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Rocketing Oil Price Predicted

By Tom Incantalupo

01 April, 2005
News Day

Think gasoline and heating oil are expensive now? Get this: Analysts at Goldman Sachs said yesterday that there was a good chance crude oil would nearly double in price in the next two years, topping $100 a barrel.

"The strength in oil demand and economic growth, especially in the United States and China ... has surprised us," the six Goldman analysts wrote in a research report. What they called a "super spike" period is beginning, they said, which could drive oil prices toward $105 a barrel in 2007.

The ominous prediction could prove conservative, the analysts said, if there are major supply disruptions in producing areas. But the analysts also predicted that prices so high would reduce demand for petroleum so that prices would slide back.

Economists believe sharply rising oil prices could depress world economies, wreck fuel-dependent industries such as airlines, and result in much higher prices for natural gas and electricity. Predictably, the Goldman report sent crude oil futures higher yesterday; the most closely watched grade for May delivery closed at $55.40 a barrel on the New York Mercantile Exchange, up $1.41.

But some analysts were skeptical that prices would rise near $100 in the foreseeable future. Mark Routt, of Energy Security Analysis Inc., a consulting firm in Wakefield, Mass., said governments, including that of the United States, would likely tap strategic petroleum reserves to stem the rising prices.

Although spring has barely sprung, gasoline prices locally already are within seven cents of the records set last June. Experts are predicting further increases as summer approaches and driving increases.

Regular unleaded gasoline averaged $2.178 a gallon on Long Island yesterday, according to the AAA's daily survey of stations - a half higher than the day before and 16.5 cents above a month earlier. The Nassau-Suffolk average hit a record $2.248 on June 8.

In the city, regular unleaded averaged $2.225, also up half a cent from a day earlier and 16.7 cents higher than a month earlier. The city's record average of $2.282 also was set June 8.

Yesterday's national average is a record $2.159, according to the AAA. Prices have yet to reach their inflation-adjusted record high of more than $3.08 set in March of 1981.

Home heating oil also is near a record, although the Long Island average dropped a penny last week, to $2.364, according to a weekly survey by the state Energy Research and Development Authority. In the city, the average rose slightly from a week earlier to a new record of $2.377.

Copyright (c) 2005, Newsday, Inc.











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