31 January 2012 18:55 [Source: ICIS news]
WASHINGTON (ICIS)--The global oil market is facing wide volatility this year, with potential disruptions that could drive crude prices to new heights and possible economic downturns that could plunge oil to $50/bbl, a leading energy analyst told Congress on Tuesday.
James Burkhard, managing director of Cambridge Energy Research Associates (CERA), told the Senate Committee on Energy and Natural Resources that the global oil market faces potentially broad price swings in 2012 “because of the wide spectrum of potential outcomes”.
“Limited spare capacity, geopolitical concerns and the risk of disrupted supply point toward the possibility of higher prices and even a severe price spike,” Burkhard told the panel.
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“The combination of tighter US and European financial sanctions, the European oil embargo on purchases of Iranian oil, political infighting in Iran, and Iran’s growing fear of encirclement creates a volatile atmosphere in which miscalculations could lead to grave consequences,” Burkhard said.
A recent analysis of oil pricing consequences if Iran were to take action to close the Strait of Hormuz suggests that crude could surge to more than $350/bbl.
Burkhard said that the decade-long nuclear standoff with
Burkhard noted that a recent Iranian official’s threat “to close the Strait of Hormuz – the most important oil export route in the world – sent a shudder through oil markets”.
On the other side of the volatility spectrum, he said, “the global economy is in a fragile state ... the eurozone crisis remains unsettled and could worsen. The pace of growth in
He said that if a member country exits the eurozone, the
In that scenario, he said, “oil prices fall below $50/bbl”.
“We do not believe the world has entered such a scenario,” Burkhard said, “but it cannot be ruled out for 2012 given the concerns emanating from the eurozone.”
Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy
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