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Oil could reach $300, says expert

by Claire Ferris-Lay on Thursday, 28 February 2008
SKY HIGH: $100 per barrel is cheap, according to an industry expert.

Oil prices could top $300 per barrel within the next five years, according to one industry expert.

Matthew Simmons, chairman and founder of specialised energy investment banking firm, Simmons & Company International, said the current highs of $100 per barrel are "cheap".

"I think the supply is showing some very troubling signs that we might well have already peaked and started [to slow] down. If we haven't, we are very close to it," he told Arabian Business. "Demand on the other hand shows absolutely no sign of slowing down because we are now at $100 a barrel, which I still think is a preposterously cheap price. It works out at just $0.15 a cup.

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"A cup of gas will get a car with six passengers in, with the air conditioning on and go two miles. It's a bargain," he added.

Simmons also told Arabian Business he is more concerned about energy shortages than the rising price of oil. "What I am worried about most is not high prices but shortages because then people worry."

He noted that in the UK's capital, London, where typically the price per gallon can reach as much as $9, it hasn't deterred motorists from continuing to use their cars.

"[That price] doesn't seem to have slowed anyone down. It works out as much as $378 a barrel. Yes [I can see it reaching that high]," he said.

"We'll never run out. What we will run out of is light sweet oil because it is the easiest to get out of the ground. So all we will be left with are massive amounts of oil in places but it is going to tend to be stains on rocks or oil sands," he continued.

Simmons is a leading expert in his field and author of the controversial book, Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy. In the book Simmons argued that Saudi Arabia will, in the coming decades, be unable to maintain its current level of oil production, with huge economic repercussions. Simmons said that the peak oil issue is poorly understood and the world's data on production, demand and inventories is inaccurate.

Last week oil reached a new record of $102, closing in on its inflation-adjusted peak, as a slumping dollar on lacklustre US economic data triggered a surge across commodities markets. Opec's president said members would agree not to raise production in part because of fears of a demand slowdown.

Oil surges back over $100, dollar slumps
US crude rises to over $102 a barrel as commodity prices rise on lacklustre US economic data.

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Price Graph to 2020 and beyond
Posted by Matt B, Melbourne, Australia on 2 March 2008 at 16:53 UAE time

OK, here I sit on my own, an Average Joe, trying to make sense of all this ('cause no-one I know knows anything - or wants to know, 'cause it's a real downer subject around the dinner table).

Week after week, I see the ONLY copy of "A Crude Awakenening" at the local Blockbuster, always available for hire and as an Average Joe, I simply cannot accept the world as we know it will end any time soon: Peak Oil couldn't possibly be real until a face I recognise on the tele says it is... Yet I know in my heart the way of things cannot last forever.

As I try and imagine how much my daughter will be paying to fill the tank on her second-hand Ford a few years from now, I'll admit I am a little bit worried about the future. Is there a price-for-crude versus time chart available, to say 2020? Even a "best guess" one will do.
This is in THE FINANCIAL TIMES WAKE UP CALL There is no 300
Posted by Firozali A. Mulla MBA PhD, Dubai, UAE on 1 March 2008 at 15:44 UAE time

CERA on $100 oil: where is the “break point”?
An excellent analysis of how we got to $100 oil on the website of Cambridge Energy Research Associates raises the question of how much higher prices can go, but does not answer it.
The piece appears to suggest that the "break point" for oil prices, as illustrated in figure 6 with some cute little blue figures, is about $120. At that point, factors such as the rise of energy efficiency, alternative fuels and other policy changes, as well as the economic impact, really begin to take their toll on demand.
As CERA points out, however, the average price for WTI over 2007 was a "mere" $72 a barrel; $100-plus sustained for a year or more would do much more damage to the world economy than anything we have seen so far. The break point may well turn out to be pretty close to where we are now.
Opec’s efforts to defend $100 notwithstanding, I think a slowing world economy still means we are likely to see oil lower at the end of 2008 than at the beginning.
January 7th, 2008 in Economics, Oil | Permalink
Firozali A Mulla MBA PhD
Matthew Simmons article
Posted by Simon Targett, Perth, Australia on 1 March 2008 at 12:21 UAE time

Re the bigoted comment by Firozali A Mulla on Mr Simmons $300 oil.
Economists have got us into peak oil with no warning.
I trust energy investment bankers and oil geologists, maybe one day economists will be held to account for their naive stupidity.
Simon Targett Western Australia
OIL at 300
Posted by Firozali A.Mulla MBA PhD, Dubai, UAE on 1 March 2008 at 10:21 UAE time

Rubbish. I study economics. This will not happen.
Firozali A Mulla MBA PhD


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