Tumbling oil prices a 'game of global chicken': expert

Oil prices are likely to continue falling in the oversupplied energy market, unless some countries slow their production, one expert says.

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The world's producers are all contributing to an "enormous" stockpile of oil, and the laws of supply and demand are continually driving prices down, professor Ian Lee told CTV News Channel on Tuesday. Lee says the only way to get the price to go up again will be for some countries to stop production – something he doesn't see happening in the short term.

"It's a game of global chicken," said Lee, a professor at Carleton University's Sprott School of Business. "We're really waiting to see who is going to blink first."

Lee says Saudi Arabia spends the least amount of money to harvest a barrel of oil, so it is better-positioned to weather low oil prices than the likes of Canada or the United States. "They can go lower than anybody else," he said of Saudi Arabia. That means high-cost oil producers, such as Canada, will be forced to slow down by market forces, if oil prices continue falling.

Lee is predicting the price of oil could fall to as low as US $20 per barrel this year. The current price is hovering around $30 per barrel.

"We're producing way too much oil for what the world wants, and there's no short-term end in sight," he said.



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