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Kidicious
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Diety of Kidiverse
Mar 2003
time: 21:33
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Basically the biggest trader in energy derivatives forecasts that the price of crude oil will keep going up until consumption is reduced because of the high price the way that it was in the 70s. This should happen within a few years, if not sooner.
I don't think the world economy will grow much though in the next few years so demand won't be as high as they predict.
quote:
Goldman sees oil spiking to $105
Says lower prices will only return when consumption is meaningfully reduced.
LONDON (Reuters) - Oil prices could touch $105 a barrel in the next few years, the influential investment bank Goldman Sachs said Thursday.
The bank's analysts said in a research report that the world energy market is in the early stages of a "super-spike" period that could see 1970s-style price surges. The bank called its forecast "conservative."
The report sent crude oil soaring Thursday, with U.S. light crude for May delivery adding $1.41 to close at $55.40 on the New York Mercantile Exchange. U.S. oil futures on NYMEX have averaged $50.03 a barrel so far in 2005 after hitting record highs in recent weeks.
But adjusted for inflation, oil would have to hit about $80 a barrel to top the levels seen during the oil crisis of the late 1970s.
Goldman's Global Investment Research note also raised the bank's 2005 and 2006 New York Mercantile Exchange crude price forecasts to $50 and $55 respectively, from $41 and $40.
"We believe oil markets may have entered the early stages of what we have referred to as a 'super spike' period -- a multi-year trading band of oil prices high enough to meaningfully reduce energy consumption and recreate a spare capacity cushion only after which will lower energy prices return," Goldman's analysts wrote.
Goldman is the biggest trader of energy derivatives, and its Goldman Sachs Commodities Index is a widely-watched barometer of energy and commodities prices.
Goldman said its predictions were supported by thin spare capacity in the energy supply chain and long response times for bringing on additional supply. The report also pointed to robust demand in the United States and in developing heavyweights China and India, despite the recent rapid increase in energy costs.
Back to the '70s
Goldman said the current oil market environment was much like that seen in the 1970s -- when oil prices spiked dramatically following the Arab oil embargoes on supply to the West and Iran's revolution.
High energy prices threw the world into recession, and triggered several years of declining oil demand.
During 1980-1981, gasoline spending in the United States corresponded to an average 4.5 percent of GDP, 7.2 percent of consumer expenditures, and 6.2 percent of personal disposable income, Goldman said.
"Our new $50-$105 per (barrel) super spike range perhaps conservatively corresponds to gasoline spending in the United States that reaches 3.6 percent of forecasted GDP, 5.3 percent of consumer expenditures, and 5.0 percent of personal disposable income.
Goldman said that assuming gasoline spending needs to reach 1970s levels to destroy demand, its upside super-spike estimate would be $135 per barrel for New York crude.
"Perhaps the ultimate answer to how high oil prices need to go before demand destruction occurs is derived from knowing when American consumers will stop buying gas guzzling sport/utility vehicles and instead seek fuel efficient alternatives," the analysts wrote.
"Based on our analysis of gasoline spending and the economy noted above, we estimate that U.S. gasoline prices may need to exceed $4 per gallon," they said.
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Cruddy
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quote:
Originally posted by Kidicious
True, but who else would you trust to make a forecast? |
Gropus without a specific interest in financing current energy companies for gazillions.
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Cruddy
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What a typo! Gropus! I'll leave it though - probably Freudian slip at its best...
quote:
Originally posted by Kidicious
Goldman has a reputation to uphold. |
Goldman has an investment interest to uphold!
Let's talk up the price of oil and convince companies that opening up non-commercial wells makes financial sense!
Do us all a favour and think WHY they might say that, eh?
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DanS
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Kickball Capital of the World
Jan 1970
time: 00:33
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Rational marketers would want to keep oil within that band precisely because anything higher encourages both marginal producers to invest in exploration/production and consumers to invest in alternative sources of portable energy.
The reasons why we don't have oil prices within that band is because: (1) the rational marketers misjudged demand; (2) there is a lot of speculative froth in the market; and (3) some non-rational aspects are creeping into the market in the margins.
Last edited by DanS on 06-04-2005 at 00:31
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02-04-2005 23:28
A mythical reputation that doesn't actually exist?
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