Low Crude Prices Affecting Investment for Future Oil Security
Because the current low crude oil prices are making it unattractive for companies to make “upstream investments” in getting crude out of the ground, it could spell trouble for oil security and oil and fuel prices down the road, according to an executive at the International Energy Agency.
Because the current low crude oil prices are making it unattractive for companies to make “upstream investments” in getting crude out of the ground, it could spell trouble for oil security and oil and fuel prices down the road, according to an executive at the International Energy Agency.
Bloomberg reports that Neil Atkinson, head of the IEA’s Oil Industry and Markets Division, said in Singapore on Wednesday that the “historic” investment cuts currently taking place increase the possibility of oil-security problems in the future.
“We need a lot of investments just to stand still,” Atkinson said at the launch event of SIEW 2016, according to Bloomberg. “There’s danger as we are reaching a point where we are barely investing upstream. If investment doesn’t resume in 2017 and 2018, we can see a spike in oil prices as oil supply can’t meet demand.”
U.S. crude stockpiles are at their highest level since 1930, but Atkinson believes supply and demand will move closer to balance in the second half of the year — and those stockpiles will start falling starting in 2018. There will be "barely any supply to meet demand" if investments in oil production don’t resume in the next one or two years, he said.
Atkinson expects oil prices to average $35 to $40 a barrel this year. He also believes a scheduled meeting next month of the OPEC oil-producing countries, where they are supposed to discuss limiting production to deal with global over-supply, will have no impact on the actual supply situation.
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