Sam Fletcher
Senior Writer

The "simplistic assumption" that crude prices eventually will fall back "to where they used to be," around $25/bbl, is likely "invalid" in today's market situation, said J. Larry Nichols, chairman and CEO of Devon Energy Corp., Oklahoma City.

"The [price] model that I think a lot of people have, which is certainly a valid one if you look [only] at the last 5-10 years, is that we're going to have very moderate prices that on occasion will spike up for a very brief period of time when we have a difficulty like the Iraqi invasion of Kuwait, and then after a few months will come back down to a more reasonable level," he said.

However, Nichols said, "Now so much of the surplus [world production] capacity in oil has been eliminated." That makes crude prices more vulnerable to various political factors that threaten to disrupt supplies, "whether it's problems in Venezuela with [President Hugo] Chávez, whether it's tribal warfare that exists in Nigeria and occasionally in other parts of Africa, the uncertainties of the political environment in Russia, and of course the largest one of all is the huge uncertainties in the Middle East and other places where Islamic revolutionists are active, which includes places like Indonesia in the Far East."