Virgin Chief Predicts Massive Oil Price Increase

Richard Branson, the British billionaire businessman shortly prior to the December 2010 meetings in Cancun, Mexico to consider ways to combat climate change, pessimistically forecast that oil prices may soar to $200 a barrel if the world does not move more rapidly to a clean-energy economy. Branson predicted an “unbelievably painful” economic slump if Governments do not do more to encourage renewable energy as an alternative to fossil fuels such as oil. Fuel demand continued to surge in China, and in the United States oil stock levels fell from record highs earlier in 2010 while refined petroleum product prices were surging in Europe – with petrol at two-year highs – as a result of tighter supplies.

Branson did not indicate when his dire prediction would eventuate but several leading analysts have also adjusted their mid- and long-term outlook for the oil price citing factors such as the booming demand in emerging markets, faster global economic growth and a reluctance on the part of the members of the Organisation of Petroleum Exporting Countries (OPEC) to boost output. They predict the short-term oil prices staying near the 26 month high of just below the price of $94 a barrel reached during the first week of January 2011. Oil traded within the range of $70 to $85 a barrel for benchmark Brent crude oil for the best part of 2010. The latest developments may mean an increase in the price of oil in excess of 9% during 2011.

According to the index released by the United States based institute for Supply Management (ISM), manufacturing activity in the USA grew at the fastest rate for seven months during December 2010. The ISM index is considered a leading indicator of the state of the American economy.

Substantial increases in the consumption of oil is hardly good news for those operations in the Building Industry sensitive to increases in the prices of oil and petroleum based products.

Pieter Rautenbach

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