Diesel fuel continues its rapid rise, jumping nearly 4.5% last week and more than 55% from a year ago, according to data released by the Department of Energy. Two highly regarded market analysts, however, offer opposing views on whether sharply rising crude oil prices will continue driving up fuel for the next few years or the market is about to see a significant crude oil drop to $80 a barrel.
A gallon of diesel now costs $4.33, up from $4.15 the previous week, a 4.39% climb. A year ago, a gallon cost $2.77, up 56.18%. Prices in California remain the highest at $4.55. The four-week average is at $4.20 nationally. AAA reported the national average has risen again, reaching $4.39 a gallon Tuesday.
Crude oil prices, after retreating slightly on Monday, climbed to new highs in mid-day trading Tuesday, reaching a record of $126.97 before slipping back to $125.81.
Goldman Sachs released a report last week that indicated that a $200 per barrel price may be in the offing in the next 6 to 24 months. The report goes on to offer several views of future prices, one suggesting a quick climb into the $150 to $200 range before leveling off and even declining back below $100 a barrel within two years.
The report notes that the recent, rapid rise coincides with the struggling U.S. economy, the weakening of the dollar overseas and lower inventories.
A report released on Monday says the rise in prices may also have come in response to China stockpiling oil ahead of the Olympics. The country imported 17.3-million metric tons (126.3-million barrels) in March, but that dropped to 14.24-million metric tons (104 million barrels) in April.
“We believe a combination of a high absolute level and sharp rate of change in oil prices is needed to sustainably ration back demand and recreate a spare capacity cushion only after which might lower energy prices return,” the Goldman report says, adding that the rise above $115 occurred despite “easing global oil demand” and suggested the higher prices are “due to a lack of adequate supply.”
The report concludes that even if there is a sudden rise above $150 per barrel, a moderation is likely, possibly driving the price below $100 by 2011.
Lehman Brothers, though, sees a different future for crude. Projecting $83 per barrel by the first quarter of 2009, Lehman believes a bearish outlook for the U.S. and Chinese economies will help drive down the price of oil. It mentions that Saudi Arabia’s commitment to building excess capacity will have the greatest impact on future prices.
The Lehman report notes several factors for its conclusion. Among those is the value of the dollar, which in recent days has started strengthening, and the announcements in recent weeks of three new oil fields (Saudi Arabia’s Khursaniyah, Nigeria’s Agbami and Azerbaijan’s Guneshli) expected to come online shortly. Combined, it is expected the group will contribute 1.3-million barrels per day.