discount natural gas now has compared to oil will disappear, potentially turning into a premium. So in two years time we may all be discussing high natural gas prices and the resulting impact on home energy costs rather than worrying about the oil price.
By the way, I enjoyed watching your presentation to Google. I can think of some other companies that should have brought the knowledge of Russia experts into their organizations...
Many thanks for that Matt and best to S.
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