Come on, you didn't really think this cheap gas lull was going to last, did you? Better tune up those bicycles!
Sharp reductions in investments and low oil prices could curb future supplies by almost eight million barrels a day within the next five years, according to a study scheduled for release Friday, the latest warning that the world could face a new energy shock when the economy picks up.
The report by Cambridge Energy Research Associates, an oil consulting firm, said that the potential drop in production capacity is a “powerful and long-lasting aftershock following the oil price collapse.”
The global slowdown has forced oil companies to slash their investments, postpone or cancel expansion plans, or delay drilling in many corners of the world. While some of the biggest companies, like Exxon Mobil and Royal Dutch Shell, say they will keep their investments unchanged this year, many other producers are curbing investments because of the crisis.
The report says about 7.6 million barrels a day of future supplies are “at risk” of being deferred or canceled, like heavy oil or deepwater projects, and which could bring total supplies to 101.4 million barrels a day by 2014. Last year, the group projected that capacity would rise to 109 million barrels a day by then.
“Seven consecutive years of rising oil prices — unprecedented in the history of the oil industry — have come crashing down, thus burying the notion that the commodity price cycle was a historical relic,” said the report, a field-by-field study of production trends.
Many experts have voiced even darker concerns in recent months. Christophe de Margerie, the chief executive of French oil company Total, recently said that producers would find it challenging to bolster supplies even to 90 million barrels a day by the middle of the next decade as projects get canceled.
Oil prices have fallen by 63 percent from their peak of $147 a barrel last summer. They are now trading around $54 a barrel after OPEC producers curbed supplies to prevent a price collapse.
But even at this level, many producers warn that oil prices remain too low to sustain increased investments.