No spike in gas prices for the rest of 2012, say economists

Oil prices are not expected to drastically rise the way they did at the start of the year, say economists who credit a slower global recovery and a less import dependent United States.

MANILA, Philippines – Good news for motorists: crude oil prices are expected to stay near current levels and not spike for the rest of the year, according to forecasts from economists at the University of Asia and the Pacific (UA&P).

“Chances are very slim” that Brent and Dubai crude oil prices which are both trading under US$100 per barrel will go past that mark before the end of the year, Dr. Victor Abola, UA&P’s Program Director for its Strategic Business Economics Program, said in a mid-year briefing on Wednesday, June 20.

“That’s good news for the jeepney drivers and labor unions,” he said. 

Meanwhile, UA&P School of Economics Dean Dr. Peter Lee U also sees brent oil prices staying relatively level but his estimates are slightly on the higher end, “hovering above and around $100 for the rest of the year.”

“The U.S. enters its driving season in June, which is about now, so demand for oil starts going up so for the next few weeks. It could go up then come down,” he added.

Brent oil for August delivery traded near 17-month lows, at $95.08 per barrel on Wednesday.

The year started with rising oil prices due to the upbeat global economic outlook, which was expected to lead to higher consumption, combined with tension in the Middle East, explained the dean. But since April, brent crude prices have slumped more than 20%. Crude fell to a 16-month low below $96 a barrel at the start of the week.

U explained that part of the reason is that “the United States, the largest importer [of oil in the world], is importing some 10% less crude in recent months because it is producing more crude oil.”

The U.S. reported that it now imports 45% of its petrolem, a drop from the 57% it bought from abroad in 2008. The U.S. is meeting more of its own demand and currently produces 5.6 million barrels a day, its highest level since 2003.

“The U.S. crude oil inventory is at a 9-year high. That is an important reason why oil prices will remain low for the near future… Eventually over the longer term we will not see the high prices we have seen in 2008,” added Abola.

U pointed out that slower economic growth overseas also weakened perceived oil demand and prices.

The economists said that since the Philippines imports most of its oil requirement, local oil prices are dictated by demand and events abroad. That means the country will benefit from America lowering its dependence on imports. “I think the future for crude oil prices is really not bleak, not as threatening,” said U. – Rappler.com