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India announced Tuesday that it wants oil sector giants ExxonMobil (NYSE: XOM) and Chevron (NYSE: CVX), among others, to bid and explore for oil and gas in the country, on concerns that oil may hit $150 per barrel, Bloomberg News reported. India, Asia's third-largest oil consumer, does not have the technology to search for and extract oil/gas from deep waters and in remote regions, and the nation is concerned that rising energy demand and rising prices will complicate the access to energy it needs to sustain its growing economy.
Predicts $150 oil
"In the next two to three years we expect prices to reach $150 a barrel," India's Oil Secretary M.S. Srinivasan told Bloomberg News on Tuesday. "Given this scenario, we are putting in more efforts in our exploration and production.''
Oil rose $1.75 to $96.75 in mid-day trading Tuesday. Oil rose an alarming 57% in 2007 and reached $100.09 on January 3, 2008. Oil hit an all-time high, in inflation-adjusted terms, of $102.80 in April 1980.
Analysts are split regarding oil's price direction for 2008. Some analysts see $85-$100 prices persisting throughout the year, with any potential supply disruptions (Nigeria, Iraq, Venezuela) causing price spikes above that range. Others, citing incremental gains in global oil production and the increased use of energy substitutes for oil, expect a more-modest $75-$80 price for oil for 2008.
Meanwhile, many analysts put 2008 global oil demand at 87-89 million barrels of oil per day. A U.S economic slowdown would generate global demand below that projection, and probably drive oil prices below $80 per barrel, analysts say. Other analysts, citing continued, strong demand from large emerging markets such as China and India, do not believe oil consumption will moderate this year.
Moreover, analysts say it's the multiplicity of supply and demand variables that helps explain why oil price projection remains a difficult task -- one that's still more of an art than a science -- despite technology improvements that have assisted oil source identification, production verification / record keeping, and supply / demand scenario modeling.
Oil Analysis: A mixed bag regarding India's Tuesday decision. On the one hand, India's receptivity regarding bids by the skilled oil exploration giants is good news for oil's supply. On the other hand, India's expressed concerns about a potential $150 per barrel oil price is not a figure that cyclical theorists -- those who believe oil will again drop substantially in the future after hitting near-record prices -- want to hear. And needless to add, $150 oil would propel wide-sweeping economic and social changes in oil consuming nations, particularly in the United States.
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Reader Comments (Page 1 of 1)
2-19-2008 @ 8:03PM
Terry said...
With the expanding US governmental account deficit (trade, federal budget), more money will be printed (see recent stimulus package of > 160 BB), and oil, as a commodity, will hold, or increase its price (in dollars), simply becuase of the dramatic decline in the value of the dollar as a paper currency. Within 5 years, oil producing states will tire of being paid in dollars, and Petro-Euros will be the norm for exchange, signaling the end of US monetary leadership and supremacy. Americans now spend $1.05 for every dollar earned, borrowing the rest, accumulating debt, part of which goes to pay for their gluttony of fuel consumption.