Blog Post

Where Are Oil Prices Headed in 2009?

Oil prices have become something of a contrarian indicator for alternative energy. While the surge above $145 a barrel this summer seemed to promise a golden age of investment in cleaner power, now that prices are back near the $37-a-barrel range and credit is in short supply, things aren’t looking so sunny.

As we close the doors on the strange and tumultuous year that was 2008, analysts are looking ahead to what 2009 will bring. So far, signs are mixed. The Energy Information Administration projects crude oil will trade at an average of $51 a barrel in 2009, translating into low gasoline prices:

Along with lower projected crude oil prices, annual average retail gasoline and diesel fuel prices in 2009 are projected to be $2.03 and $2.47 per gallon, respectively…The U.S. economic recession is also contributing to lower natural gas wellhead prices. The Henry Hub natural gas spot price is projected to decline from an average of $9.17 per Mcf in 2008 to $6.25 per Mcf in 2009.

The chief energy economist of Deutsche Bank, Adam Sieminski, said recently that the demand for oil in 2009 will drop more than any other time in the last quarter of a century, due to the weak economy. Sieminski forecasts oil traded in New York falling as low as $30 and averaging $47.50 for the whole year. He says higher forecasts haven’t adequately factored in how the global downturn will hurt oil demand.

Others see the supply-demand balance starting to tip in favor of higher prices later in the year, thanks in part to OPEC’s plans to cut output. Paul Stevens, a professor at the UK’s Royal Institute of International Affairs, said:

In 2009, we will see continued prices weakness in first half or quarter of year. A lot depends on demand and that depends on the nature and depth of the economic recession…if demand does not completely collapse, my guess is that as we move through 2009, as OPEC’s determination to defend its price bears up, then prices will creep up to US$70, to US$80 that they want.

Once demand returns, oil prices could spike quickly if companies decide to lay off workers and cut back on new investments. That could rekindle interest in cleantech initiatives in the private sector, apart from what is expected from public stimulus. In the topsy-turvy world of energy investments, OPEC may be a key factor in reviving green energy next year.

8 Responses to “Where Are Oil Prices Headed in 2009?”

  1. Michael Barnett

    Oil prices going up and down is some thing that will always happen. However, in 2004 the barrel was at a avg price of46-$48. Gas avg price was $1.08. so my question is, if the barrel is around the same price today, why is gas around $2 a gal today? Why doesnt anyone question this? when gas was $4-$5.00 a gal, the oil companies said it was because of the oil price. Well, Oil is low so why is the price twice what it was when the barrel was this price before?

  2. Oil prices will increase in 2009.

    The top story of the year is that global crude oil production peaked in 2008.

    The media, governments, world leaders, and public should focus on this issue.

    Global crude oil production had been rising briskly until 2004, then plateaued for four years. Because oil producers were extracting at maximum effort to profit from high oil prices, this plateau is a clear indication of Peak Oil.

    Then in July and August of 2008 while oil prices were still very high, global crude oil production fell nearly one million barrels per day, clear evidence of Peak Oil (See Rembrandt Koppelaar, Editor of “Oil Watch Monthly,” December 2008, page 1)

    Peak Oil is now.

    Credit for accurate Peak Oil predictions (within a few years) goes to the following (projected year for peak given in parentheses):

    • Association for the Study of Peak Oil (2007)

    • Rembrandt Koppelaar, Editor of “Oil Watch Monthly” (2008)

    • Tony Eriksen, Oil stock analyst and Samuel Foucher, oil analyst (2008)

    • Matthew Simmons, Energy investment banker, (2007)

    • T. Boone Pickens, Oil and gas investor (2007)

    • U.S. Army Corps of Engineers (2005)

    • Kenneth S. Deffeyes, Princeton professor and retired shell geologist (2005)

    • Sam Sam Bakhtiari, Retired Iranian National Oil Company geologist (2005)

    • Chris Skrebowski, Editor of “Petroleum Review” (2010)

    • Sadad Al Husseini, former head of production and exploration, Saudi Aramco (2008)

    • Energy Watch Group in Germany (2006)

    Oil production will now begin to decline terminally.

    Within a year or two, it is likely that oil prices will skyrocket as supply falls below demand. OPEC cuts could exacerbate the gap between supply and demand and drive prices even higher.

    Independent studies indicate that global crude oil production will now decline from 74 million barrels per day to 60 million barrels per day by 2015. During the same time, demand will increase. Oil supplies will be even tighter for the U.S. As oil producing nations consume more and more oil domestically they will export less and less. Because demand is high in China, India, the Middle East, and other oil producing nations, once global oil production begins to decline, demand will always be higher than supply. And since the U.S. represents one fourth of global oil demand, whatever oil we conserve will be consumed elsewhere. Thus, conservation in the U.S. will not slow oil depletion rates significantly.

    Alternatives will not even begin to fill the gap. There is no plan nor capital for a so-called electric economy. And most alternatives yield electric power, but we need liquid fuels for tractors/combines, 18 wheel trucks, trains, ships, and mining equipment. The independent scientists of the Energy Watch Group conclude in a 2007 report titled: “Peak Oil Could Trigger Meltdown of Society:”

    “By 2020, and even more by 2030, global oil supply will be dramatically lower. This will create a supply gap which can hardly be closed by growing contributions from other fossil, nuclear or alternative energy sources in this time frame.”

    With increasing costs for gasoline and diesel, along with declining taxes and declining gasoline tax revenues, states and local governments will eventually have to cut staff and curtail highway maintenance. Eventually, gasoline stations will close, and state and local highway workers won’t be able to get to work. We are facing the collapse of the highways that depend on diesel and gasoline powered trucks for bridge maintenance, culvert cleaning to avoid road washouts, snow plowing, and roadbed and surface repair. When the highways fail, so will the power grid, as highways carry the parts, large transformers, steel for pylons, and high tension cables from great distances. With the highways out, there will be no food coming from far away, and without the power grid virtually nothing modern works, including home heating, pumping of gasoline and diesel, airports, communications, and automated building systems.

    It is time to focus on Peak Oil preparation and surviving Peak Oil.