Derek Henderson, senior partner at professional services firm Deloitte in Aberdeen, believes the world may have to get used to an average oil price close to $80 a barrel.
Mr Henderson noted that the oil price had gyrated wildly in the past year or so, from a record peak of $147 last July to $34 by the end of the year. Since then, the oil price has doubled.
Yesterday oil prices gave back early gains as the dollar rebounded and worries about the ailing world economy persisted. US crude in New York settled down 15 cents at $70.47 a barrel, after rising as high as $72.77, while Brent crude in London was unchanged at $70.24.
Mr Henderson said: “The doubling of the oil price this year seems to be part of a wider move back towards higher-risk assets.
“Since March, rising optimism about the global economy has also driven up the prices of metals, equities and corporate bonds. On one level, a surging oil price looks odd given that oil stocks are at high levels and demand is continuing to fall as the global economy contracts.
“Yet the factors which drove up the oil price last year are still in place. Supply is constrained by underinvestment and a shortage of skilled workers, a legacy of the low oil prices of the 1990s, a period when the oil price averaged just $16.
“A low oil price depressed capital spending, especially on new, higher-cost fields.
“Despite much higher oil prices the International Energy Agency reckons investment in the oil sector will fall by 15-20% this year.”
Mr Henderson said that the rise of China and the other emerging economies had created a huge new source of demand for oil. Last year, oil demand from developing countries, including China, outstripped that from the industrialised world.
Some factors will operate to restrain energy demand in the medium-term, he believes. Energy efficiency should continue to improve driven by the search for cost savings and the imperative of tackling global warming.
He said that, since 1970, technological improvements had reduced overall energy demand by 56% from what it would otherwise been. It was particularly striking, for instance, that the efficiency of jet transport had more than trebled since 1960.
Mr Henderson added: “For some western countries, particularly the US, reducing dependence on oil imports from potentially unstable or unreliable providers is seen as a policy priority.
“And, slower world population growth, forecast by the World Bank to average 0.8% a year in the next 20 years compared with 1.2% in the past 10 years, should slow energy demand.
“Nonetheless, it looks as if oil prices have moved to a permanently higher level relative to the 1990s. Recently the Saudi oil minister, Ali al Naimi, suggested that the world economy had strengthened enough to cope with oil prices of $75-$80.”
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