Dan Yergin’s Cambridge Energy Research Associates (CERA) sees oil rising to $150 before policy, technology, and alternative fuels collectively put a halt to the run-up.
At the heart of the Break Point scenario is a slow pace of growth in liquids supply that reflects the range of aboveground risks. “Decision making to facilitate new development in oil-exporting countries loses its urgency,” we wrote. “Many countries with large oil endowments feel less pressure to expand production as the continued surge in revenues pours into their rainy day oil funds.” Current headlines about the future of oil production capacity in the world’s two largest producers — Saudi Arabia and Russia — have their own specific drivers, but the market’s interpretation is that supply growth is highly uncertain and may fall short. The amount of money flowing into the “rainy day oil funds” — now rechristened as sovereign wealth funds—has been enormous. Those mounting financial surpluses certainly reduce the urgency to expand capacity. Lower expectations for demand growth are having the same effect.
