Cambridge sees energy price run up.(Current Happenings And Events)

CAMBRIDGE, MA -- Cambridge Energy Research Associates (CERA) called the energy market "precariously balanced" with the possibility that prices could move well above $50 per barrel. This new finding, contained in a September 28th report, comes on the heels of CERA's correct August 9th, forecast of "... a 50/50 probability that the price of oil will reach $50 per barrel within the next 50 days." Eastern U.S. electricity prices will also be pressured upward by continued transmission bottlenecks, said the firm in a separate report, released earlier in the month. Within weeks of the report, oil breached the $50 per barrel mark, closing as high as $54 per barrel.

James Burkhard, CERA's Director for World Oil Analysis, observed that, "Last month's previous oil prices record was broken Monday as WTI, the benchmark US crude oil, hit $49.75 per barrel on the NYMX and topped $50 in after-market trading. The sharp decline in US crude oil inventories precipitated by production disruptions wrought by Hurricane Ivan, and fear about the reliability of oil supply were the main drivers behind this new move toward and beyond $50 oil."

"The combination of strong demand growth and geopolitical instability fuels high prices," said CERA Chairman Daniel Yergin, who first issued CERA's $50/barrel outlook in August. "Today's prices reflect how sharply these two trends are reinforcing each other this year." The most important reason prices are high is exceptional demand growth.

CERA says that continued oil price hikes depends on developments in regions where supply concerns have intensified: the Middle East, Russia, and Nigeria. With the market precariously balanced, the loss of a major supply source for several weeks could see prices move well above $50. However, if fear of a supply disruption recedes and demand growth moderates and supply grows, prices could slip to the low $40 range," Burkhard concluded.

The firm harbored no uncertainty about the causes and results of the lack of transmission investment. Persistent transmission constraints in the eastern three-fourths of the U.S. block up to $300 million of potential annual energy cost savings from a group of high-potential congestion relief projects, according to Grounded in Reality: Bottlenecks and Investment Needs of the North American Transmission System, a new CERA study.

CERA's analysis identified numerous specific bottlenecks in which congestion relief projects could enable consumers and businesses to benefit significantly from gaining access to power produced at lower-cost coal-fired generation ...