Taken from Meryll Lynch Global Energy Paper:
The path for oil prices after 2011 is very uncertain Looking out after 2012, we see a very broad range of outcomes. On the one
hand, should our base case scenario of a sustained recovery play out, oil prices
could move firmly above $100/bbl. We find a strong and positive income elasticity
of oil demand across all major countries and regions (Chart 60), so continued
economic growth should contribute to reduce OPEC�s spare productive capacity.
In effect, while subsidies and taxes can sometimes distort the underlying
fundamental trends, economic development clearly requires more oil, at least for
now (Chart 61). Thus, the shape and degree of the economic recovery will be the
primary driver of global oil demand growth over the medium-term
We see large fluctuations in oil prices past 2014 With OPEC capacity utilisation rates now running at around 81%, any return to
the recent demand growth path will likely eat into spare capacity sooner rather
than later (Chart 62). Much of the problem is, of course, a lack of competition
among oil suppliers and limited potential for efficiency and substitution among oil
consumers. Conventional crude oil output from non-cartelized producers already
peaked, while much of the substitution out of oil into other fuels was achieved in
the 1980s. The market structure for oil has thus become extremely static and
price-inelastic. As a result, large fluctuations in prices will remain the norm to
bring these medium-term supply and demand trends into balance. In line with this
view, we see the band for oil prices widening from $70-$85/bbl at present, to $60-
$100/bbl next year. By 2014, the range could expand again to the $50-150/bbl
range observed in 2008 (Chart 63)..
http://www.scribd.com/doc/30051311/Merrill-Lynch-Medium-term-crude-oil-outlook-to-2015
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Taken from Meryll Lynch Global Energy Paper:The path for oil...
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