In another development, the CEO of Chevron said the current price of oil, near $70 a barrel, cannot be sustained. That news follows immediately below the Forbes comment. The article about Chevron quotes Nigerian oil minister Edmund Daukoru.
The Forbes.com site has generally been bearish on ERHC Energy (OTC symbol: ERHE).
Here is the article:
Oil price bubble about to burst — Forbes
SYDNEY, Aug. 30 (AFP) — Oil prices are set to crash from this week’s record highs as a speculative market bubble bursts with an impact that could make the hi-tech bust of 2000 "look like a picnic," business publisher Steve Forbes predicted Tuesday.
Forbes said the high oil prices currently dampening the US economy, which peaked at more than $70 a barrel Monday as Hurricane Katrina headed for the US Gulf Coast, would fall to $30 to $35 a barrel within a year.
"I’ll make a bold prediction... in 12 months, you’re going to see oil down to $35 to $40 a barrel," he told reporters in Sydney.
"It’s a huge bubble, I don’t know what’s going to pop it but eventually it will pop — you cannot go against supply and demand, you cannot go against the fundamentals forever."
The billionaire magazine publisher’s comments came as the price of crude eased following US government comments that it could release some of its Strategic Petroleum Reserve (SPR).
The SPR, a 700 million barrel stockpile set aside for emergency use, could be used to counter oil shortages caused by Hurricane Katrina’s devastation of the Gulf oil industry, which accounts for about a quarter of US output.
Forbes, who unsuccessfully sought Republican nomination in the 1996 and 2000 US Presidential elections, said the US government’s constant topping up of the SPR had helped drive up oil prices.
"The speculators know now that no matter what happens to the price of oil, Uncle Sam is there buying almost every day," he said.
"Stop the buying and in fact throw some of that oil on the open market, boy that would throw it in turmoil and send the price down."
He said factors such as inflation and increased demand for oil from China and India only accounted for a small part of the price hike from $25 to $30 a barrel three years ago.
"The rest of it is sheer bubble speculation," Forbes said.
"I’ll be blunt, there’s hardly a hedge fund in North America that hasn’t speculated on oil futures."
Forbes said the higher the oil price rose, the harder it would eventually crash, creating more pain for hedge find managers and their clients.
"I don’t think it’s going to go to $100 but if it does the crash is going to be even more spectacular," he said. "It will make the hitech bubble look like a picnic — this thing is not going to last."
Economists said the damage caused by Hurricane Katrina could lead to higher oil prices in the short term.
"The key factor is really going to be how much damage has been done to oil production facilities, how long the higher prices are going to be sustained," National Australia Bank minerals and energy economist Gerard Burg said.
"That, at the moment, is the big unknown because really it’s far too early to know what has been done to the oil rigs.
"But if there’s any sustained damage then obviously prices are going to be supported higher in the short-term."
Here;s the Chevron article:
Chevron: Oil Cannot Remain at $70
Wednesday, August 31 2005 @ 09:03 AM Eastern Daylight Time
One of the world's largest oil companies, Chevron's CEO David O'Reilly said oil prices cannot remain over $70 for long.
In the Indonesian capital Jakarta to join a conference about the sector, Chevron's top executive claimed that soaring oil prices will cause a reduction of consumption causing prices to a fall.
A price of $70 per barrel or higher is not a "sustainable" price he said, yet, did not offer any figure to suggest what a "sustainable price" is.
The Organization of the Petroleum Exporting Countries (OPEC) member Nigeria's Oil Minister Edmund Daukoru defended that the organization should increase its daily output by a million barrels.
"I support this, but it would not be sufficient. The market will not be affected by small increases. If we can, an increase of a million barrels would be better for the market psychology," said the Nigerian minister who mentioned OPEC Chairman Sheikh Ahmad al-Fahd's call for an increase of daily production by 500,000 barrels.