Industry leaders expect sharp price correction

Houston: Even as oil prices ascended to new highs of more than $124 a barrel this week, many oil and gas industry executives say they expect the price to fall significantly by year's end, a survey shows.

Fifty-five per cent of 372 petroleum industry executives surveyed by KPMG said they think the price of a barrel of crude will drop below $100 by the end of the year.

Twenty-one per cent of respondents predicted a barrel of oil will end the year between $101 and $110, while 15 per cent forecast the year-end price to be between $111 and $120 a barrel.

Nine per cent said they expect the price to close the year where it's been this week - above $120 a barrel.

What's more, 44 per cent of the executives said their companies plan to increase capital spending on exploration and production by 10 per cent during the next year.

The survey was conducted last month and scheduled for release yesterday. Participants included executives for major oil companies, independent exploration and production outfits and other energy companies.

"The expectation of increased investment by US energy companies shows oil and gas executives are deeply concerned about energy security," said Bill Kimble, who oversees the global energy institute at KPMG, the audit, tax and advisory firm.

Of late, all eyes have been on crude prices, which have nearly doubled in the past year. The dollar's decline against the euro and other foreign currencies has helped spur the rise, attracting investors looking for a hedge against inflation.

Rising demand for oil from the rapidly developing economies of China and India has played a role too, as have concerns about tighter supplies. Indeed, 63 per cent of survey participants said growing demand in emerging markets was the main factor in the historic rise in oil prices.

Goldman forecast

Widely watched oil price prognosticator Goldman Sachs said this week oil prices could rise to $150 to $200 within two years; others say crude could plummet to as low as $40 or $50 a barrel during the same period.

"To be sure, the future does not unfold neatly in line with any projection, and the time frame of the actual price surge has been remarkably short," Cambridge Energy Research Associates said in a report last week.

Asked what would most enhance US energy security, participants overwhelmingly said opening up more acreage for domestic drilling was the best option. In particular, 43 per cent said the Arctic National Wildlife Refuge should be opened for drilling. Another 28 per cent said more investment in renewable energy sources such as bio-diesel would enhance US energy security the most.

However, even though many of the executives support further investment in renewable energy sources, the majority still don't view renewables as a serious near-term solution to the energy supply equation.