- Oil prices could rocket to $100 within six months, plunging
the world into an unprecedented fuel crisis, controversial Texan oil analyst
Matt Simmons has warned.
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- After crude surged through $60 a barrel last week, nervous
investors were pinning their hopes on a build-up in US oil-stocks to depress
prices in the coming months.
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- But Simmons believes surging demand will keep prices
bubbling well above $50. 'We could be at $100 by this winter. We have the
biggest risk we have ever had of demand exceeding supply. We are now just
about to face up to the biggest crisis we have ever had,' he said.
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- Opec producers held emergency talks last week to consider
making their second 500,000 a barrel increase in production quotas in a
fortnight: but the discussions were suspended last Thursday after prices
dipped back below $60.
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- The looming oil crisis is not high up the agenda at this
week's G8 meeting, although the heads of state are expected to repeat their
finance ministers' call for greater transparency from Opec and other oil-producing
nations about their reserves.
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- However, global warming is one of Britain's two major
priorities, and Tony Blair hopes to secure a pledge to pour more cash into
developing alternatives to the oil-intensive technologies that cause climate
change.
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- Simmons believes such moves will be too little, too late.
He will publish a hard-hitting book this week in which he argues that Saudi
Arabia, the world's largest producer, is running out of oil, and further
price rises are inevitable as supplies decline. He warns that the scramble
for resources could eventually descend into war.
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- Many analysts expect extra production over the next year,
as high prices boost investment by energy firms. But Simmons says after
many years of underinvestment, there is even a shortage of drilling rigs.
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- 'Many of these projects are aspirations; many of them
won't create peak production in the first year, and many of them within
five years will be in decline,' he said.
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- However, the Economist Intelligence Unit predicts that
oil prices will peak by the end of this year, and decline by 10 per cent
in 2006 as the Chinese economy slows, reducing demand. Chinese imports
have been crucial to propping up the oil price in the last two years.
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- But the EIU warned that its forecasts - which show a
30 per cent increase in oil prices for 2005 - could prove too conservative
if there are further wobbles in supply. 'The narrow margin of spare production
capacity has made prices vulnerable to unforeseen reductions in supply
or rises in demand,' it said.
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- Paul Horsnell, head of commodities analysis at Barclays
Capital, said supply constraints would continue to bite for the rest of
the year. 'It's all getting a bit tight'
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- Brent crude closed almost $2 a barrel higher in New York
on Friday night, while futures contracts for heating oil, widely used in
the US, hit a record high, which analysts said was unusual for summer.
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- 'It's fear,' said Kyle Cooper, an analyst at Citigroup.
'It's not based on what is happening now. It's based on fear of what could
happen.'
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- Guardian Unlimited © Guardian Newspapers Limited
2005
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- http://observer.guardian.co.uk/business/story/0,6903,1519745,00.html
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