Oil price super-spike 'inevitable' - investment chief

SUPER SPIKE: An investment chief has warned of an oil price super spike. (Getty Images)

The director of Istithmar World Capital has said a super-spike in oil markets in inevitable if prices remain at current levels.

“I really hope that the price of oil goes up to $60 or $80…This is a price that everyone can pay and will keep a sustainable level of investment in the oil industry,” Pablo Fetter said on the sidelines of a conference.

“If we keep on with this low price of oil for some time, there will be no investment in the oil industry, and that would mean the return of oil overshooting.”

Fetter said that although demand for oil has come down, there has also been a significant reduction in capacity. The Canadian oil sands hold larger oil reserves than Saudi Arabia but production is unprofitable at current price levels.

In a report issued on Tuesday, US investment bank Morgan Stanley said the price of oil will average $35 per barrel this year.

“If you take a look at history, there has been barely a year when the demand for oil went down on a year by year basis on an annual basis,” Fetter said.

Istithmar World Capital is a private equity and alternative investment house focused on the aviation and aerospace industry, including airlines, manufacturing, engineering and financing.

It is part of Istithmar World, an investment arm of Dubai World.

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READERS' COMMENTS

obama's plans
Posted by paul, Dubai, UAE on Thursday 5 February 2009 at 11:36 UAE time


Much depends on whether Obama can succeed with his plan to make the US 'energy independent'. That would require the US to exploit more oil reserves in its own territory, as well as cutting energy usage and mandating a switch to renewable energy and alternative fuels for motor vehicles.

If Europe follows a similar path on reducing carbon emissions, then oil demand may well fall annually for some time.

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