Oil prices may triple: analyst

OTTAWA - Consumers should brace for crude oil and natural gas prices possibly doubling or tripling this northern winter, says author and analyst Matthew Simmons.

"Prices are really cheap and they need to go a lot higher, and they probably will go a lot higher," he said yesterday.

"I am concerned, given the destructive damage done by [Hurricanes] Katrina and Rita, that the United States must be closer to starting to see significant product shortages than we've seen since 1979."

The Houston-based analyst said too much got destroyed and too little had been brought back on stream. He also said that cold weather this winter could bring a high risk of natural gas curtailment in the US.

"Either one of those events [oil product shortage or natural gas shortage] could send prices two to three times higher than they are today," he said.

That could translate into natural gas prices of US$40 ($57.40) per million British thermal units from more than US$13 now. Doubling or tripling crude would put it in the range of US$125 to US$190 per barrel.

"Everyone keeps thinking there is a [price] ceiling ... There is no ceiling," said Simmons, who wrote in his book Twilight in the Desert that Saudi oil output was at or near its peak.

He said there had been little sign that higher prices had reduced consumption.

Heating fuel supplies were in an okay shape, but could drain fast if the weather turned cold. Diesel was tight and shortages of jet fuel had caused planes to be diverted from some airports.

"It's going to be painful for people to get used to actually paying real money for a really valuable resource."

- REUTERS