The Economics of Energy

Briefing Note

Topical Lunch – Offshore Europe, Crombie Room, 8 September 2009

The Economics of Energy
Paul Horsnell, Managing Director, Head of Commodities Research, Barclays Capital


Oil seems to be selling at a discount of $20 per barrel.  $40 seems way too cheap.

OPEC thinks $70 per barrel would be “nice”

Actual price depends on demand but we believe oil will average out at $60 for 2009 (rolling average)

We are already detecting recovering demand for diesel fuel in the US

We believe 2010 will be getting back to a sustainable level for oil industry investment activity. 

At $75 – $90 per barrel, oil sands become attractive.  We are not running out of oil but the remaining oil will cost more to obtain.

The economic development of China and to a lesser extent India, will keep oil demand strong
We see the price for recovering as per the following trend: -