Fossil fuel demand means $70/barrel oil is here to stay: analyst

Austin, Texas (Platts)--4Aug2006

Rather than being a short-term fluke, global oil prices at the $70/barrel
level or above may be here to stay, chiefly because demand is increasing
rapidly in countries with large populations, such as the US, India and China,
and industry's best efforts and investments just can't catch up, petroleum
analyst and media commentator Michael Economides said Thursday.
"Don't expect oil to drop below $70/barrel for a long time to come,"
Economides, who is also a petroleum engineering professor at the University of
Houston and editor-in-chief of the monthly publication Energy Tribune, said at
a Texas Independent Producers and Royalty Owners Association meeting in
Austin.
While numerous solutions have been proposed to eliminate the seemingly
insatiable need for oil, none are realistic in the short-term and some may
never be, Economides said.
For example, while they are well-meaning, proposals to greatly increase
the geographic reach and sophistication of public transportation likely
underestimate human motivation because the first major purchase that comes
with increasing affluence is an automobile, he said.
"I doubt anyone will sacrifice their freedom of a car for someone's bus,"
Economides said.
Ethanol, which is increasingly used for gasoline blending in many parts
of the US because of federal policy changes, is a "scam...that will collapse
of its own weight," because it costs more to produce than what it replaces,
Economides said. "It cannot survive without huge subsidies from the
government."
Eliminating sport utility vehicles, which are considered by many to be
fuel-inefficient, would "probably reduce energy demand by 1%," he added.
As for much-vaunted, but not yet widely used alternative energy sources
such as wind, solar and geothermal, they are not only years away greater
prevalence, but may be centuries away from being a major energy source
replacing fossil fuels, Economides said.
"There are no alternatives to hydrocarbon energy sources in the
foreseeable future," outside of new hydrocarbon-based technologies such as
gas-to-liquids, coal-to-liquids and shale oil, he said.
Meanwhile, natural gas will gradually "infringe" on the oil market share
by 2025-2030 may eventually account for 40-50% of the world energy mix,
Economides said. Currently, oil accounts for 40% of the world's energy mix and
gas makes up 23%.
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