Updated: A new study by research firm IHS Herold illustrates why there are fears of a supply crunch: oil is getting much more expensive to find, but investment in finding new oil is falling this year.

Exploration spending by listed oil companies rose 21 per cent and development spending 23 per cent in 2008 – but total reserves fell 3 per cent, according to the study. Much of this was due to some existing reserves becoming uneconomic: there was a a 5.2 billion barrel decline in revisions “due to the steep drop in commodity prices”. It’s not the first time total reserves have fallen, but it makes us wonder what this year, when capital investment is set to fall further, will bring.

Meanwhile the average cost of replacing a barrel of oil equivalent rose 70 per cent to $23.44 in 2008.  Here’s how finding and development costs weigh up against reserve replacement:

Source: IHS Herold

The study culled data from the filings of 232 companies with the SEC “and other similar agencies worldwide”, so some of the really big national oil companies such as Saudi Aramco aren’t in there. Petrobras and Pemex are represented, however, along with the big Russian and Chinese companies.

Crude oil prices dipped on Wednesday ahead of the latest US inventories data while gold found support from dollar weakness as investors in commodity markets awaited the outcome of the US Federal Reserve’s monthly meeting.

US interest rates will remain locked near zero for an extended period and the focus of the meeting will be to see if US policymakers issue a more upbeat assessment of the economy and provide any guidance on their exit strategy from quantitative easing and the other special measures taken to counter the financial crisis.

In energy markets, Nymex November West Texas Intermediate oil slipped 44 cents to $71.32 a barrel while ICE November Brent eased 53 cents to $70.00 a barrel.