Posted: January 3, 2008

While other analysts were cheerily predicting that oil prices would drop last fall in keeping with seasonal patterns, Marshall Adkins of Raymond James & Associates in Houston warned that prices would stay unseasonably high, which is exactly what happened.

Adkins’ 2008 prediction is that oil prices will start the year with some modest softening, but that by the second half, prices will start rising sharply to the point where current 2008 global GDP growth forecasts of about 5% will be unobtainable.

Adkins told EnergyTechStocks.com that early year softening will result from recent increases in OPEC production. But he doubts the increases will be able to keep up with growing Asian demand. “In late 2008 and/or early 2009,” Adkins said, “oil prices must continue rising to the point where they slow oil demand growth.” When that happens, “the U.S. economy will likely be the hardest hit since the lower dollar forces us to absorb the full impact of higher oil prices.”

Adkins went on, “Current 2008 global GDP growth forecasts are about 5%. I don’t see any way that can happen with the limited crude supplies that will be available in 2008.”

Don’t expect better drilling technology to save the day. Raymond James just issued a report that, in spite of better and more efficient drilling techniques, the number of wells drilled per rig isn’t growing, because the wells now being drilled are in more difficult formations.

Tomorrow, January 4 – Part 3 of 2008 Oil Outlook – Milton Copulos: Beware Rising Refiner Acquisition Costs