ZEW Energy Market Barometer: Medium-term Fall in Oil and Natural Gas Prices Cannot Be Expected

Falling oil and gas prices are no longer to be expected in the short- or medium-term. This is the conclusion reached by some 150 experts from the fields of energy supply, trade and services, as well as research, who participated in the ZEW Energy Market Barometer survey, carried out by the Centre for European Economics Research (ZEW) in November and December last year. The aim of the survey was to assess the expected future development of international energy markets.

In the first six months of this year, 58 per cent of the experts expect to see, no doubt in large part due to the continuing crisis in Iraq, further rises in the price of crude oil (mineral oil: 63 per cent).

38 per cent of the experts expect prices to remain unchanged (mineral oil: 32 per cent). Only 3.5 per cent of the experts surveyed, however, expect the price of crude oil to fall

(mineral oil: 4 per cent).When it comes to natural gas, 52 per cent of experts consider further price rises likely in the coming six months. Only 6 per cent, however, believe that prices will fall. These assessments suggest that experts are taking account of the fact that the price for natural gas tends to show a slight delay as it adapts to changes in the price of oil.

Experts are also pessimistic when it comes to medium-term price developments. For the coming five years, 58 per cent of the experts surveyed expect the price of crude oil to rise (mineral oil: 63 per cent). Around 29 per cent of survey participants expect crude oil prices to remain unchanged (mineral oil: 26 per cent) and only 13 per cent predict a decrease in the price of crude oil (mineral oil: 10 per cent). When it comes to natural gas, 57 per cent of the experts expect prices to rise, whilst 31 per cent expect prices to remain unchanged and only 12 per cent predict a fall in prices.

These expectations are most probably a reflection of the fact that it may become increasingly difficult to get hold of oil and gas in sufficient quantities. This is largely a result of the fact that two thirds of the world’s most cheaply exploitable oil reserves are located in dessert regions surrounding the Persian Gulf and are therefore the property of unstable states which lack democratic governments. The concentration of oil reserves which can be cheaply accessed in this region is set to increase. In view of this, it is imperative that the range of energy sources utilisd in Germany is diversified in the medium to long-term.

Contact

Prof. Dr. Manuel Frondel, E-mail: frondel@zew.de