Oil Price Long Term Outlook

by: Richard Shaw

Given recent oil price declines, the declines in oil company stocks, and all the back and forth about weather, geopolitical risk premium, etc, we should take a look at the long-term as predicted by US Energy Information Agency.

First, however, let’s look at a near-month oil futures price chart. [click to enlarge]
Light Crude Oil Futures

Is this just a short term phenomenon based on unseasonably warm weather, or something else? The U.S. Defense Department, Energy Information Agency – Annual Energy Outlook 2007 for the period ending in 2030 projects a multi-year oil price decline until about 2015. Their rationale is explained in their preliminary Annual Energy Outlook 2007.

DOE EIA Oil Price

They feel the same way about natural gas.

DOE EIA Natural Gas

These projections are a single case out of several developed by the Energy Information Agency, but that case is their view of the most likely outcome.

It is important to note that the projections are in constant 2005 dollars. Nominal prices will vary with inflation which is expected to be positive throughout the projection period.