Trucks at Work

Brief respite only predicted from high oil prices

Global oil prices are down and fuel prices are dropping (albeit slowly) from recent highs – so the worst is past us, right?

Well, not so fast. According to a survey of 225 global oil company executives conducted by the KPMG Global Energy Institute (a division of global consulting firm KPMG), a majority expect the price-per-barrel of Brent crude oil to peak this year significantly higher than the current $112 per barrel (bbl) mark – with 43% of them predicting oil prices to exceed $141/bbl by year’s end.

On top of that, more than two-thirds of the poll’s respondents believe U.S. energy independence is not attainable until at least 2030, despite the increased focus on domestic energy sources, energy infrastructure, and alternative energy sources such as “Shale” gas.

Here are some more gloomy details from KPMG’s survey, conducted ahead of its 10th annual global energy conference going on right now in Houston, TX:

  • Some 25% of the energy executives polled think 2012 Brent crude oil prices will peak between $131 and $140 per barrel. 
  • Almost half of them project even higher oil prices, with 27% predicting a peak between $141 and $150; 9% predicting $151 and $160; and 6% between $161 and $180. 
  • Only one-third think Brent crude prices peaked earlier this year when it was hovering in the mid-$120 range and believe prices will hover between $121 and $130 per barrel as a high for 2012.

“Our survey findings confirm that we may not have seen peak levels on crude yet as energy executives tell us continued volatility will be driven by underlying issues such as economic uncertainty, geopolitical risk, rising operational costs and regulatory concerns,” noted John Kunasek, national leader of KPMG’s U.S. energy practice and executive director for the KPMG Global Energy Institute. “In fact, 40% of executives say the single most important energy issue facing the United States is the need for a sound and long-term energy policy.”

He added that this perceived lack of a national energy policy could be one reason energy executives are so glum about the prospects of U.S. energy independence.  

For example, when asked when they think the U.S. could attain energy independence, 27% said never, 21% said 2040 or beyond, and 18% said by 2030. Happily, though, 12% deemed it possible by 2020 while the remaining 22% think by 2025, Kinasek reported.

On another positive note, the majority of executives in KPMG’s energy survey agree that the development of shale oil and gas reserves will have a significant effect on global energy needs over the next three years. 

In addition, nearly half (49%) believe shale, which accounted for only 20% of total natural gas production in 2010, will become the dominant source for natural gas in the U.S. by 2020. Another 22% believe shale will be the primary source for natural gas by 2025.

“Increased production of shale gas in North America could have profound implications on the global energy sector,” noted said Regina Mayor, oil and gas sector leader for KPMG U.S. “Companies will continue to invest heavily in shale assets, as the industry has only just scratched the surface in the development and resulting production resulting from these assets.” 

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