Oil boom has a few years to run: experts

By Erwin Seba

NEW YORK (Reuters) - The current oil industry boom will almost certainly eventually turn to a bust, but it may be a few years away, analysts and government officials said this week at the Reuters Global Energy Summit in New York.

Oil industry investments to boost crude oil supply and refining capacity could combine with an economic downturn, due in part to high energy costs, to bring current lofty prices to an end in two to four years.

"New golden ages only last a short period of time," said Adam Sieminski, chief energy economist for Deutsche Bank, referring to the recent stretch of record oil company profits and soaring energy prices.

Oil prices have tripled to over $70 a barrel in the past four years as world demand outpaced new supplies and geopolitical turmoil undercut the reliability of shipments, spelling sterling returns for energy companies and pain at the pumps for consumers.

The soaring prices have triggered a wave of investment in new refineries and oil production, but it has also renewed fears that the burden of energy costs could trigger inflation and hamper economic growth.

The world's leading oil producer, Saudi Arabia, is spending tens of billions of dollars to expand refining capacity around the world and boost its oil production by 1.5 million barrels to 12.5 million barrels per day (bpd) by 2009.

In the United States, the world's biggest energy consumer, the oil industry is expected to boost refining capacity by 12 percent by 2010 with expansions at existing plants, according to the U.S. Energy Department.

The combination makes up a recipe for a fundamental downturn in oil prices in the coming years, experts said, underscoring the perennial boom and bust trend of the energy business.  Continued...