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Oil prices: Some say up, some say down
05/13/2008
Diesel fuel continues its rapid rise, jumping nearly 4.5% last week
and more than 55% from a year ago, according to data released by the
Department of Energy. Two highly regarded market analysts, however,
offer opposing views on whether sharply rising crude oil prices will
continue driving up fuel for the next few years or the market is about
to see a significant crude oil drop to $80 a barrel.
A gallon
of diesel now costs $4.33, up from $4.15 the previous week, a 4.39%
climb. A year ago, a gallon cost $2.77, up 56.18%. Prices in California
remain the highest at $4.55. The four-week average is at $4.20
nationally. AAA reported the national average has risen again, reaching
$4.39 a gallon Tuesday.
Crude oil prices, after retreating slightly on Monday, climbed to
new highs in mid-day trading Tuesday, reaching a record of $126.97
before slipping back to $125.81.
Goldman Sachs released a report last week that indicated that a $200
per barrel price may be in the offing in the next 6 to 24 months. The
report goes on to offer several views of future prices, one suggesting
a quick climb into the $150 to $200 range before leveling off and even
declining back below $100 a barrel within two years.
The report notes that the recent, rapid rise coincides with the
struggling U.S. economy, the weakening of the dollar overseas and lower
inventories.
A report released on Monday says the rise in prices may also have
come in response to China stockpiling oil ahead of the Olympics. The
country imported 17.3-million metric tons (126.3-million barrels) in
March, but that dropped to 14.24-million metric tons (104 million
barrels) in April.
“We believe a combination of a high absolute level and sharp rate of
change in oil prices is needed to sustainably ration back demand and
recreate a spare capacity cushion only after which might lower energy
prices return,” the Goldman report says, adding that the rise above
$115 occurred despite “easing global oil demand” and suggested the
higher prices are “due to a lack of adequate supply.”
The report concludes that even if there is a sudden rise above $150
per barrel, a moderation is likely, possibly driving the price below
$100 by 2011.
Lehman Brothers, though, sees a different future for crude.
Projecting $83 per barrel by the first quarter of 2009, Lehman believes
a bearish outlook for the U.S. and Chinese economies will help drive
down the price of oil. It mentions that Saudi Arabia’s commitment to
building excess capacity will have the greatest impact on future
prices.
The Lehman report notes several factors for its conclusion. Among
those is the value of the dollar, which in recent days has started
strengthening, and the announcements in recent weeks of three new oil
fields (Saudi Arabia’s Khursaniyah, Nigeria’s Agbami and Azerbaijan’s
Guneshli) expected to come online shortly. Combined, it is expected the
group will contribute 1.3-million barrels per day.
Brian Straight, managing editor
Fleet Owner, by Brian Straight, managing editor, http://fleetowner.com/management/oil_prices_up_down_0513/