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- Sep 25, 2007
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Hi all,
An article from the November 14th edition of the Globe and Mail (Globe Investor).
Excerpts:
It`s that kind of prescience that gets guys labelled "guru" - a tag Mr. Groppe long ago earned in his almost six decades predicting the oil market. The soft-spoken Texan cemented his forecasting in the early 1980s, when he foresaw the collapse of oil prices from then-record levels of $40 a barrel.
His view is based on a fundamental belief that global oil production has peaked, and is destined to go into a slow but steady decline. At the same time, though, he also believes those higher prices will result in demand destruction as consumers shift to alternative fuels - thus keeping a lid on prices, albeit at higher levels.
"We`re in a new era ... in which oil production will be irreversibly declining," he said. "The question then is, what price trend during that period will give you the matching demand destruction?"
"Our conclusion is that, on an average annual basis, [under] normal conditions, it`s something that rises slowly from about $65-$70 to about $100. We think that will provide the necessary reduction in consumption."
While he`s skeptical that worldwide vehicular consumption can be significantly reduced over the next 10 years through the use of alternative fuels, he believes fuel substitutions already happening among industrial users will be sufficient to offset the declining global oil production and keep average annual prices in that $70-$100 range.
"That`s all been set in motion," he said, noting that even China - which many forecasters point to as a major driver for continued long-term growth in oil demand - is changing its ways.
He`s forecasting that prices will rebound to average $83-$84 a barrel in 2009, as the current cheaper prices rejuvenate demand while the reduced Saudi production constrains supplies.
http://www.theglobeandmail.com/servlet/sto...david+parkinson
Keith
An article from the November 14th edition of the Globe and Mail (Globe Investor).
Excerpts:
It`s that kind of prescience that gets guys labelled "guru" - a tag Mr. Groppe long ago earned in his almost six decades predicting the oil market. The soft-spoken Texan cemented his forecasting in the early 1980s, when he foresaw the collapse of oil prices from then-record levels of $40 a barrel.
His view is based on a fundamental belief that global oil production has peaked, and is destined to go into a slow but steady decline. At the same time, though, he also believes those higher prices will result in demand destruction as consumers shift to alternative fuels - thus keeping a lid on prices, albeit at higher levels.
"We`re in a new era ... in which oil production will be irreversibly declining," he said. "The question then is, what price trend during that period will give you the matching demand destruction?"
"Our conclusion is that, on an average annual basis, [under] normal conditions, it`s something that rises slowly from about $65-$70 to about $100. We think that will provide the necessary reduction in consumption."
While he`s skeptical that worldwide vehicular consumption can be significantly reduced over the next 10 years through the use of alternative fuels, he believes fuel substitutions already happening among industrial users will be sufficient to offset the declining global oil production and keep average annual prices in that $70-$100 range.
"That`s all been set in motion," he said, noting that even China - which many forecasters point to as a major driver for continued long-term growth in oil demand - is changing its ways.
He`s forecasting that prices will rebound to average $83-$84 a barrel in 2009, as the current cheaper prices rejuvenate demand while the reduced Saudi production constrains supplies.
http://www.theglobeandmail.com/servlet/sto...david+parkinson
Keith