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Oil to stay in $100 range for next decade, agency says

Globe and Mail Update

Thursday, May 15, 2008

OTTAWA — Oil will sell for about $100 (U.S.) per barrel over the next decade, according to the United Nations' Food and Agriculture Organization.

The FAO, which is putting the finishing touches on new 10-year forecasts for commodity prices, expects crude prices of $104 per barrel in 2017, Ali Gürkan, chief of the agency's trade and markets division, told a Senate committee today.

“Prices are going to remain high,” Mr. Gürkan said via teleconference from the FAO's headquarters in Rome.

Mr. Gürkan revealed the prediction for 2017 during testimony for the Senate agriculture committee, which is investigating the effect of soaring oil, fertilizer and other input prices on Canadian farmers.

The estimate is further evidence that consumers should get used to elevated costs for gasoline and food.

The surge in commodities over the last couple of years will slow, but demand from emerging market economies and biofuels producers will keep prices from falling much below where they are now, Mr. Gürkan said.

The FAO's full 10-year outlook for commodity prices will be released within the next couple of weeks, Mr. Gürkan said.

FAO economists, who predicted at average price of $94 per barrel in 2008, are struggling to understand why prices have surged to that level.

Mr. Gürkan said prices would have to soon drop to about $80 a barrel to make the $94 per barrel prediction come true.

“This is no longer valid,” Mr. Gürkan said of the FAO's 2008 estimate.

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