[Maddog78]

Another analyst weighs in.


Analyst says oil prices will bounce back

HOUSTON - All that money you're saving these days at the gas pump? You might want to put it in the bank.
The same cheap oil that's providing relief to drivers and businesses in an awful economy is setting the stage for another price spike, perhaps as soon as next year, that will bring back painful memories of last summer's US$4-a-gallon gas in the United States and C$1.40-a-litre gas in Canada.
The oil industry is scaling back on exploration and production because some projects don't make economic sense when energy prices are low. And crude is already harder to find because more countries that own oil companies are blocking outside access to their oil fields.
When the world emerges from the recession and starts to burn more fuel again, and higher demand meets lower supply, prices will almost certainly shoot higher.
Some analysts say oil could eventually eclipse US$150 a barrel, maybe even on its way to $200. In such a scenario, gasoline would easily cost more than the record high set last summer. Oil trades at about $50 today.

[eastbay]

Remember, it only requires a very small surplus of oil to cause prices to collapse, and conversely a tiny shortage results in huge price increases.

Once this small (on a percentage basis) surplus is worked through 'the system' we'll see a small shortage and that's when prices will rise again.

Maybe by summer? Fall? Who knows when, but these low prices definitely won't last very long. Have patience. Save your money.

[Dezakin]

Sure. Eventually the economy will recover after all, as strange as that sounds to so many here...

[TreebeardsUncle]

The big 3 and others going to electric and hybrid cars will make it harder to make money investing in oil service companies.

[Plantagenet]

The big 3 and others going to electric and hybrid cars will make it harder to make money investing in oil service companies.

Depends on whether or not the electric cars (1) actually get manufactured and (2) whether anyone will spend $40,000 to buy a tiny electric car that can only go 40 miles before it needs 10 hours of charging.

[threadbear]

Remember, it only requires a very small surplus of oil to cause prices to collapse, and conversely a tiny shortage results in huge price increases.

Once this small (on a percentage basis) surplus is worked through 'the system' we'll see a small shortage and that's when prices will rise again.

Maybe by summer? Fall? Who knows when, but these low prices definitely won't last very long. Have patience. Save your money.

Not with gun shy investors, and a democrat Govt that is likely going to reregulate the energy trade, and punish those who don't conform.

The next price rises will be due to ACTUAL supply problems, or a trashed dollar, that raises the price of everything. It'll be a problem we can all believe in, with a simple explanation---and it won't be nearly as steep as last summer, I'll wager.

[AirlinePilot]

If the dollar does get trashed, I have a sneaking suspicion that things around the world, and particularly in the main oil producing nations will get very scary very quickly. There is a lot that has to change if we de-peg from the dollar and oil pricing. That is what will happen if the dollar goes down. Its probably one of the worst case scenarios you could come up with.

[TheDude]

Enjoy low oil prices while you can: guru

Barry Critchley, Financial Post Published: Saturday, February 07, 2009

Henry Groppe, founder of Houston-based Groppe, Long & Littell, is 83 years old, a vegetarian and has been a forecaster in the oil and gas business since 1955. And he is not afraid to go against the conventional wisdom. One year back he predicted the oil price would collapse in the second half of the year -- and not reach the much talked-about price of US$200 a barrel.

Now Groppe, a special advisor to the Toronto-based Middlefield group of companies, has done his analysis and concluded that between now and year end the price of oil will double. If that forecast pans out, oil will hit US$80 a barrel, or more than double what others are predicting. His advice to consumers: Enjoy the current low gas prices, because they won't last for much longer.

"Given enough time, it's the fundamentals of supply and demand balances that control the price," Groppe said. "It's just like journalism: 'Get your facts straight,' " he said, when referring to moves inside the 80-million-barrel-a-day global oil business.

He bases his 2009 consumption forecast relative to 2008 on three such factors: the two-million-a-day barrel cut in production from OPEC, the bulk of which will come from three countries (Saudi Arabia, Kuwait and Abu Dhabi); the four-million-barrel-a-day increase in demand that will result from the average 50% decline in the crude oil price; and the 1.2 million barrel drop in consumption that will flow from the global recession. Put them all together and what emerges is a 4.8-million-barrel-a-day net oil shortage.

"There has to be a big upward correction in prices to bring things back into balance," Groppe said.

Happened to listen to David Strahan's interview with Henry today, where he called world peak in 2008, complete with KSA holding steady for 10-15 years minimum. He also says EIA etc. production figures are routinely inflated in a band averaging ca. 2 mb/d.

[yesplease]

Depends on whether or not the electric cars (1) actually get manufactured and (2) whether anyone will spend $40,000 to buy a tiny electric car that can only go 40 miles before it needs 10 hours of charging.

Depends on the EV you're referring to. For $40,000, we're looking at full size PHEVs, so they can run on gasoline after 40 miles if need be. For ~$28,000, you'll probably be able to nab a pure electric two seater that'll go 100+ miles per charge. Both should qualify for the federal tax credit of up to $7,500, so given the above assumptions we're probably looking at a $32,500 full size four door PHEV that can go 40 miles per charge on electricity and however much farther on gas w/o a charge, and maybe a $22,000-$25,000 all electric two seater at 160+ miles per charge.

[lowem]

Remember, it only requires a very small surplus of oil to cause prices to collapse, and conversely a tiny shortage results in huge price increases.

Right. You know what they say. Pricing happens at the margins.

[AgentR]

Don't get used to any price point.

Problem is, which is worse for commercial interests; a consistently high price, or a wildly jittery, unpredictable price? I assert that the consistent price would be better, since the cost of producing an end product (say a basketball) will eventually work its way into the market; whereas a volatile price only creates gambling winners and losers out of people who don't want to be gambling at all.

[Pops]

Don't get used to any price point.

+1

Increasingly true for any commodity on which you rely for income or depend on for survival; in either "the manner you've become accustomed" or in the most basic sense.

[jamest]

The big 3 and others going to electric and hybrid cars will make it harder to make money investing in oil service companies.

A little arithmetic suggests that PHEVs and EVs won't have much of an impact on gasoline and diesel consumption.

Suppose 10 million of them are put on the road, and that they average 12,000 miles per vehicle per year on electricity (a highly optimistic assumption, as these are urban commuter vehicles), and that the PHEVs and EVs displace parallel hybrids that would have averaged about 35 mpg over the same miles.

This works out to an annual savings of about 3.5 billion gallons of gasoline per year or 2% of current gasoline and diesel consumption in the U.S.

The cost of achieving these savings would be $75 billion in subsidies (assuming a subsidy of $7,500 per vehicle), as well as the cost to generate and transmit the electricity to charge the vehicles.

Don't make no sense to me.

[copious.abundance]

I'm beginning to find these oil price "predictions" by these "analysts" amusing. According to this guy back in November, oil was supposed to spike up to about $70-$80 by now, then crash back down to $20.

http://www.cnbc.com/id/27949592

Charts Predict: Oil on its Way to $20
Topics:Stock Market | Energy
Sectors:Oil and Gas
CNBC.com | 28 Nov 2008 | 04:00 AM ET

Crude oil prices will rally in the near-term, but then investors will see another sharp selloff that will take crude back down to seven-year lows, according to one technical analyst.

Looking at the chart for light, sweet crude, prices will rise to $76 to $80 in the next two months, Dick Otto from Matrix Asset Management said Friday. But then another slide is expected.

"What we seen when we look at the move down from $130 to $50 is an impulsive wave," Otto said.

After the near-term rise, the next wave will also be "impulsive," with prices touching the 2001 bottoms of about $20.

Once prices reach those levels, "we have completed the correction down and then we will find, in the next four to five years after that, an up market," he said.

Looking at the Dow Jones Industrial Average, volatility will go down through the end of the year, but the trend will be down again starting in 2009, Otto added.