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Are you ready for $80-a-barrel oil?


The news in business circles that some analysts are predicting $80-a-barrel oil came as an unwelcomed deep-winter freeze. But noted investment bank Goldman Sachs threw down the non-consensus gauntlet this week and conjectured that by the end of the year, oil would likely achieve $75 a barrel, and quite possibly $80 over the next 330 days, averaging $77.50 a barrel.

Shocking as that may sound, it isn’t inconceivable, after all only two years ago, oil touched an anemic $26 a barrel and no one then would have given credible or serious thought we’d be back in the mid sixty dollar range within 24 months. But the rise of another say $10 to $15 a barrel, to crude prices not seen since November 2014, would require an optimist’s approach to global affairs at a time when many new oil discoveries and developments are now coming on stream with the US alone reaching the magic 10 million barrels a day of oil production while imports continue to drag to about 3 million a day for the second month in a row.

Fears of oil having risen “too fast, too quickly” seems to be the countervailing majority opinion as most observers talk of a looming oil bubble that might soon be corrected. Still, there’s plenty evidence suggesting oil is still discovering its newfound momentum, spurred in no small part by the notion that global oil supply and demand has already achieved a balance, Venezuelan oil production continues to crater, OPEC’s success in maintaining a high degree of compliance on output is solid and growing world demand all point to a rally that hasn’t finished. However it is the issue of “backwardation” or the price of oil rising before its cash out value, or expiration occurs, that has seen the return of speculators looking to take advantage of the windfall, thought by some to be about 20% in possible profits. Adding to this reality is the belief that growing U.S. shale production won’t be able to compensate for the supply crunch created by OPEC, in the short term. Longer term, however, is a different matter as the outlook for 2020 assumes OPEC will remove it’s production quotas and light tight oil will soar from its near-record levels today.

For this reason, oil’s volatility is a precursor of pump price fluctuations, which could reach an all-time high in volatility and driver angst, as we approach the 2018 summer driving season.

Senior Petroleum Analyst, Canada

Dan is a skilled and noted bilingual (French and English) consumer advocate specializing in energy and current affairs. Known as Canada's “Gas Guru,” he founded to better help motorists anticipate the price of gasoline in advance across Canada. He has over three decades of experience in the petroleum industry, as a parliamentarian and an analyst.