Oil ‘will just keep rising’

The world has moved into an irreversible era of high oil prices in which crude prices are expected to climb continuously and possibly hit US$100 (Bt3,900) a barrel by the middle of the next decade, a US energy expert told an oil industry audience in Bangkok this week.

Dr Fereidun Fesharaki, president of FACTS Inc, also warned Thai policymakers to keep their promise to eliminate within the next two years the Oil Fund’s Bt65-billion debt, incurred by recent fuel subsidies, and he said PTT Plc should reconsider its multi-billion investment in a network of natural gas for vehicles (NGV) filling stations.

“We’re not in a cycle, but in a changed paradigm,” he said. “Oil prices will continue to go up.”

Fesharaki’s base-case scenario is for the price of Dubai crude to increase to $80 a barrel in real terms by the middle of the next decade, resulting in a demand loss which will then see the price settle at about $60 a barrel. The upcoming peak in prices is expected to occur in about 2014. The lowest-case scenario projects a price of $50 a barrel and the highest case, $100.

Over the next few months, he said oil prices were likely to decline, thanks to an extraordinarily high output this year from non-Opec producers. But output will drop next year.

Speaking at a public lecture on “The New Paradigm in the Global Oil and Gas Industry: Challenges for Thailand”, hosted by the Petroleum Institute of Thailand on Tuesday, Fesharaki said that due to an expected convergence in the prices of oil and natural gas, gas will no longer be a cheap fuel and electricity producers will need to diversify to coal and eventually to nuclear power.

The Nation