A contrarian says oil prices are in for a 50 percent drop

An economics writer predicts that oil prices will slide with the advent of new extraction methods and ongoing exploration that will lead to increased supply. Ethanol subsidies and gas alternatives, including natural gas, nuclear power, and synthetic crude, will also help to beat down oil prices within the next two or three years, contends the writer, David Levine, in the January issue of Portfolio, a monthly business magazine.
Further, Levine maintained, an economic slowdown “could put the brakes on demand and bring prices down,” and global oil consumption could slow as China and India become “more serious about shifting to alternative energy sources.” Tony Hayward, for one, doesn’t see it that way.
“For the medium term, the era of cheap energy is behind us,” Hayward, chief executive of BP, told an audience of industry professionals and community leaders in a speech in November at the Houston Forum.
Hayward said that although he is no subscriber to the theory that oil supplies have peaked, “The hard truth is that the political and technical obstacles to bringing reserves to market become more challenging all the time.”
He outlined what BP is doing in order to bolster U.S. energy security, investing $30 billion in the last five years. “That makes us America’s biggest energy investor,” he said.
BP is already one of the biggest biofuels blenders in the country, according to Hayward, and is investing $8 billion in alternative energy, including wind farms, solar, and a partnership with three major universities to develop biofuels.
The oil company is also spending $6 billion a year in the next five years on new projects, said Hayward, including the giant Thunder Horse platform in the Gulf of Mexico; the Wamsutter tight natural gas project in the Rockies; and upgrading its refinery in Whiting, Ind., to take complex and heavy crudes.

However, looking to the future, Hayward said he hoped that a comprehensive energy policy for the U.S. would incorporate energy conservation as an important way to both promote energy security and to meet environmental concerns
He said: “You might think that counter-intuitive coming from an oil and gas man, but it is in the nature of our business to adapt to market conditions. And the fact is that our customers, whether they be ordinary consumers or business, would benefit from increased energy conservation in buildings, transport, at home or in power generation.”