Oil industry facing headwinds in 2008

By Michael Erman

NEW YORK, Feb 10 (Reuters) - Will 2008 be the year that the oil industry's vastly profitable ride slows?

After years of record oil prices and profits, the oil industry is facing the headwinds of a weak U.S. economy, dwindling access to supplies and slowing production.

These will be among the top issues discussed by oil executives and policymakers in Houston at this week's CERAweek energy conference -- one of the biggest U.S. energy conferences of the year.

"For the last half decade we've been in a very high growth global economy and that has been the No. 1 driver of energy prices. The degree of a downturn will change the equation," said Daniel Yergin, Chairman of Cambridge Energy Research Associates, the group hosting the conference.

Worries of a recession have already cut into oil prices, which in the United States have dipped to around $90 a barrel after hitting a record of more than $100 a barrel in early January.

"Everybody treated $100 a barrel as the beginning of something," said Kevin Book, an analyst with Friedman, Billings and Ramsey. "It's just a number and it was the wrong number."

Book said he believes the average price for U.S. crude in 2008 will be around $80 a barrel as weakness in the economy takes its toll on prices.

Still, he suggested that there is some support for oil prices below these levels.