By the time global oil production peaks in 2015, its price will zoom to nearly $300 a barrel. That was the message Charles Maxwell, a senior energy analyst at Weeden & Co., had for attendees at this year's Financial Advisor Symposium in Chicago on October 16.
While Maxwell expects an extended global recession to keep oil prices and energy stocks cheap in 2009 and into 2010, he thinks it will rise to $147 a barrel by 2012, and continue climbing above $200 by 2014 before hitting $300 by 2015. It should be noted that earlier this decade Maxwell predicted the price of oil would top $100 a barrel within seven years.
The decade between 2015 and 2025 may be characterized by severe energy shortages because Maxwell expects both OPEC and non-OPEC oil production to decline at an increasing pace during that period. In 2006, oil accounted for 39% of the total global supply of energy. Maxwell predicted it would fall to the 38% or 37% area over the next several years. "After 2015, it will fall very fast," he said.
The problem, he continued, is the lag time between approving a new energy project and the energy actually coming on stream. For example, it typically takes six or seven years after Exxon Mobil's board approves a new project before oil actually reaches the pump. Increasingly, supply-and-demand imbalances will squeeze prices upward.