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Oil Industry Faces “Boom-and-Bust” Future
Oil producers face a future of boom-and-bust cycles unless they hike investment now to develop new petroleum sources, the Paris-based International Energy Agency warns.
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Oil producers face a future of boom-and-bust cycles unless they hike investment now to develop new petroleum sources, the Paris-based International Energy Agency warns.
Last year the industry’s spending on exploration slumped to a 60-year low of $580 billion from $780 billion in 2014, according to IEA. It estimates investments will drop to $440 million this year.
IEA estimates that investment must jump to $700 billion next year to ensure the industry will be capable of matching supply with demand by 2020. That’s because it takes between three and six year to begin pumping oil from a new field.
The failure to accelerate spending now will trigger “the start of a new boom/bust cycle,” the agency predicts.
The lack of investment reflects persistently weak prices for crude. Oil prices, which began at $100 per barrel in 2014, dipped below $40 earlier this year and currently are at about $45. Last week the Organization of the Petroleum Exporting Countries predicted that oil prices will rise to only $60 per barrel by the end of the decade.
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