Bold Predictions

If low oil prices are what you want for Christmas, then don’t hold your breath. In the November issue of Forbes magazine, Sheik Ahmed Zaki Yamani, Saudi Arabia’s former oil minister and now chairman of the Center for Global Energy Studies in London, suggested that a combination of energy conservation, alternative fuel technologies, and high crude production will bring prices down next year-to as low as $10 US a barrel.

Can oil realistically fall $20 US a barrel in just 12 months?

“Not in our lifetime,” responds Ron Rosnak, senior petroleum advisor for EnPro International, an Oshawa, Ont.-based energy consulting firm. “Especially not in the (one-year) timeframe that is predicted.”

Rosnak argues that alternative fuels have been available for years-without widespread adoption-and will have little immediate effect on the market.

Martin Molyneaux, a petroleum analyst with Calgary-based First Energy Corp., agrees. “Take what Yamani says with a grain of salt. What he says is not going to do anything for oil prices,” he says.

Molyneaux believes that high prices have not impacted the demand for oil or what people are willing to pay at the pumps.

“Prices have tripled since January 1999, yet consumption is off by less than 1%. What does that tell you?” he asks. “If you call a dealership and ask how many SUVs they’ve sold since 1999, I think you’ll find SUV sales have hardly eroded at all even though they’re big consumers of gasoline.”

Rosnak says there may be some light at the end of the tunnel. He says more homeowners in the northeastern U.S. will convert from oil to natural gas furnaces in the next two or three years. This could generate a lesser demand for middle distillates (where diesel fuel is derived from), resulting in lower diesel prices.

But he warns not to expect per-barrel prices to dip below $20 any time soon.