NEW YORK (Reuters) - The price of a barrel of crude oil jumped to record levels this week, and top executives and regulators in the energy sector agreed that the surge has been driven by fundamentals -- not speculation.
In other words, there's no bubble to burst when it comes to oil prices.
Speakers at the Reuters Energy Summit this week -- representing some of the most important players in global energy markets -- said the global economy has virtually no margin of error in production, refining and distribution of oil and gas with supply and demand in such a tight balance.
They said surging energy prices are pushing consumers to change their habits and forcing oil and gas companies to find and develop new sources of energy to accommodate growth.
"We think fundamentals are really the driving force," said Guy Caruso, administrator of the Energy Information Administration at the U.S. Department of Energy. "What it's done is used up any excess productive capacity," Caruso said at the summit at Reuters' offices in New York.
Despite increases in output from OPEC countries in the second half of the year, international executives believe the market will remain tight.
"Even with this increasing capacity, spare capacity is low. Spare capacity is almost nil in refining," said Claude Mandil, executive director of the International Energy Agency, characterizing current prices as "unfair" to consumers.
With little hope of new refineries being built in the United States soon, and with production declines mounting at existing oil fields, some said markets must invest in unconventional plays like oil sands and push conservation.
"We have to conserve more energy. We can't carry on the way we are. There isn't enough oil in the world, there certainly isn't enough oil in North America, and we're creating all kinds of problems for ourselves," said Gwyn Morgan, chief executive of EnCana Corp. (ECA.TO: Quote, Profile, Research, Stock Buzz)
PRICE FLUCTUATIONS
Among those executives and analysts willing to guess at future oil prices, many expected some softening, though they held off at predicting how soon prices would come down or by how much.
"Personally I think it's almost inevitable that they will come down," said Shell Canada SHC.TO CEO Clive Mather.
But some were sanguine about prices lingering around $60 a barrel, noting that past prices have really been higher.
"Oil prices at $60 or $50 of course in real terms are still well short of where they were after 1979 and the Shah left Iran," said Lee Raymond, chief executive of Exxon Mobil Corp.(XOM.N: Quote, Profile, Research, Stock Buzz), the world's largest oil company.
Larry Nichols, chief executive of Devon Energy Corp. (DVN.N: Quote, Profile, Research, Stock Buzz), said oil prices, adjusted for inflation, would have to hit $94.77 a barrel to reach the peaks of the 1980s. Continued...
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