former economics teacher at Harvard University is predicting that the price of oil next year could be roughly half of what it is today as long as speculators can be reined in and the volatile situation in Iran stabilizes.
"Oil in real terms will be substantially less than where it is today," Todd Buchholz, who served as director of economic policy for former President Bush, told legislators from 16 southern states at the Southern Legislative Conference on Saturday.
"Before China came on the scene in a massive way, the price of oil was roughly $22 a barrel," he said. "You can add China and India and that could justify $40 or $50 a barrel, but it can't justify $150 a barrel. The massive surge in energy technology will for the long term cap the real price of energy."
"Barring war in Iran, nine months from now oil prices should be lower," Buchholz said, estimating the price of oil next year could be about $70 a barrel if there is some resolution to the Iranian situation.
"The overall price of energy will fall, and I don't think it's going to be collapsing to the $20, $30 or $40 per barrel," said Buchholz, a frequent economics commentator on television networks. "Oil will peg out two years from now being closer to $50 a barrel, which is still high enough to make those alternative fuels worth pursuing."
He said he wouldn't be surprised if discussions took place two years from now about keeping the price of oil from getting too low so it "doesn't pull the rug out from solar, wind and clean coal technology."
The biggest step the U.S. could make in reducing its dependence on foreign oil is finding a way to develop clean coal technology, he said.
"The U.S. is the Saudi Arabia of coal," Buchholz said. "And China has a lot of coal, too. It would be a good fix if China could develop clean coal technology because then they wouldn't be buying up every oil well they could find."
The U.S. economy is stagnant and struggling but doesn't appear headed to a recession, Buchholz said.
"I don't see strong growth, I see very weak growth in the next year, but I think the second half of 2009 will look more normal," he said.