High oil price has come to stay
During the past quarter the oil price has been increasing steadily, and the instability in the Middle East is increasing the risk of additional price increases.
Petrol prices are continuously going up, and if you ask chief analyst at Danske Invest Bo Bejstrup Christensen we may as well forget all about the times when you could fill up one litre of petrol for approx. one euro. This is so because there is no prospect of significant oil price decreases.
”We must get used to the fact that oil prices below USD 100 per barrel belong in the past. The production is generally not increasing enough to keep up with demand, and at the same time it will become more and more expensive to collect oil from the subsoil in step with the depletion of the easily accessible oil reserves,” says Bo Bejstrup Christensen.
Consuming more and more oil
He explains that particularly the emerging market countries are contributing strongly to increasing the demand for oil. The standard of living in these countries become higher and higher, and the same goes for the demand for oil. China is a good example of a country that is constantly consuming more and more oil.
In addition, unrest and instability in the Middle East are also factors that push the oil price up - and not least within recent months where a possible military conflict between Iran and Israel is threatening to result in even higher oil prices.
The price of a barrel of Brent oil is currently at USD 120 (mid-April 2012), and according to Bo Bejstrup Christensen a sharp increase to USD 150 would have a deteriorating effect on the growth in the US economy. Since the US economy is a significant heavy weight in the global economy, the development in the USA is of great importance to the rest of the world.
Psychological barrier has been broken
”The petrol price in the USA has already increased to USD 4 per gallon (corresponds to almost 4 litre). Thus, a psychological barrier has been broken. Already now the Americans can feel how the high petrol prices are affecting their personal finances, and if we will see additional large increases, this will affect the economy negatively, “ states Bo Bejstrup Christensen.
A barrel of oil contains almost 159 litres, and on 18 April 2012 one barrel of Brent oil was priced at USD 118. Back in August 2010, such a barrel was traded at an amount slightly above USD 70.
