Columnist Jim Jubak on MSN Money Central believes that analysts who confidently predicted $200 per barrel oil weren't wrong. They were just a bit premature.
“Maybe it's just been delayed in transit. A recession in the world's developed economies can do that. Remember Arjun Murti’s time in the sun when the analyst at Goldman Sachs predicted that oil would soon hit $200 a barrel?” writes Jubak.
“A number of other prognosticators weren't far behind. T. Boone Pickens predicted that oil would hit $150. In case you haven't noticed, all of us were wrong. Oil peaked at $147 a barrel in summer 2008 and then plunged to $35 a barrel by June 2009.”
Oil recently traded at about $82 a barrel.
Will oil hit $200 a barrel in the end? That’s increasingly likely.
“A little thing called the Great Recession killed global demand for oil for a while,” writes Jubak.
“But none of the supply-side problems that led me and others to predict $150-to-$200 oil has gone away. As soon as oil demand rebounds with a global economic recovery, I think we're going to be right back on the road to $150-, $180- or $200-a-barrel oil.”
Jubak reckons that the global recession wiped out roughly two years of worldwide demand for oil.
The slowdown wasn't limited to the United States, and in developed economies it hit hard enough to earn comparisons to the Great Depression of the 1930s.
Oil demand is finally picking up. But the cost of drilling is continuing to climb.
“Western oil majors have recently reported a rise in the drilling failure rate. Chevron, for example, reported that 35 percent of the wells it drilled in 2009 came up dry. In 2008, the rate was just 10%. More dry holes mean spending more money to find less oil,” writes Jubak.
Jubak is not the only expert predict a return to higher oil prices.
The Wall Street Journal is reporting that the Saudis are now warning of higher prices for crude.
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