GAS PRICES SEEN OUTPACING OIL PRICES

The consensus of a group of petroleum evaluation specialists is that gas prices will rise faster than oil prices in the coming decade. But oil and gas prices, as well as operating and drilling costs, will closely match inflation trends. In connection with its annual meeting late last month in Napa, Calif., the Society of Petroleum Evaluation Engineers disclosed the results of its 12th annual survey of economic parameters used in property evaluation. An April survey brought 206 responses,

July 5, 1993

2 min read

The consensus of a group of petroleum evaluation specialists is that gas prices will rise faster than oil prices in the coming decade.

But oil and gas prices, as well as operating and drilling costs, will closely match inflation trends.

In connection with its annual meeting late last month in Napa, Calif., the Society of Petroleum Evaluation Engineers disclosed the results of its 12th annual survey of economic parameters used in property evaluation. An April survey brought 206 responses, mostly from SPEE members involved in production, consulting, and energy banking.

Average of the forecasts by survey respondents is for the price of West Texas intermediate crude to gain 4.31%/year, beginning at $19.59/bbl and rising to 528.46/bbl by 2002. The price increase rate is slightly less than that predicted by last year's survey, SPEE's evaluation parameters survey committee said.

The survey predicted that the mean natural gas price on the U.S. Gulf Coast will increase 5.44%/year, bringing the price to $2.96/MMBTU by 2002 from $1.84/MMBTU in 1993. Maximum price predicted in the survey was $3.89/MMBTU.

For the first time in the 12 years the survey has been conducted, consultants expect the greatest price escalations for both oil and gas. Average of the consultant group responses is for an average increase in oil price of 4.65%/year and an increase in natural gas price of 6.04%/year.

Bank energy specialists responding to the survey were less optimistic about price trends than producers and consultants. The bank group expects oil prices to rise 4.03%/year and gas prices to gain 4.29%/year.

Most respondents' cost increase forecasts were influenced by their expectations for inflation, SPEE said.

The average of the forecasts by survey respondents is for an escalation in drilling costs during the next 10 years of 4.24%/year and a gain in operating costs of 4.31%/year. The group expects inflation to average 4.27%/year from now to 2002.

"Several indicators of U.S. petroleum industry activity are trending upward," SPEE said. It cited a bright outlook for the natural gas industry, a stable oil price, and a decrease in the cost of money as positive signs.