NEW YORK: Oil prices are expected to remain “significantly higher for many years” and could even touch $100 per barrel by the end of this year as underinvestment in the hydrocarbons sector keeps a lid on supply, according to a top economist.
Underinvestment comes as the world focuses on transitioning to clean energy as it seeks to cut emissions.
The massive under investment is “going to lead to a reduction in the supply of hydrocarbons and fossil fuels for many years to come”, he told the Alternative Investment Management Summit (AIM) in Dubai on Monday.
Oil prices have been rallying in the past few weeks as demand outstrips supply owing to a surge in gas prices and a quicker-than-expected economic recovery in developed countries. The rise in natural gas prices before the winter season has also increased the possibility of higher volumes of oil products being consumed to generate power, boosting overall demand.
Brent, the international benchmark for more than half of the world’s crude, is up 2.33 per cent to $84.31 per barrel at 4.39pm UAE time on Monday. West Texas Intermediate, the key gauge for US oil, is also trading higher at $81.64 per barrel, up 2.89 per cent. Both benchmarks slipped to $83.5 and $81.17 at 9.35pm UAE time.
Mr Roubini also said the supply of green energy and renewable energy was not “rising fast enough” to meet the growing demand as global economy recovers from the coronavirus-induced slowdown.
The rising oil prices will also lead to higher inflation globally, resulting in a slowdown in the growth, he said.
Annual inflation across some of the world’s largest economies increased to 4.3 per cent in August, driven by rising energy and food prices, the Organisation of Economic Co-operation and Development said in a report earlier this month.