Decade of cheap petrol is over, warn experts

[Red Squirrel]

This comes to show that it's a limited resource. They better move on to hydrogen fast and stop with this patent crap and just let car manufacturers use their own ideas.

http://www.guardian.co.uk/business/story/0...1441327,00.html
Ashley Seager
Saturday March 19, 2005
The Guardian

Motorists are facing further petrol price rises after crude oil hit a record high this week with experts and oil-producing countries warning that a decade-long period of cheap energy is now over.

With pump prices already at an average of 82.5p a litre for unleaded and 87.1p for diesel, the latest surge in crude, which has reached more than $57 a barrel, is likely to push petrol up over the coming days, experts say.

Ray Holloway, of the Petrol Retailers' Association, dismissed speculation that petrol would hit £1 a litre as "scaremongering" but said prices were likely to rise further in the second quarter of the year ahead of the summer driving season, when demand peaks.

"There is a shortage of refinery capacity in the United States and the Americans are bound to come shopping for petrol in Europe, which will push up prices here," he said.

Pump prices are not as high as they were last autumn when oil hit its previous highs, at least in part because the dollar, in which oil is priced, has fallen against the pound.

Petrol prices briefly hit 85p a litre last year but then fell back as crude dropped towards $40 a barrel after Opec, the producers' cartel, opened the taps and pumped more oil. Anything above 85p a litre would be a new experience for British drivers.

More recently, continued strong demand from China and the US, along with a cold snap across the northern hemisphere, have combined to push prices back up again.

Prices yesterday were down from Thursday's record levels but not by much. Brent blend traded in London at about $55.50, within sight of the record $56.15 hit the day before while US light crude futures were not far off their high of $57.60.

Opec pumps about a third of the world's crude and this week agreed to raise production by half a million barrels per day to 27.5m. It said it was prepared to go to 28m bpd if prices did not cool off.

Normally an announcement from Opec that it was raising output would send oil prices down, but not this time.

Sheikh Ahmad al-Sabah, president of the oil cartel, was forced within 48 hours of the announcement to admit that Opec may have to go for a further rise soon but he blamed speculators for pushing prices up, rather than the fundamentals of supply and demand.

Although they benefit from higher oil prices, many Opec members, in particular Saudi Arabia, have long been concerned that letting prices rise would cause recessions in the consumer nations, thereby choking off demand for its oil. In other words, high prices lead to low prices.

But there are signs that might be changing. Saudi oil minister Ali al-Naimi said this week that his country, the world's largest exporter, was aiming for world oil prices in the $40-$50 a barrel area, double the previous Opec target range of $22-$28 a barrel.

Oil demand is presently at a 25-year high and supply is struggling to keep up. The Paris-based International Energy Agency predicts demand will rise to 86.1m bpd later this year from about 83m in the first half of the year. Opec's forecasts are similar but both assume Chinese demand growth will halve this year to 10% from 20% - an assumption the oil market thinks may be overly optimistic.

The Opec president said on Thursday the group planned to raise output to 30m bpd by the fourth quarter of the year in anticipation of the peak winter period. But the market fears that many Opec members, already pumping flat out, do not have any spare capacity.

Simon Wardell, of Global Insight, said: "Opec has been stating that it believes it will be able to meet demand in the fourth quarter and still maintain spare capacity, but few traders seem convinced. Further volatility is the only real possibility and price spikes above $60 seem possible.

"Any supply disruptions or refining problems will be pounced upon by the market and force prices up further. Only bullish news appears to be moving the market."

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