Monday, May 12, 2008

Speculating on Oil Prices

There is an interesting story about the pricing expectations of a barrel of oil up on the Biobased news. Its a news wire piece on a recent KPMG poll of petroleum executives. The poll will be discussed at an upcoming KPMG Global Energy Institute conference.

Long story short. Over half of oil execs believe a barrel of oil will close below $100. See below:

In this year's KPMG survey, which polled 372 financial executives from oil and gas companies in April 2008, 55 percent of the respondents think that the price-per-barrel of crude oil will drop below $100 by the end of the year. Twenty-one percent think that the price will close between $101 and $110; 15 percent think between $111 and $120; and nine percent believe it will close at above $120. And, while 44 percent felt that prices would peak by the end of the year, a further 39 percent thought that they would not peak until after 2010.

Fair enough. Past as pretext for any speculation you would assume that the historical high would flatten out and trend lower. I would understand why that would be the majority consensus. What I don't follow is why 39% (not exactly a small contingent) thought oil wasn't going to peak until after 2010. I think this is evidence that there is some other factor effecting price currently and that this dynamic has yet to run its course.

Other interesting findings of the poll. The underlying cause for the increasing prices.

Indeed, a significant majority, or 63 percent, of oil and gas executives believe that growing demand due to accelerated demand in emerging markets is the major contributor to the high price of oil. The second highest contributor, according to 15 percent of the respondents, was the lack of access to new oil resources, and rising exploration and development costs. Ten percent attributed current pricing to growing demand in developed markets.

That supply was not readily available even with highs never before expected or seen. These same execs also mentioned a much bigger role for natural gas, see wind being a growth sector, and biofuels being a credible mass producible energy source within ten years.

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