Oil Energy Thread (oih)

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Biofuel can cause crude oil slump to $40 in ’07: expertPublished: Thursday, 7 December, 2006, 12:03 PM Doha Time

TOKYO: Crude oil prices in New York may tumble to $40 a barrel next year as demand for biofuel made from crops spurs investors to switch from energy to agricultural commodities, said Tetsu Emori, chief commodities strategist at Japan’s Mitsui Bussan Futures Ltd.
Shifting to biodiesel and ethanol additives may slow the growth of demand for gasoline and diesel in the US, Europe, and Japan, Emori said in an interview on Monday.
Emori predicted oil would rise to $96 a barrel in August this year because of the hurricanes in the US Gulf. Prices fell from a peak of $78.40 on July 14 after a calmer-than-usual storm season.
“Some people may say the 2006 oil bubble eventually was short-lived like a firework that sparks and disappears,’’ Emori, 40, said. “People called me crazy when I projected a couple of years ago oil to surge this year. They may do that again because I said oil may touch the $40 a barrel mark next year.’’
Oil consumers are increasing use of fuels and additives that derive from corn, soybean, sugar cane, and oilseed, as they try to reduce pollution. The switch may cause a shift of money from oil futures on the New York Mercantile Exchange to the grain futures market in Chicago, Emori said in Tokyo.
Biofuels may account for 7% of global transportation energy by 2030, provided governments implement International Energy Agency policies to promote alternatives to oil, the Paris-based adviser to oil-consuming nations said in its World Energy Outlook 2006 report.
Oil prices in New York have dropped 20% from the record set in July and traded at $62.71 a barrel at 4.47pm in Tokyo.
“Biofuels may be an epoch of great change for oil, possibly ending the spike in prices of crude we’ve seen in the past few years, and attract pension and commodity fund managers to pour more money into grains,’’ Emori said. “A record of $78.40 a barrel set on July 14 may eventually be the peak of oil in the years through the end of 2010.’’
Biofuels include gasoline blended with ethanol that’s made from sugar cane or grain and diesel mixed with vegetable oils. Prices for corn, used to make ethanol, have risen 47% in Chicago this year. Oil has gained 2.4%.
Crude oil will average $62 a barrel next year and $61 in 2008 in New York, according to the median forecast of 35 analysts surveyed by Bloomberg News.
Shinzo Abe’s government, an IEA member country, plans to increase consumption of biofuel for transportation to 500,000 kiloliters (3.15mn barrels) by the end of 2010 as part of efforts to cut greenhouse gas emissions and meet targets set under the Kyoto Protocol. Japan currently doesn’t use biofuel.
Starting in April 2010, Nippon Oil Corp and other Japanese refiners aim to supply about 12mn kiloliters of ethanol-blended gasoline, about 20% of the country’s total consumption, the Petroleum Association of Japan said in a statement in April. – Bloomberg

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