Oil to hit $100 in 2008, Predicts Bank

A "steady ascent" of crude oil prices toward $100 (U.S.) a barrel continues, but the predicted date when that level will be hit remains a moving target, according to a CIBC World Markets report Wednesday.

The investment banking division of the Canadian Imperial Bank of Commerce (TSX: CM) predicts "new record highs of $80 a barrel this year and reaching as high as $100 a barrel by the end of 2008 as soaring oil demand outpaces growth in global supply." . . . more

U.S. crude price could top $90 a barrel this autumn and hit $95 by the end of the year if OPEC keeps oil production capped at current levels, Goldman Sachs said in a report issued on Monday.

U.S. oil prices have risen to near $74 per barrel, driven this month by higher demand and lower supplies, the report said, pointed out that such fundamentals could tighten further unless key OPEC members hike output. . . . more

We are in an era where the general trend in crude prices is upward.  It is not that we have a lack of energy supplies, but we lack the infrastructure for harvesting and processing our energy supplies.  I am increasingly convinced that the integrated oil companies will not build more refining capacity refineries in the U.S. until we have a shortage or severe crunch in refined products due to their perceived view that they 1) cannot take the risk that crude prices will go down and 2) that they are making record profits now and do not have much incentive to expand right now. While I agree that crude will reach $100 in the not too far distant future, 2008 seems too soon to me.

Comments

[Brian]

The integrated oil companies are currently increasing refining capacity. They are expanding their existing refineries. The regulatory hurdles to build a new refinery in the U.S. are quite high.

[Jim from The Energy Blog]

Brian,

I meant't to say refineries, not refining capacity, I don't know why I made this mistake, sorry.

BTW The Oil Drum predits Sept 09 for the price of crude tp reach $100. See my July 21 post with their graphic.

[Brian F]

While it is true that the location of 500+ billion barrels is known, the trick is in profitably getting the oil to the surface from complex subsurface reservoirs. Increasing levels of sophisticated technology are needed to know where to drill and how to complete the well in order to produce hydrocarbons. Yes, the technology costs money but primarily the need for the technology points to the increasing difficulty in getting the oil out of the ground. I don't have a well-researched prediction for oil prices but I do know it isn't getting any easier to find it or produce it and I am in the very thick of that business. My only conclusion is that prices aren't going significantly lower without a drop in demand.