‘Sky-high’ oil prices to last until 2020

The world is now in a period of sky-high oil prices that will last a long time—probably until 2020, according to the world’s largest investment bank.

Senior analyst Gioavanni Serio in Goldman Sachs, visiting Norway, told participants in an energy seminar that the oil industry moves in 20-year cycles, reports finance industry newswire E24.
In the long-term, oil prices reflect marginal costs to the oil industry,” said Serio at a yearly energy seminar held by Wilhelmsen at Lysaker outside of Oslo. “The oil price and marginal costs stayed low in the 1990s. Now that it has become far more expensive for the oil producers to retrieve oil, the price is going to rise correspondingly,” he predicted.

The Goldman analyst does not think oil demand will increase significantly but he pointed to “bottlenecks everywhere”. He said: “Oil companies are lacking professionals and rig rates have exploded from around USD 100,000 per day in 2002 to USD 500,000 per day this year.”

Serio expects oil prices to fall in the short-term, to about USD 90 per barrel, but said it is “unrealistic” that the price would fall under USD 70 per barrel in the coming years. By the end of 2008, he expects the price to be well over USD 100 per barrel.

However, not everyone shares Goldman Sachs’ bullish predictions. Italian oil giant ENI’s CEO Paolo Scaroni said last week he believes oil prices will fall as a result of increased production.

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