Your best guarantee that they will fall
The Energy Department yesterday significantly increased its projection for oil prices in 20 years to about $54 a barrel after concluding that Middle Eastern oil-producing countries are spending less than previously expected on expanding production. That price is about $21 higher than had been predicted last year by the department's Energy Information Administration. "It has to do with a reassessment of the willingness of oil-rich countries to expand their oil-production capacity," said G. Daniel Butler, an analyst with the Energy Information Administration. "We're not as bullish on expansion of production capacity, especially from OPEC members."
Oil prices have soared as worldwide demand has increased faster than production. The report, updated annually, said the United States and "emerging Asia -- notably, China -- are expected to lead the increase in demand for world oil supplies, keeping pressure on prices though 2030."
The projections often change year by year, though officials said the gap between last year's estimates and this year's projections is unusually large. As prices have become volatile, analysts have had difficulty in accurately projecting them.
Oil-producing countries lack the ability to significantly increase production in response to a supply disruption elsewhere. Oil traders have pushed up prices, fearing that terrorist attacks or other disruptions could lead to shortages. Prices rose after hurricanes Katrina and Rita damaged oil production in the Gulf of Mexico this fall.