WASHINGTON (ICIS news)--World oil prices could moderate to the $75/bbl range in coming years with increased consumption efficiencies, production innovations and reduced geopolitical tensions, a leading energy analyst said on Monday.
Jim Burkhard, managing director for global oil at Cambridge Energy Research Associates (CERA), told a World Bank forum that with oil now at $105/bbl, it is easy enough to see a doom and gloom outlook, and it is easy to see oil perhaps going to $150/bbl .
However, those kinds of crude price increases are not cast in stone, and we could see oil prices moderate to the range of $70-80/bbl within the next ten years, he said.
NYMEX light sweet crude futures gained almost $2/bbl on Monday to take the front month April contract to a new record high of $107/bbl, a rebound after having lost a dollar on profit-taking just after midday.
He said the path of oil pricing over the coming decade depends more on government policymakers, technology developments, labour availability and capital investments rather than supply alone.
Burkhard noted that global oil prices reached $104/bbl in real terms in April 1980 at a time when the US economy was struggling, US tensions with Iran were high and the Strait of Hormuz - a potential choke point in the sea-flow of Mideast oil shipments - was under threat.
It was a period not unlike today, but over the next few years global oil demand fell by 10% or 5.5m barrels per day, and in one four-month period in late 1985 to early 1986 the price of oil plummeted from $30 to $10/bbl, he said.
That decline in oil prices reflected demand reduction, the substitution of coal and natural gas for oil as a power generation fuel, and the availability of new supplies as high oil prices in the early 1980s spurred development in non-OPEC countries.
The lesson for today is that supply can react to high prices if capital is allowed to flow to development, he said.
Burkhard said analysts at CERA in general are optimistic about oil supply growth. We see crude production continuing to grow for a few more years but then flatten out while production of natural gas liquids [NGL] and condensates will increase along with some growth in biofuels, he said.
He noted, however, that it will be more challenging for refiners to meet global demand for middle distillates such as diesel fuel and gasolines with NGL and condensates, and that those less productive feedstocks will require more downstream refining investment.
He also forecast increasingly higher costs upstream in exploration and development, driven by a shortage of skilled labour and increased prices for enabling commodities such as steel and equipment such as onshore and especially deepwater rigs.
Burkhard said that while greater consumption efficiencies and biofuels developments both will play a part in the energy equation over the next decade, those contributions will remain relatively minor.
We will need significant technological breakthroughs in biofuel development over the next 10-20 years before biofuels can play any game-changing role, he said.
Jim Burkhard, managing director for global oil at Cambridge Energy Research Associates (CERA), told a World Bank forum that with oil now at $105/bbl, it is easy enough to see a doom and gloom outlook, and it is easy to see oil perhaps going to $150/bbl .
However, those kinds of crude price increases are not cast in stone, and we could see oil prices moderate to the range of $70-80/bbl within the next ten years, he said.
NYMEX light sweet crude futures gained almost $2/bbl on Monday to take the front month April contract to a new record high of $107/bbl, a rebound after having lost a dollar on profit-taking just after midday.
He said the path of oil pricing over the coming decade depends more on government policymakers, technology developments, labour availability and capital investments rather than supply alone.
Burkhard noted that global oil prices reached $104/bbl in real terms in April 1980 at a time when the US economy was struggling, US tensions with Iran were high and the Strait of Hormuz - a potential choke point in the sea-flow of Mideast oil shipments - was under threat.
It was a period not unlike today, but over the next few years global oil demand fell by 10% or 5.5m barrels per day, and in one four-month period in late 1985 to early 1986 the price of oil plummeted from $30 to $10/bbl, he said.
That decline in oil prices reflected demand reduction, the substitution of coal and natural gas for oil as a power generation fuel, and the availability of new supplies as high oil prices in the early 1980s spurred development in non-OPEC countries.
The lesson for today is that supply can react to high prices if capital is allowed to flow to development, he said.
Burkhard said analysts at CERA in general are optimistic about oil supply growth. We see crude production continuing to grow for a few more years but then flatten out while production of natural gas liquids [NGL] and condensates will increase along with some growth in biofuels, he said.
He noted, however, that it will be more challenging for refiners to meet global demand for middle distillates such as diesel fuel and gasolines with NGL and condensates, and that those less productive feedstocks will require more downstream refining investment.
He also forecast increasingly higher costs upstream in exploration and development, driven by a shortage of skilled labour and increased prices for enabling commodities such as steel and equipment such as onshore and especially deepwater rigs.
Burkhard said that while greater consumption efficiencies and biofuels developments both will play a part in the energy equation over the next decade, those contributions will remain relatively minor.
We will need significant technological breakthroughs in biofuel development over the next 10-20 years before biofuels can play any game-changing role, he said.
