$100 A Barrel Oil – My Predictions Revisited
The price of oil topped $100 on January 2 and again on January 3. During the days since I have received emails and phone calls from regular readers, complimenting me on my correct prediction. As I wrote here more than two months ago, the price of oil would not only cross the $100 price barrier, but would trade in the $80-125 range for the next year
A year ago, on the syndicated program “First Business”, when oil was trading in the $50-55 range, I predicted that oil would go over $80 during 2007, which, at the time was a contrary view, as oil had been down trending for several weeks at that point.
As a futurist, it is my job to look into the future and try to discern what might happen in the months, years and decades ahead. I look at patterns and large dynamics that translate into macro trends that then translate into specific developments.
It is an odd sensation, but whenever any of what I have predicted becomes reality, it feels as though I have already experienced it. When oil crossed the $100 price barrier these past few days, it was as though I had already experienced that. My reaction? Of course it went over $100 a barrel, what’s the big deal?
The long term trend in oil and gas prices is ever upward. I do think that the trading range for oil for the next year at least will be $80-120. There are few if any situations I can see where the price could fall below $80. However there are some situations that could take the price up over $120. The rebel uprising in Nigeria, which was the cause for the breaking of the price barrier, is just an example. What if there was a successful terrorist attack on a major oil pipeline in the Middle East? What if Mexico or Russia, or Canada, all major exporters of oil decided to export less as internal market demands forced them to keep more of the output for their own countries? That is already occurring in Iran.
What might happen if the dollar continues to decline against the Euro? The headquarters of OPEC is in Vienna. What if OPEC made the decision to switch the price of oil to be benchmarked to the Euro? Even if that radical step were not taken, a declining dollar will force the price up, in dollars. Euro economies will not experience an increase in price as the dollar has declined. The truly powerful upward demand pressure on the price comes from China and India whose currencies are less tied to the dollar than the U.S. would like them to be.
As I will discuss in my annual predictions next week, 2008 will be the year when the concept of peak oil will move into the larger awareness of the public. A great number of scientists and energy experts believe, as do I, that the world is now passing through peak oil. When the understanding of this probability sinks in it will trigger some oil producing companies to start to manage sales for the long term. This could well drive up the price as production will be limited as these countries look for long term revenues.
Of course the great news in the rise in the price of oil is that incredible amounts of investment capital are now flowing into the alternative, renewable energy field. Now that people in the U.S. and around the world have accepted the fact that oil will most likely never be cheap again, the rush toward alternative energy will accelerate as there will be a perception that large financial investments can be recouped.
It is gratifying when my predictions about the future prove to be true. It is one of the reasons you read this column. I appreciate your readership and will strive to continue to provide you with clear views into the future. It is my job as a futurist to do so.
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