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Sunday, September 25, 2005

Will oil strike $380 a barrel by 2015?

by Adam Porter in Perpignan, France (April 21 2005)

A steep rise in prices is expected due to growing energy demands

A report prepared by energy economists at the French investment bank Ixis-CIB has warned crude oil prices could touch $380 a barrel by 2015.

Analysts Patrick Artus and Moncef Kaabi said in the next ten years demand for oil will outstrip supply by around eight million barrels per day.

"If one takes into account the level of previous oil shocks such as in the 1970's, we don't think a price level of $380 per barrel is out of the question", they said.

The analysts argued that the shortfall in energy needs would not be made up by alternatives as they were not developed as yet. "Thus the world will still need to rely upon traditional fossil fuels", their report said.

Growing demands

They also said existing new oilfield projects would not be enough to satisfy unprecedented growth in demand from developing economies, particularly China.

"We have taken into account every new oil discovery and potential source ... as well as this we note the continuing situation of a fall in new field discoveries", the analysts said.

They pointed out China would contribute greatly to the world's rising energy needs.

"Rapid movements of people from the Chinese countryside into the cities would increase the demand for housing, cars and general transportation. All of this will fuel energy consumption", the report said.

Economic juggernaut

Industrial production in China is also growing rapidly with no major signs of decline.

"The types of energy-intensive production in China are growing fast and forecasts also point to continued growth".

"Chinese economic development is at a stage where the amount of energy used is not yet recycled back into the economy. This has definitely been the case in recent times and this explains the sharp increases in China and other similar nations recently", Artus and Kaabi said.

"One could thus envisage a scenario where there is a near seven-fold increase in crude oil prices, whereby, adding annual 2.5% inflation ... we arrive at a price of $380 per barrel by 2015".

Bill Totten


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