Oil Will Hit $150 Again
Source: Petroleum News (8/23/09)
"Hoping for higher oil prices? Be careful what you wish for."
Longtime oil industry observer Roger Herrera is convinced that high oil prices, though often omitted in current economic and political debate, actually drove the global economy into recession in 2008.
The direction crude prices take in the near future will play a major role in determining what happens with the economy, Herrera told Petroleum News in an Aug. 10 interview.
"It's clear to me that $150-a-barrel oil was the trigger for the recession," said Herrera, who has spent more than 40 years observing oil prices, initially as a petroleum industry geologist who started his career in Alaska, and then worked around the world in places such as Peru, East and West Africa, Greece, Canada's Arctic Islands, Colombia, Papua-New Guinea, Libya and Barbados before returning to Alaska in 1975, where he became increasingly involved in the federal politics of operating in the northernmost state.
Herrera spent a lot of time in Washington, D.C., on issues such as offshore exploration and opening the 1002 area of the Arctic National Wildlife Refuge to energy exploration.
Each time, he has been interviewed by Petroleum News over the last 15 years, he has accurately predicted the direction of oil prices.
"The prices put extreme stress on the economy—on the airlines, trucking companies, even consumer's pockets," Herrera said. "And if you look at the economic pattern in the past, you'll see that when the price of oil goes up, recession follows."
The sharply higher oil prices "without any shadow of doubt" pushed the economy over the edge into recession, Herrera said.
Little has changed in his ongoing forecast for medium- and long-term oil prices. They will surely keep climbing, back to $150 a barrel and likely beyond in the long term, he said.
Hydrocarbons comprise 85% of world energy consumption and world oil reserves have either hit their peak or slipped past it into decline. Also, the growing world population has an increasing thirst for oil, while alternative energy sources and transportation fuels are doing little to close the gap between supplies and demand. Add to this energy market speculation, which is exacerbating already intense upward pressure on oil prices.