Since the crude oil price crash of 2014, investment in energy projects has been significantly reduced, and some industry observers have warned that while relatively low prices and a global oil glut make investments in the short term-unattractive, they are imperative for supply and price stability in the long run. One of the most recent examples of these warnings is an article by Haley Zaremba in “Oil Voice”.
Zaremba cites Robert Johnston, of Eurasia Group, who questions the conventional wisdom that Saudi Arabia and U. S. shale can produce enough oil to meet future demand growth. He contends that by 2022 global oil production will increase by 7 million barrels of oil per day (bopd); 5 from shale and 2 from oil sands and deep water. If demand continues to increase as he expects, that would still leave the world short by 15 million bopd. If you accept this forecast, we need to start looking for new oil, and fast!
The investment drought and potential ensuing oil shortage are nothing new, but two straight years of investment decline are unprecedented in the industry. Fatih Birol, executive director of the International Energy Agency, points out that no major projects were started in the last year, and there were no major oil discoveries “because there is no money for exploration. You find something if you look for it.”
Optimists take solace in the advances in renewable energy and electric cars. However, many renewable energy projects are not economically viable without government subsidies, and electric cars constitute less than 2% of the global fleet.
A former colleague used to point out that “Shortage never won a race with technology”, and there are promising technologies on the horizon. Zaremba sees advances in seismic prospecting, well logging, gravity surveying, magnetic prospecting and geothermal prospecting as encouraging, but not without significant limitations.
In my opinion, the world is not in danger of running out of oil, but we may find that plentiful supplies at reasonable prices will not last as long as many hope.
To read the article in its entirety, please go to https://oilvoice.com/Opinion/5019/Todays-Stunted-Oil-Prices-Could-Cause-Oil-Price-Shock-In-2020 .
Russell T. Rudy Energy, LLC buys oil, gas and mineral interests nationwide. Please call (800-880-0940), or write (firstname.lastname@example.org ) to let us know if you agree, disagree or would just like to comment on this, or any of our posts.