17 September 2008 17:38 [Source: ICIS news]
BOSTON, Massachusetts (ICIS news)--Crude oil prices are likely to rebound and continue to escalate sharply in the next decade, Andy Weissman, senior energy advisor at FTI Consulting, said on Wednesday.
"There are grave risks ahead, and the stakes couldn't be higher" Weissman said at the Chemical Purchasing Summit, organised by ICIS and Purchasing magazine.
"While prices could briefly remain moderate, risks to the petrochemical industry and the US and global economy are far more severe than recognised," Weissman said.
"As with mortgage-backed securities, as recently as 12-18 months ago forecasters are currently living in a dream world," Weissman said.
The spike in crude oil to $147/bbl this summer was an "early warning signal", he said.
Since then, crude oil prices have declined sharply to around $94/bbl.
"The risks of extreme things happening are higher than recognised. The assumption that the status quo will continue and that people have a firm grip of what's going on is false," Weissman said.
On the demand side, global energy use is expected to triple by 2050, driven by emerging market countries, he said.
On the supply side, there will not be enough oil to meet this demand, he said.
"There is a growing recognition that oil supplies will likely fall far short of the needs of the global economy," Weissman said. "In the next five years, the world will have to do with less oil supply and increasing demand in Asia, Latin America and the Middle East."
It will take 3.5-4m bbls/day in new oil supplies just to offset declines in existing oil fields, he said.
A renewed spike in oil prices could cripple the US economy, Weissman said.
"If NYMEX crude peaked at just $250/bbl, this could equate to an $11.8 trillion (€8.4 trillion) cost increase between 2010 and 2020," he said.
($1 = €0.71)
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