Oil prices in the short, medium and long-term

Abstract

OPEC countries continue to remain an important force in the determination of oil prices. Though they are able to impact supplies, they will have little influence on demand. In the short term, OPEC nations will manage their supplies through ad hoc agreements on production discipline, though there are many who would desire higher quotas. They will not allow their wishes to result in a free-for-all oil war with a collapse in prices. Instead they will bargain and negotiate for a compromise. In the medium to long term, scenarios of oil supply and demand indicate that demand for OPEC oil will approach and exceed OPEC's ‘preferred’ capacity. Indeed, once OPEC's ‘preferred’ capacity is approached, prices are likely to rise significantly. As of 1992/1993 there will be a possibility of substantial increase in the price of crude oil. The base case scenario points to US$23/bbl oil in 1995 and $29 in the year 2000.