Kerry win could mean cheaper oil -- analysts
Oil may cost as much as 10 percent less next year if U.S. Democratic challenger Senator John Kerry defeats President Bush in Tuesday's election, some energy analysts said on Monday.
"Under a Kerry administration we'd likely have a much more interventionist SPR policy," said Jamal Qureshi, market analyst at PFC Energy in Washington. "And when you look out a bit further, Bush is more likely to be aggressive in the Middle East, particularly in Iran," he added.
Oil prices have jumped to record highs of more than $55 a barrel on concerns over tight supplies, unreliable shipments from war-torn Iraq and growing demand from countries like China and India.
The high energy costs have sparked some concerns about their impact on the global economy, with a U.S. Federal Reserve Board governor last week calling the oil price increase a shock to the U.S. economic system.
On Monday, a day ahead of the election, oil prices recoiled more than 3 percent to $50.13 a barrel. PFC predicts an average oil price of $43 a barrel in 2005 if Kerry wins, compared with $48 if Bush is reelected.
Despite surging energy costs this year, the Bush administration has been reluctant to release oil from the nation's stockpile, which was created by Congress in the mid-1970s after the Arab oil embargo.
"This administration doesn't want to be accused of playing politics with the crude reserve," said Aaron Brady, analyst at Cambridge Energy Research Associates.
Kerry has criticized Bush's tight-fisted policy and said Bush should at least stop filling the SPR to allow for more oil on the open market. The reserve currently holds about 670 million barrels, with a target of 700 million.
"A Bush status quo results in somewhat higher oil prices both in the short and the longer term, in my view," said Tim Evans, senior analyst at IFR Energy Services. "In the short run, it means more oil drained from the market."
Oil supplies in the United States, the world's largest energy market, are lagging well-below last year, according to government figures -- a key reason behind record high heating oil prices and gasoline over $2 a gallon.
Some analysts have added that oil prices in the longer term could trend higher if Bush is reelected because of tensions with Iran, an OPEC-member nation that Bush has named part of a global "axis of evil."
"There's an increased likelihood of some material confrontation in Iran with a Bush presidency," said PFC's Qureshi. Kerry is seen as more likely to work through conventional diplomatic channels, he said.
Iran, which sits on the world's second largest reserves of oil and gas, is facing international pressure due to concerns over its nuclear ambitions.
Both Bush and Kerry have said they hope to reduce U.S. dependence on imports from the Middle East, but they differ on how, with Bush focusing on increasing domestic production and Kerry focusing on cutting demand.
Many experts have said neither approach is likely to significantly reduce the need for foreign oil, which costs less to produce than U.S. oil, but they add that curbing domestic oil consumption is key to keeping a lid on prices.
"Conservation, in my opinion, is the only way to get us out of this hole which we put ourselves in," said Fadel Gheit, senior energy analyst at Oppenheimer & Co.
The U.S. consumes roughly 20 million barrels of oil per day, accounting for
about a quarter of world demand.