High oil prices to last until 2020?
The high oil prices may well be with us for a long time to come, if senior analyst Gioavanni Serio in Goldman Sachs is right. In an energy seminar in Oslo he told participants that the oil industry moves in 20-year cycles.
The world is now in a period of sky-high oil prices that will last a long time—probably until 2020, according to the world’s largest investment bank.
The price for American raw oil rose to a record-high USD 112 per barrel this week after new figures revealed a surprising decrease in storage the week before. Brent oil from the North Sea also rose to new highs, selling for USD 109 per barrel.
“In the long-term, oil prices reflect marginal costs to the oil industry,” said Serio at a yearly energy seminar held by Wilhelmsen at Lysaker outside of Oslo. “The oil price and marginal costs stayed low in the 1990s. Now that it has become far more expensive for the oil producers to retrieve oil, the price is going to rise correspondingly,” he predicted.
The Goldman analyst does not think oil demand will increase significantly but he pointed to “bottlenecks everywhere”. He said: “Oil companies are lacking professionals and rig rates have exploded from around USD 100,000 per day in 2002 to USD 500,000 per day this year.”
However, not everyone shares Goldman Sachs’ bullish predictions. Italian oil giant ENI’s CEO Paolo Scaroni said last week he believes oil prices will fall as a result of increased production.
“We expect the oil price to fall to USD 50-60 per barrel, a price that will provide for global growth,” said Scaroni in an interview on Italian TV.
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