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Suppliers of pumps, valves, scrubbers, filters and treatment chemicals are going to have to re-examine their business strategies due to the surge in oil prices, according to the McIlvaine Co.
The research company is currently revising its forecasts based on the surge in the price of oil to over US$60/barrel. The new forecasts are based on the belief that oil will remain above US$40/barrel over the next 20 years. Due to its interchangeability with oil, the price of natural gas will remain above US$5.00/MM Btu in the US despite importation of LNG.
McIlvaine believes that these prices will reduce investment in energy intensive industries in the US and Europe and that the flight of heavy manufacturing to Asia will be accelerated due to the high oil and gas prices. The impact on the world economy as a whole will be negative if no major initiative to develop synthetic fuels is undertaken, says McIlvaine. This, in turn, is expected to affect all purchasers of pollution and flow control products and services.
But McIlvaine argues that if the US Administration guaranteed that it would purchase any oil made from coal or oil shale for US$40/barrel (if the supplier could not otherwise receive a higher price), then there could be a positive side to the high oil prices. This simple guarantee would be the catalyst for a huge spurt in capital investment, believes McIlvaine. Plants which convert coal to oil such as the Sasol plant in South Africa require considerably more valves and pumps than conventional refineries, for example.
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