Even as oil prices ascended to new highs of more than $124 a barrel last week, oil and gas industry executives say they expect the price to fall significantly by year’s end, a new survey shows.
Around 55% of 372 petroleum industry executives surveyed by KPMG feel the price of a barrel of crude will drop below $100 by the end of the year. 21% of respondents predicted a barrel of oil will end the year between $101 and $110, while 15% forecast the year-end price to be between $111 and $120 a barrel. 9% said they expect the price to close above $120 a barrel.
What’s more, 44% of the executives said their companies plan to increase capital spending on exploration and production by 10% during the next year. Participants included executives for major oil companies, independent exploration and production outfits and other energy companies.
“The expectation of increased investment by US energy companies shows oil and gas executives are deeply concerned about energy security,” said Bill Kimble, who oversees the global energy institute at KPMG. Of late, all eyes have been on crude prices, which have nearly doubled in the past year.
The dollar’s decline against the euro and other foreign currencies has helped spur the rise, attracting investors looking for a hedge against inflation. Rising demand for oil from the rapidly developing economies of China and India has played a role too, as have concerns about tighter supplies.
63% of survey participants said growing demand in emerging markets was the main factor in the historic rise in oil prices. Goldman Sachs said last week oil prices can rise to $150-200 within two years; others say crude can plummet to as low as $40 or $50 a barrel during the same period.
“To be sure, the future does not unfold neatly in line with any projection, and the time frame of the actual price surge has been remarkably short,” Cambridge Energy Research Associates said in a report. Asked what will most enhance US energy security, participants overwhelmingly said opening up more acreage for domestic drilling was the best option.
In particular, 43% said the Arctic National Wildlife Refuge should be opened for drilling. Another 28% said more investment in renewable energy sources such as biodiesel will enhance US energy security the most. However, even though many of the executives support further investment in renewable energy sources, the majority still don’t view renewables as a serious near-term solution to the energy supply equation.
In last year’s survey, 60% of 553 petroleum industry executives said large-scale production of renewable fuels was not a near-term possibility, at least not in the next couple of years. In the most-recent survey, 54% gave the same response, though ’15 was the target date.
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