I read an article a couple of days ago which I can’t find now which was discussing oil prices. If I read it correctly, it said that predictions by those whose job it is to predict such things for the price per barell in a year range from 50 to 120 dollars. My questions is, under what circumstances would the price drop to the 50 dollar range is a years time?
The only way I could see that happening is ‘demand destruction’.
Something would have to happen to cause China, India, and the US to buy about a quarter of the oil they now do. Even if vast new oilfields, bigger than Arabia, were discovered right now, it would take years to put them into production.
Of course, OPEC, and the other oil exporters, can charge whatever they feel like for oil within reason. They could just choose to drop the price significantly. They won’t of course.
If demand were to drop massively overnight then they’d be forced to drop the price however. But that’s incredibly unlikely. Even if we developed a cheaper alternative to oil, we still have all the oil and gas infrastructure, and of course all the industries that rely on petroleum as their source of hydrocarbons. Demand wouldn’t drop overnight.
Having said all that, in such a scenario the oil exporters might be suitably “spooked” that they would drop the price to discourage uptake of the alternative.