t a time when major oil companies are pulling back investments in view of one of the most severe economic downturns in a generation, and lack of incentive to invest in the sector, the IEA stressed that it’s vital for continued investment in new projects. The total potential tab through 2030 as per the IEA is to the order of $26.3 trillion — colossal by any means.
“There remains a real risk that underinvestment will cause an oil supply crunch’’ by 2015 as the decline in output from mature oilfields speeds up, the Paris-based adviser to 28 oil-consuming nations said in its annual report. “The current financial crisis is not expected to affect long-term investment, but could lead to delays in bringing current projects to completion.”
OPEC has also warned that crucial downstream investment — in refining and distribution — will be curtailed if the oil price is not maintained at a reasonable level.
The crisis is beginning to unfold.
NVDL: The short termism the markets are demonstrating [with oil prices around $50 now) is nothing short of absurd.
Oil markets are facing a major slump — for a number of reasons — and continue to stream further down. As I write these lines, prices are already in the vicinity of $50 a barrel. Rather than seeking a ceiling, crude markets now appear looking for a floor — somewhere — at respectable levels. What a transition indeed. And indeed this transformation is not without ramifications, of considerable magnitude, one can easily deduce.
Crude markets have entered a phase where, due to low prices, the incentive to invest in the industry is getting less and less.
And if the trend continues, as some are arguing today, another round of price spiral may not be far off. The emerging scenario may not only be disastrous for the industry, but indeed for the overall global energy balance too — a real cause of concern indeed. We need to wake up to the consequences now — and not later.
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clipped from www.arabnews.com
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