The epic $147-per-barrel spike in the summer of 2008 was the sequel of an alarming chorus that the world was running out of oil, which in its turn caused an unthinkable bubble. However, since that time, production has continued to reach new highs almost every year. Nowadays, some market watchers claim that crude oil production worldwide is surging like never before. Others question whether today’s rates of output can ever be increased, and say that an imminent shortage will be permanent. The glass-half-empty experts say that oil is still running out once and for all and see oil prices rising far out into the future. An infinite set of probabilities makes forecasting a churlish task.
In an issue as global as oil, geopolitics is one of the key points.
“There’s every possibility that there will be some kind of political or military issues that will cause further disruptions. Libya was at three hundred thousand barrels a day this year, it’s now to nine hundred thousand, it could easily go back down again, ISIS seems to be contained, that might change – you can never really tell with this market because these very large geopolitical moves can have a real impact on the price,” Alex Griffiths, Managing Director at Fitch Ratings in London said.
Joerg Doerler, a principal with A.T. Kearney who is head of its oil and gas practice in Russia and the CIS, is among those who dare to make forecasts. According to Doerler, “Next year the prices might even fall a bit lower, maybe to levels around $60 per barrel or even lower, but this might not be sustainable for a longer period of time, so I think the price around the current level or slightly lower can be expected for next year.”
Moody’s rating agency just issued its base case forecast of $80-$85 per barrel for 2015, noting that the exact impact will vary from country to country and a further fall in prices, if it happens, would worsen the situation for oil-exporting sovereigns.
“Our current forecast is $80-$85 per barrel. This is significantly below what we had in the beginning of the year but I would like to stress that lower oil prices are a net positive for the global economy because the economic weight of oil-importing countries is much greater than oil-exporting countries,” Moody’s Chief Economist and Managing Director Lucio Vinhas de Souza.
Many analysts also note the cyclical nature of the world oil market throughout its century-and-a-half-long history. There are several key players, including the Saudis (who want to drive out competition from US fracking and Canadian tar sand production; Saudi Arabia’s cost of production is far less), other sovereigns like Russia, Iran, Ecuador, Norway, the countries of the Persian Gulf and Venezuela that rely on oil revenues, and the US, which on one hand doesn't want to see fracking become unprofitable but on the other hand stands a lot to gain economically from lower oil prices. The US may also be hoping that low oil prices take their toll on Russia and Iran, which are both already subject to US sanctions. Yet the wisest say that only time can tell whether oil prices will continue to hover around the $65-per-barrel levels, or whether the forces of history will send them in a different direction altogether.