The warnings are not new, but they’re getting louder. Ever since oil prices began their plummet from July’s peak, concerns about investment in ever more difficult oil sources have been growing.
The IEA last month warned that falling investment could lead to an oil supply crunch/price rise in 2013 or 2014, and last week it made a much more plaintive warning – and moved it closer, to 2012.
Ali Naimi, Saudi Arabia’s oil minister, yesterday joined in with a warning to G8 energy ministers, who were meeting in Rome:
“We are maintaining our long-term focus rather than being swayed by the volatility of short-term conditions,” he said in prepared remarks at the summit.
“However, if others do not begin to invest similarly in new capacity expansion projects, we could see within two-to-three years another price spike similar to or worse than what we witnessed in 2008.”
John Lipsky, first managing director at the IMF, also touched on the theme:
Declines in oil prices are likely in the near term, leading to persistently subdued investment next year and the risks of supply crunch, top International Monetary Fund official John Lipsky said Monday.
Lipsky’s comments though were more about price volatility:
“Rapid oil price changes are detrimental to both global growth and to global economic and financial stability,” he said. Policy makers should “address the principal factors underlying large oil price swings.”
It’s not clear what he believes those factors might be, but he also said rising oil prices signalled confidence in the economy; so presumably oil market distortions aren’t among them.
As if on cue, Brent crude was down 1.5 per cent and Nymex WTI more than 2 per cent today.
Oil producers and consumers fret over future price spikes (FT Energy Source, 27/04/09)
Delaying investment projects: Who’s doing it, and why (FT Energy Source, 13/03/09)
Threat to oil investment from falling price of crude (FT, 13/01/09)