Wednesday, August 20, 2008

Don't count on $113 a barrel oil

It may be nice to think that the slide in oil prices that dropped the price to $113 a barrel will keep on sliding downward.

Dream on.

The Energy Information Agency today said it expected oil prices to climb back to the $120 to $130 per barrel range for the rest of the year. Maybe.

From the agency's report, "This Week in Petroleum:"

While we are not quite as confident in forecasting the near-term path for oil prices as Michael Phelps might be about winning his next race, we do think that crude oil prices may settle in the $120 - $130 per barrel range for most of the remainder of the year, barring any additional major supply disruptions from hurricanes or other events such as the current conflict in Georgia. This is largely due to our projection that year-over-year declines in U.S. oil consumption will not be as large in the second half of the year, in part due to relatively weak consumption in the second half of last year and also to the perceived end of the upward surge in prices. Balancing out the forecasted decreases in U.S. consumption, we project relatively strong continued demand growth in non-OECD countries. Finally, as prices drop, Saudi Arabia may cut back on its recent increase in production, which could halt the most recent price decline. Of course, whether or not this scenario unfolds is anyone’s guess, but understanding the factors behind the increase and recent decline in oil prices is important in understanding what might come next in the prices we pay at the pump.

Meanwhile, we have a State Department of Transportation celebrating an $800 million freeway interchange that too many people can't afford to drive on because they can't afford the gas, and a transit system that very same WisDOT is watching wither and die. It just doesn't make sense.

1 comment:

Kofi Bofah said...

The price of oil finds equilibrium at $50 - $75 / barrel. I predicted this months ago...