TEHRAN(Bazaar) – Professor Hossein Askari, who teaches international business at the George Washington University, says “To-day, I cannot see oil prices going over $60 for years to come.”
In an interview with the Bazzar, Askari also says, “My range for oil prices over the next ten years is $40 to $55.”
Following is the text of the interview:
Bazaar: Following the outbreak of the Corona virus and the weakening of the global economy and the slowdown in economic growth of countries, we are witnessing a decline in demand for oil. This has reduced its price. When do you think the world economy will be revived?
Askari: The question of when depends in large part on what governments do in response to combatting the virus and stimulating their economies. I fear that the world will fail on both counts and thus there may be a mirage of a recovery but it will not be sustained. Please let me explain. Combatting the virus is essential to sustained economic recovery. Confidence in a vaccine has been eroded by the rush to get a vaccine approved, especially in the United States. Without a vaccine that is accepted the world over, economic recovery will be spotty. At the same time, some countries, such as the United States, still don’t have a national plan to contain the virus. On the economic stimulus side, tribal political disputes are obstructing rational policies to promote economic recovery.
Bazaar: A few years ago, when oil was above $ 100 a barrel, you predicted a drop of $ 50 a barrel, according to the Bank of New York. What is your forecast for oil prices for the coming years?
Askari: Yes, thank you for bringing up my prediction. Wall Street gurus thought I was crazy because by and large they did not take into account all the factors affecting oil prices. To-day, I cannot see oil prices going over $60 for years to come. My range for oil prices over the next ten years is $40 to $55. Yes there may be short run spikes because of disruptions but not sustained. My reasons are simple, low sustained economic growth, the impact of global warming and the concern to cut oil consumption translating into more electric cars and lower meat consumtion, more competition from renewables, rapid improvement in battery technology and a general awareness to cut energy consumption.
Bazaar: What effect will the discovery of the Corona vaccine have on oil prices? US officials say the US vaccine will be available in about two months after the presidential election. What effects will this have on the energy market and the stock market?
Askari: It depends how effective is the vaccine. Will the vaccine afford long-term immunity? Will the vaccine be available widely and will everyone take it? I don’t know the answer to these questions. But if I had to bet I would say that there will be short-term euphoria but the vaccine will be much like the flu shot—affording limited and short-term immunity. So I don’t think it will do as much as people predict. A short-term spike in energy demand and in the stock market but not a sustained boost to either.
Bazaar: What effects will Joe Biden's possible victory in the US elections have on energy prices and the stock market?
Askari: I think Biden will win. I think his victory will slowly restore general confidence in the American experiment. It will rescue the United States from the abyss. Confidence and more certainty will boost the stock market and economic growth. Slowly but assuredly. I say slowly because some Biden policies may dampen growth and the stock market. Such as raising corporate taxes. But in the end, less strife, more confidence and trust and lower volatility will win over some tax hikes and boost steady growth.. So as a result, I believe energy prices will go up steadily to over $50. But I believe natural gas prices will go up faster because of environmental concerns.
Bazaar: Due to sanctions, Iran has lost a large part of its oil market. If sanctions are lifted and given the oversupply in the oil market, can Iran regain its oil market?
Askari: I believe that this will be tough because of slow growth in oil demand and a likely trend downward soon in the future as other factors reduce the demand for oil and at the same time competition on the supply side. I recommend that Iran focus more on natural gas exports—piped and liquified. The future of gas is brighter than that of oil. This is a better bet for Iran.
Interview by Javad Heirannia
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