$110 oil in 2011 says Goldman, but what if…

Goldman Sachs is sticking by its $90-a-barrel oil price for 2010 but predicts a $110 per barrel average in 2011 based on a surge in demand from emerging markets.
The bank’s 2010 price forecast natural gas futures fell to $6 per million British Thermal Units, down from a prior $7.30 bet, before rising to $6.50 in 2011.
But what if that emerging market surge doesn’t show up as predicted?
George Friedman of Stratfor Global Information Services recently told me about his belief China’s growth is an unprofitable, debt-driven bubble reminiscent of the pre-collapse Japanese economy of the late 1980s.
And Amy Myers Jaffe over at the Baker Institute’s energy blog notes the poor track record of the widely-cited International Energy Administration’s global oil consumption predictions continues to show China accounting for 40 percent of new demand through 2030.
“But what if China, unlike the United States, institutes a serious comprehensive strategic energy policy?” she asked. Privately the Chinese say they’re going to do away completely with the massive price protections they put on oil and other fuels to protect consumers, Jaffe said. If that price hike leads the Chinese to react to the price shock the same way the U.S. economy reacted to the 1979 oil price crisis …

… the path for Chinese oil use across sectors might be dramatically altered. Instead of rising by upwards of 7 to 8 million b/d as currently expected, China’s oil use could moderate by half, with about 4.5 million b/d of demand never materializing. Should China’s forays into electric and natural gas vehicles take off, the impact could be even larger, shaving substantially the rate of growth in global oil demand in the years to come.

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