Optimism from supply growth and more LNG dampened by politics, the low dollar ///

Crude oil should have another solid year in 2008 as long as prices don’t go too high, too fast and crater global demand. International exploration and development activity should remain robust as oil prices will remain high in 2008, likely not the current $90/bbl, but well above $60/bbl. Natural gas is in for another choppy year. Our long-term fundamental optimism is tempered by 2008 onshore supply growth, lack of GOM decline and more LNG. Geopolitical events in 2008 may be overshadowed by election-year issues in the US. The specter of high oil and gasoline prices during next year’s political debates is enough to put a smile on Bill O’Reilly’s face. Political issues. Two words-carbon tax! Get ready for whoever wins the White House. Carbon legislation will tax oil and coal to fund clean energy technology. Natural gas likely “wins” in the near term as it has the lowest carbon intensity of the mainstream fossil fuels.

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