We’re looking at six more weeks of winter and ten more years of cheap gas, according to a groundhog and the world’s largest independent oil-trading house.
In an interview with Bloomberg, Vitol Group BV chief executive officer Ian Taylor predicted that the combination of slowing Chinese growth and the booming U.S. shale industry will prevent oil prices from rising any higher than $60 a barrel in the next decade.
“We really do imagine a band,” probably between $40 and $60 a barrel, Taylor told the news service. “I can see that band lasting for five to ten years. I think it’s fundamentally different.”
The lower boundary of that range would offer little relief to petrol states and oil producers — Brent crude currently trades around $33 a barrel. And Taylor’s best-case scenario for energy producers would merely bring prices back to where they were last July, when the oil industry already considered itself in crisis.
Per Taylor, the problem for oil producers is threefold:
1. The energy industry expanded to keep pace with China’s unsustainable construction boom, which is now winding down.
2. The global economy has become more efficient in its consumption of crude.
3. The shale boom in the United States and Iran’s opening to the world will ensure that the market remains glutted with supply, even if China were to return to a more robust rate of growth.
As a consumer-dominated economy, low oil prices could redound to the United States’ benefit, even as they hurt our domestic energy industry. But at least some economic analysts believe long-term low prices in the energy sector could be disastrous — last week, Citi named such a scenario “Oilmageddon.”