HOUSTON" Oil's meteoric rise to near $120 a barrel looks like more than just another economic bubble " growing demand and tighter supplies are likely to keep prices high. Some analysts say even $200 a barrel would not be out of the question.[/b]
The latest price surge " pushing crude to record heights in recent weeks, and to nearly double its level a year ago " has some key components of a classic bubble, when market prices climb far above their intrinsic value. The burst comes when investors realize the assets are overvalued.
But growing worldwide thirst for crude, in large part from the rapidly developing economies of China and India, means frustrated consumers probably won't get any relief.
"We can do our homework, but prices are going to go where they want to go at this point," said Jeff Spittel, an analyst at investment bank Natixis Bleichroeder Inc.
Americans who hoped to ride out temporarily high prices by carpooling or driving less may have to make those habits permanent. And because of the premium prices,
oil companies may be willing to search out more oil in places they previously couldn't afford to explore.
Oil came close to $120 a barrel Friday on news that a ship under contract to the U.S. Defense Department fired warning shots at two boats in the
Persian Gulf that may have been Iranian. The markets were also weighing the effects of a pipeline attack in Nigeria and a looming refinery strike in Scotland. ( strike now in progress )[8D]
Retail gas prices, which at times rise in tandem with crude oil, moved further into record territory near $3.60 a gallon.
The Organization of Petroleum Exporting Countries " which supplies about 40 percent of the world's crude " insists it's supplying more than enough oil.
Instead, many observers blame speculative traders for bidding up the price as a hedge against inflation and as protection from the sinking U.S. dollar. Some see that as evidence of a bubble.
It's also becoming harder and more expensive for oil companies to find and tap new petroleum reserves " a troublesome scenario given forecasts that the world's energy needs will escalate by more than 50 percent in the next two decades.
Toss in the weak dollar and political instability in some oil-producing countries, and it seems unlikely that oil will fall below $100 a barrel anytime soon, if ever.
http://www.foxnews.com/story/0,2933,352681,00.html
The major oil companies began reporting earnings for the first three months of the year this week, with ConocoPhillips saying it earned more than $4 billion, up 17 percent from a year ago. Exxon Mobil Corp. and Chevron Corp. are scheduled to report earnings Thursday and Friday.
The higher prices have allowed companies to extract oil from sources too expensive to tap only a few years ago, like the Canadian oil sands and deepwater sites in the
Gulf of Mexico, said Gary Adams, who heads the U.S. oil and gas practice for Deloitte & Touche USA LLP. He expects the price of oil to settle at around $90 to $100 a barrel in the coming months.
Even if oil prices fall back to $60 or $70 a barrel, "the capacity of those businesses to do well and fund major projects will continue," said analyst Bernard Picchi of securities firm Wall Street Access. "These are great storehouses of value, and I don't think anyone can take that from them right now."
.....deepwater sites could be the answer?
Oil Costs not Caused by Supply, Demand or Market Speculation?
