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Rocketing oil price will fall: economist -

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TONY EASTLEY: The price of crude oil is this week expected to make a renewed assault on that
psychologically important US$100 a barrel mark.

Oil closed in New York trading early Saturday at $96.32.

The US Federal Reserve Chief, Ben Bernanke, who is warning about a slowing US economy, has briefly
put the brakes on the oil market but analysts expect it's only temporary.

Jim Williams, an economist with US energy research firm WTRG, expects the oil price to hit $100 but
then to fall sharply.

He spoke to our North America correspondent, Michael Rowland.

JIM WILLIAMS: There is a lot of speculative money in the market and it seems set on seeing $100 a
barrel oil. If you look at the non-industry participants that are trading on the NYMEX (New York
Mercantile Exchange) exchange, they are in what's called a net-long position, in other words,
they're betting on prices going higher.

And the industry participants are short and betting on lower prices and so a lot of the speculative
money is pushing this up. And the underlying fundamental that'll really allow that to happen is
that there is so little spare oil production capacity now compared to five years ago.

MICHAEL ROWLAND: What's stopping oil from breaking through that US$100 a barrel threshold?

JIM WILLIAMS: Well, I think the thing that stopped it this week was the obvious thing, which was
Bernanke's statement about, you know, the possibility of a recession in the United States, and if
you look at history, you know, at least back 30 years or so, every time the United States has had a
recession, there's been a dramatic drop in crude oil prices.

So that took some of the wind out of the price sails, so to speak, and slowed things down. Whether
that stays or not or goes back on its trend to hit US$100, but I think once it hits the US$100 it
will go the other way.

MICHAEL ROWLAND: So you believe it's a case of when, not if, that US$100 threshold will be reached.

JIM WILLIAMS: Yeah, I think it's a when and then afterward the market will get a dose of reality
and come back down considerably.

MICHAEL ROWLAND: How far would oil drop, if and when it does hit US$100?

JIM WILLIAMS: I think US$80 is probably a reasonable number if the US economy muddles along, and
US$60 is certainly possible.

TONY EASTLEY: Jim Williams, an economist with US energy research firm WTRG Economics, speaking with
our North America correspondent Michael Rowland.