Expect Oil Demand, and Price, to Go Up

By George Hohmann

The price of oil is hovering around $90 a barrel and it’s going to go even higher, economist David Wyss predicted.

Wyss, chief economist at Standard & Poor’s, gave his forecast for the United States economy at an economic outlook conference in Charleston on Thursday. West Virginia University’s Bureau of Business and Economic Research sponsored the conference.

“The demand for oil will increase greatly over the next 10 years,” Wyss said. “In the long run, energy prices are going up. There’s no shortage of energy. There is a shortage of oil.”

Wyss said the price of oil is up because “people are scared about the saber-rattling in the Middle East” and because “demand is growing rapidly and the supply isn’t.”

He predicted that coal and natural gas prices will go up, “but probably not as much as oil.” He said that’s because oil is being used mostly to produce transportation fuels, while coal is mostly used to generate electricity.

Dubai is converting natural gas to diesel fuel, he said. And there are efforts underway to convert coal to liquid fuels, he noted. The price of coal and natural gas will increase “but won’t go where oil is going until the technology catches up” and coal and natural gas can be used to fuel vehicles, he said.

“Global warming is a real issue,” Wyss said. “The world is getting warmer. We can argue about how much and how serious it is, but it’s happening and we’ve got to do something. It’s going to mean a shift away from fossil fuels. But that’s hard to arrange. People are all in favor of wind power until you put a windmill in front of their picture window. But we’re going to have to go with alternatives.”

There’s plenty out there. “Yellowstone has enough thermal energy to power the western United States,” he said.

There’s enough coal and natural gas to last for a couple of centuries, “although it gets more and more expensive,” Wyss said. “But there’s no question, in the long run we’ve got to get away from fossil fuels because we only have so much and the impact on the environment is going to kill us.

“So far we haven’t been willing to do much,” he said. “Thirty- four years ago we had the Arab oil embargo and we still don’t have a national energy policy. That’s disgraceful. It’s a total lack of courage in Washington.”

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Wyss predicted the nation’s economy will grow by 2.2 percent this year and about the same next year. “That’s a slowdown,” he said. “There’s a chance it could get worse. There are a lot of things that can turn this slowdown into an outright recession.”

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The value of the dollar will decline another 10 percent against the euro because the nation’s trade deficit is too big, Wyss said.

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The spurt of mergers and acquisitions is slowing because costs are going up “but I don’t think they’ll grind to a halt because companies have plenty of money to do acquisitions,” Wyss said. “My general feeling is, if a chief executive officer has money available, he’ll find a way to spend it. God forbid he’d give it back to the shareholders.”

(c) 2007 Sunday Gazette – Mail; Charleston, W.V.. Provided by ProQuest Information and Learning. All rights Reserved.