WHERE WOULD PRICE GO?

    People's eyes are fixed on the future development of world oil prices as they directly affect everyday lives and the financial fortunes of nations. Amidst the deepening impact of the international financial crisis, various financial institutions have lowered predictions for oil prices next year. Merrill Lynch, for one, has reduced its forecast from 90 dollars to 50 dollars dpb, without excluding the possibility of 25 dollars.

    OPEC, meanwhile, thinks that in addition to the traditional demand-production factor, many other causes help stir oil prices, making them volatile and unpredictable. The world's largest oil producer targets a stable price of between 70 to 90 dollars per barrel, calling it a "fair price."

    Simon Wardell, director of the energy markets group at Global Insight Ltd in London, sees broad agreement between OPEC and consuming countries that around 75 dollars is about right for oil.

    "That price gets you investment in new production, is high enough to encourage more efficient use of oil and is enough to maintain the budgets of the Middle Eastern countries," he said.

    Analysts warn that extremely low prices now will encourage buying and discourage production, causing a possible price rebound in the near future.

    The Paris Bank predicted that in the next few quarters, weak demand will still prevail in the market and dampen prices, but the limited output increase of non-OPEC countries and the reduction of OPEC production will push up prices later in 2009.

    According to the World Energy Outlook 2008, the current "cheap oil era" is approaching its end as long-term demand for oil remains robust. The report predicts that in the next two years, international prices will remain volatile, but will surge sometime during the period, especially after the financial crisis ends.

    The outlook predicts that in nominal terms, world oil prices will go up and down to about 70 dollars per barrel in 2015, then rise steadily to 113 dollars in 2030, about 70 dollars per barrel in inflation-adjusted 2006 dollars.