– Oil Crisis...is the world about to be shocked

Energy analyst sees $85 a gallon crude by end of year; $100 by 2009
By Matthew Scott

Expect crude oil prices to hit $85 a gallon by year’s end and $100 a gallon by 2009, as expanding world economies make it difficult for oil companies to meet the growing demands for energy, says one energy analyst.

Speaking during the Dow Jones indexes/AIG mid-year commodities outlook conference call, Phil Flynn, vice president and energy analyst for Alaron Trading, said the run-up on oil prices was not necessarily a bad thing for the U.S. economy. In fact, he said increasing oil prices have been a reflection of strong economic growth.

“As the price of oil has risen, unemployment in this country has fallen,” Mr. Flynn noted, adding that rising oil prices have corresponded with global economic expansion and “the better standard of living for many people in Asia and other parts of the world.”

Mr. Flynn, who successfully predicted oil would reach $78 a gallon last year, said he expected crude oil prices to continue to rise because most experts doubt that the oil companies will be able to meet the world’s demands for energy in the next 10 to 25 years by conventional means. Difficulties finding new sources of oil, the trend of countries like Russia and Venezuela nationalizing their oil supplies, and U.S. regulations restricting oil companies from competing for new sources of oil are factors contributing to higher prices, he said.

“More than likely, we’ll add $10 a barrel per year,” Mr. Flynn concluded, putting prices above $100 a barrel in early 2009.

Mr. Flynn also forecast record heating oil prices as refineries juggle building gasoline reserves while getting ready for the winter.

“Supplies are already running 8.6% below what they were last year at this time,” he said, warning that an early winter could drive heating oil as high as $2.50 or $3.00 a gallon by January.

And his outlook for natural gas wasn’t much rosier. Even though there are healthy reserves right now, Mr. Flynn said that with disruptions from hurricanes or a major heat event, “there’s a possibility that into the next year we could see the price of natural gas double.”