Friday, September 7, 2012

Barclays' Oil Warning: $180 Per Barrel & $8 Gasoline By 2020

The view of future oil prices from Barclays Bank should make us shudder. And it may even be optimistic.

Last week, Barclays Bank projected that oil would hit $125 per barrel next year and $180 by 2020. Those oil prices would translate to US gasoline prices above $4 in 2013 and at about $8 by 2020.

Barclays based its projection on inexorably rising global oil consumption and struggling world oil production. Yet, on both consumption and production, the US is moving in the opposite direction to the global trends that are the foundation of the Barclays' analysis.  Here oil consumption is back to 1990 or 1991 levels and oil production in 2012 will rise another 12%, reaching the highest mark in 14 years.

Despite the positive oil trends in the USA, the US economy still relies on oil more than any other fuel to power it and stalls whenever oil prices go to $125 or higher.  It remains maddening that neither at the national nor at the state levels has America embarked on a comprehensive plan that substantially accelerates the mass adoption of oil substitutes like natural gas, electricity vehicles, and biofuels.

For goodness sake, the  leadership of the US House of Representatives refuses to even allow a vote on the Pickens Plan (Natural Gas Act). The US Senate at least voted on it, and even 53 Senators voted for it.  But it did not pass, as it fell victim to more 60-vote obstruction from the Senate minority.  Despite this policy void, no state has aggressively acted to deploy fueling infrastructure for gas, electricity vehicles, or biofuels.

The failure to make moving beyond oil a top priority means that our economic and national security remains imperiled.  Hostilities over Iran's nuclear program could begin almost at anytime, and the world oil market prices in that possibility today by adding about $20 to each barrel of oil. If war begins, oil prices almost certainly quickly go to $150 and possibly beyond.  And that could happen this month or year.

But today's era is one of high oil prices, even if peace reigns, simply because of exploding demand for oil in China, India, and even the Middle East itself. The damage done by high oil prices to economic growth is here and now.  As Barclays warns, much worse, however, is likely ahead, because our economy remains over an ever more expensive barrel of oil.


  1. Hi John, I like your blog alot.

    It's informative, smart, it's all about the facts and for me personally, it's especially exciting to see so much in-depth coverage of energy issues.

    I would like to give two suggestions for improvement, however:

    1. Tags/categories. So that people can sort things out according to their interests.
    So for example, a reader like me would pay extra attention towards issues of oil, even subcategories like Bakken production.

    So I would naturally look for those tags, as a reference for past blogposts. Someone else might conclude to skip them alltogether.

    2. Images/charts.
    They help underscore points and while some people post too many, I would encourage you to show a few charts once in a while to show the magnitude of the changes you describe.

    That's about it for now, keep up the good work!

  2. What happened to $2.00 gasoline by November?