The bull market for oil has many years to go before it peters out, says billionaire Jim Rogers, chairman of Rogers Holdings.
There are several factors for this view, but the primary one is that "known sources of petroleum are dwindling," Rogers told Bloomberg in an interview.
Global oil supplies could fall far short of need and expectations in the next 20 years, reported the International Energy Agency in mid-May. The agency long expected supply to rise to meet demand of 116 million barrels a day by 2030.
It now expects oil output to struggle to reach 100 million barrels in that time frame.
These market conditions will make life difficult for airlines — and airline stocks — well past 2010 and will also impact Federal Reserve policy in the coming months, Rogers said.
Rogers has proved astoundingly prescient since suggesting that investors buy into the older, industrial economy back in 1999 when gold and oil were coming off 25-year lows and when the Internet stock market was soaring.
Now in his mid-60s, Rogers retired from full-time work when he was 37, and invests for fun.
Other market watchers reckon that Rogers may well be right.
"Oil prices will stay high because of the lower dollar, increase in domestic energy demand in the oil-producing countries, power shortages, and private generation," A.F. Alhajji, an associate professor of economics at Ohio Northern University, tells Moneynews.
Alhajji says that the U.S. economy was able to mitigate the effects of oil price increases from 2004 to 2007 through a variety of monetary and fiscal policies. But, now "we have too many problems at once," says Alhajji. "That's not enabling us to do what we have to do at this stage."
The problems, however, won't last forever.
Studies show that when the price of oil doubles, consumption declines, especially in industrialized countries.
"Jim Rogers is correct over the short-term," Paul A. Woods, president and CEO of Odyssey Advisors, tells Moneynews. "But there is a light at the end of the tunnel after that."
Woods says that the popularity of hybrid cars — now a major niche market — shows that alternatives to petroleum are being embraced by consumers.
That could cut into the price of oil in the next few years.
"Plug-in hybrids are the next step in the process that will eventually put cars with combustion engines in museums, where that 19th century technology belongs," says Woods.
"Gasoline will not be able to compete with the pennies per mile cost for plug-ins and electric vehicles."
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