Warning of US$200 a barrel oil crunch
An oil supply “crunch” could hit the world in five years time and drive up oil prices to more than US$200 a barrel, a think tank warned today.
Chatham House said incessant demand combined with inadequate investment by oil companies in raising output – rather than dwindling supplies underground - risked driving up prices to more than two-thirds current levels.
This would cause “serious policy implications” for oil dependent nations like the United States and the UK, the institution’s report said, and probably do for energy policy what 9/11 terror attacks did for the US military posture.
Chatham House senior research fellow Professor Paul Stevens said such a crunch was likely “even allowing for some increase in capacity over the next few years”.
He added: “The implication is that it will quickly translate into a price spike although there is a question over how strategic stocks might be used to alleviate this.
“A spike of over US$200 is possible,” Prof Stevens said.
The report came as oil prices dipped to just over US$117, down nearly US$30 in the past month amid mounting concern that slower economic growth is reducing global demand.
Light, sweet crude traded on the New York Mercantile Exchange, the world’s benchmark oil price, reached US$117.23 at one point before rising back up nearly a dollar. Brent crude was trading even lower at around the US$116 mark.
The movement saw share price gains in London for the likes of fuel-hungry British Airways, which added more than 4%, and easyJet, up more than 1%.
Prof Stevens said to avoid a crunch, energy policy needed to reduce oil demand, increase oil supplies or beef up supplies of non-conventional liquids such as bio-fuels.
International oil companies (IOCs) were returning funds to shareholders, rather than investing in the industry, he said.
“Many producer countries are also experiencing a resurgence of resource nationalism which excludes IOCs from helping develop capacity,” the professor added.
Earlier this year Chakib Khelil, president of oil producing cartel Opec, warned that a major market crisis, such as production stopping in Iran, could see prices rise to US$200 or more.
