Ernst & Young Forecasts $120 per Barrel Oil by Summer

photo taken by Ruhrfisch

Tower for drilling horizontally into the Marcellus Shale Formation for natural gas.
Global oil supply may be outpacing demand, but Ernst & Young is projecting oil prices will remain high through June.

Increased U.S. oil production from shale is keeping pressure on OPEC members to limit crude output.  Even if it threw open the spigot, OPEC has little spare capacity. Add in the potential for supply interruptions from Iran and smaller sources.  The result, Ernst & Young says in its second quarter outlook, is oil prices in the range of a $120 per barrel.

Marcela Donadio is Ernst & Young’s Americas oil & gas sector leader. She says even if the rise in domestic production doesn’t bring relief at the pump, it will help create jobs.

“To the extent that we are not, essentially, exporting U.S. dollars in order to import energy supplies, that would have a positive impact on the trade balance. That, by definition, means we keep that money here. We can reinvest it in our own economy.”

Donadio says the rise in shale gas production could lead to consolidation in the industry, as low natural gas prices make it tougher for smaller players to stay in business.

Bio photo of Andrew Schneider

Andrew Schneider

Business Reporter

Andrew Schneider joined KUHF in January 2011, after more than a decade as a print reporter for The Kiplinger Letter...