Is a price spike in oil’s future?
Although supermajors continue to announce plans to maintain oil and gas investment even though the price of light, sweet crude continues to hover around $50 per barrel, the oil minister of Egypt, Sameh Fahmy, is sounding the alarm that the current global recession could lead to oil prices over $200 per barrel. Fahmy’s reasoning is he believes oil and gas investment is falling and energy sector projects are facing increasing delays. These factors will create a shortage of oil and gas as demand ramps back up. Fahmy’s concerns seem unrelated to the actual investment level of privately held petroleum companies across the globe. From The Boston Herald:
Sameh Fahmy, in concerns echoed loudly by oil executives at a gas conference in the Egyptian capital, said that global investments and contract signings had fallen sharply over the second half of 2008 as crude collapsed from a record high of almost $150 per barrel and banks, struggling to remain solvent, sharply reigned in lending. But oil and gas production costs had only dropped by 5 to 10 percent. “We are in a period of extreme slowness” on the global level, Fahmy said, adding that fears about last year’s price spike in crude would be quickly eclipsed if investments — key to generating new supply sources — are not sustained. Crude could go to “over $200 (per barrel) in a period of two or three years if we don’t all act quickly now,” Fahmy said. Oil officials and executives have repeatedly warned about another price spike as falling investments hamper efforts to tap new supply to meet a rebound in demand once the world economy picks up again. As companies are forced to go deeper offshore, or explore in difficult terrain to secure new resource reservoirs, production costs are also expected to remain high. Industry executives, while echoing Fahmy’s concerns, were also eager to show how they are stepping up to meet future energy needs even as the slide in oil prices challenges the economic viability of a number of major oil projects worldwide.
Published Monday, May 18th, 2009 at 6:54 am and filed under Industry News.