Speculation keeping oil prices high, says analyst

Growing market fears that global oil production has reached its peak and crude resources are starting to erode have allied with other factors to keep oil prices high, according to a veteran Iranian oil analyst.

Manouchehr Takin, a senior energy analyst at the London-based Centre for Global Energy Studies (CGES), listed a host of other factors that are contributing to the oil price surge but dismissed many of them as inaccurate.

In a study on the “oil price outlook”, Takin said demand for oil remained strong despite the price surge but said consumption could be affected in the long term if prices remain high. He said he wondered whether the soaring costs of oil exploration are contributing to higher prices but added this is “putting the cart before the horse”.

“Could it be the growing perception global oil production has reached or is reaching its maximum level or that fear of scarcity is making the price of oil go higher,” said Takin, who had held several senior oil positions in Iran before joining CGES.

“Is the world running out of oil… not yet and it will not happen suddenly… world oil production will reach a peak and then begin to decline… reaching a peak and declining oil production are inevitable...” he said in the study, which he presented to a conference held in Gleneagles, Scotland, this week.

But Takin said he does not support fears oil output is reaching its peak and the world could suddenly suffer from supply shortages. He said two opposing arguments about the oil abundance and scarcity have been going on for a long time.

“The two sides in this debate have been arguing since the early days of the oil industry… one side believes oil reserves will soon be exhausted… the other believes market incentives and technical ingenuity will result in more discoveries and the production of more oil.”

Over the past five years, oil prices have leaped by nearly sixfold to hit record levels of $147 a barrel last week. 

The rise has triggered accusation between Opec and key consumers, who argue that prices are high because of limited crude supplies from the 13-nation group. But Opec has denied responsibility, saying supplies are enough and blamed widespread market speculation and the ailing US dollar.

The surge also gave rise to varied analyses from oil experts, who cited what they called fundamental and non-fundamental factors. These include speculation, non-increase in Opec output for years, geopolitical tensions, refining bottlenecks, peak oil fears, weak US dollar and other reasons.

 

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