måndag 9 februari 2009

Enjoy low oil prices while you can

Henry Groppe, founder of Houston-based Groppe, Long & Littell, is 83 years old, a vegetarian and has been a forecaster in the oil and gas business since 1955. And he is not afraid to go against the conventional wisdom. One year back he predicted the oil price would collapse in the second half of the year -- and not reach the much talked-about price of US$200 a barrel.

Now Groppe, a special advisor to the Toronto-based Middlefield group of companies, has done his analysis and concluded that between now and year end the price of oil will double. If that forecast pans out, oil will hit US$80 a barrel, or more than double what others are predicting.

His advice to consumers: Enjoy the current low gas prices, because they won't last for much longer.

"Given enough time, it's the fundamentals of supply and demand balances that control the price," Groppe said. "It's just like journalism: 'Get your facts straight,' " he said, when referring to moves inside the 80-million-barrel-a-day global oil business.

He bases his 2009 consumption forecast relative to 2008 on three such factors: the two-million-a-day barrel cut in production from OPEC, the bulk of which will come from three countries (Saudi Arabia, Kuwait and Abu Dhabi); the four-million-barrel-a-day increase in demand that will result from the average 50% decline in the crude oil price; and the 1.2 million barrel drop in consumption that will flow from the global recession. Put them all together and what emerges is a 4.8-million-barrel-a-day net oil shortage.


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