Crude oil to remain in high-price territory
Updated: 2007-12-10 10:27
While China and other Asian economies rely through exports on the external demand from advanced economies for their GDP growth, a slowdown in these economies should only moderate the GDP growth in emerging markets and their demand for oil.
According to an NPR (National Public Radio) report, the impact on the United States is not as serious as expected. One reason is that the US economy has shifted from a largely manufacturing to a service economy, and therefore its energy needs, as a percentage of GDP, are lower.
Also, cars and airplanes are, overall, significantly more efficient today than they were 35 years ago.
Hong echoed the viewpoint, saying that high oil prices have a limited impact on rich countries.
By taking into account the inflation factor, analysts said oil consumption only represents 3 percent in consumers' entire consumption, accounting for half of the figure in the 1980s.
CRUDE OIL TO REMAIN IN HIGH-PRICE TERRITORY
Although it has failed to cross the 100-dollar threshold in November, experts said oil prices will remain around 90 dollars for some time and will cross the 100-dollar mark sooner or later.
Oil prices will climb higher next year with the yearly average price to reach 76 dollars, said Hong, adding it is almost impossible for global oil prices to drop sharply if the world economy does not move into recession.
Oil prices are expected to remain volatile as long as factors remain such as US-Iran tensions and the financial market turmoil that followed the American housing mortgage market crisis, an industry expert said.
The world's financial and oil markets are becoming increasingly connected and oil prices are no longer driven by the fundamentals of supply and demand alone, said Daniel Yergin, chairman of US-based consultancy Cambridge Energy Research Associates (Cera).
Tensions between Iran and the West over the former's nuclear development have contributed to high global oil prices and affected investment in Iranian oil and gas projects.
Much of the price volatility in the commodity has to do with day sentiment, said senior oil analyst Colney Turner, adding the fact remains however that it is becoming increasingly difficult to locate additional hydrocarbon reserves.
"Existing reserves across the world are already experiencing declines in output at a time when demand is still strong," he said.
The 100-dollars-per-barrel scenario, while it may not be reached this year, is likely to occur in the not-too-distant future, he said. "This supply-demand issue is not going away and the days of cheap oil are for the history books."
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