Newspaper article THE JOURNAL RECORD

Industry Execs Fear Low Prices Will Cause Energy Crisis

Newspaper article THE JOURNAL RECORD

Industry Execs Fear Low Prices Will Cause Energy Crisis

Article excerpt

LONDON -- Oil prices now among the lowest in a decade threaten to discourage the search for new fields, a development that could create an energy crisis in the years ahead, industry executives said Tuesday.

The warning, delivered by executives from a range of energy companies at an industry conference in London, comes at a time when benchmark Brent crude in London trades at less than $12 a barrel, among the lowest prices since 1988. After adjusting for inflation, oil prices are the lowest on record.

Alarmed by a plunge in oil prices from a peak of almost $25 a barrel last year, the executives expressed concern that low prices today will undercut investment in tapping new sources of oil. Already, several of the world's largest oil companies have said they would shelve certain developments until prices improve. "We will see a period of low oil prices, but this period will trigger a new crisis," said Franco Bernabe, chief executive of Eni, Europe's third-largest oil company. Crude oil prices started their slide a year ago this month, after recessions in Japan and South Korea reduced energy demand at the same time the Organization of Petroleum Exporting Countries, source of 40 percent of the world's oil, boosted its output by 10 percent. To be sure, OPEC ministers will meet next week and are expected to consider ways of bolstering crude oil markets. And the executives' fears of spiraling long-term energy prices stood in contrast to increasingly gloomy forecasts from others made Tuesday at the very same conference. "It's possible we could see $5 to $6 oil next year -- briefly," said Phil Verleger, an economist with the PKV Associates consultancy in Massachussets. "The inventory build is back. The market is telling us it is there, and it could depress the price of oil significantly in the next six months." Like other industry executives, Bernabe said his company is planning for oil prices between $12 and $13 a barrel during the next five years, well below the historic $18 to $22 a barrel levels seen during most of the past decade. The executives said the current glut is not as serious as in 1986, the last time oil prices plunged. …

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