Supply crunch may bring $200 oil in 5-10 yrs-study

Adrian Croft
Reuters
Friday, Aug 8, 2008

The world faces a serious oil supply crunch within five to 10 years that may drive prices up to more than $200 a barrel, a British think tank said on Friday.

The Chatham House report says $200 oil is possible, barring a collapse in demand, because of inadequate investment by oil companies in raising output -- not because of a lack of oil underground.

A supply crunch appears likely around 2013, "even allowing for some increase in capacity over the next few years," says the report by Paul Stevens, a senior research fellow at Chatham House.

"The implication is that it will quickly translate into a price spike although there is a question over how strategic stocks might be used to alleviate this," the report adds, concluding that "a spike of over $200 is possible."

The report concedes that it uses a "controversial and extremely bullish" forecast of future oil demand and supply.

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