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Thursday, April 23, 2015

Big Oil’s Latest Fear: A Price Shock After $114 Billion of Cuts

As the oil patch grows accustomed to a new world of $50 to $60 crude, it’s now looking ahead to a different but equally daunting sort of cliff.

Oil companies are warning there will be a price to pay -- a much higher price -- for all the cost cutting being done today to cope with the collapse in the crude market. Big projects intended to start pumping oil and natural gas 5 to 10 years from now are being canceled or put on hold as the price crash forced $114 billion in spending cuts on the industry.

Energy giants from Exxon Mobil Corp. to Royal Dutch Shell say they’re taking a much more cautious approach to approving projects that cost billions and take years to complete. That’s setting the table for a future oil-price shock when a growing world population drives higher demand, said oil executives and financiers at the IHS CeraWeek Energy Conference in Houston.

“What we decide today will have an effect on the future,” Patrick Pouyanne, chief executive officer of Total SA said Tuesday during the event. Postponing spending on mega-projects that usually deliver significant quantities of oil or gas “will have an impact. This could affect supply in three or four years.”

Demand has already begun to show signs of strength. The Paris-based International Energy Agency last week raised its forecast for 2015 demand, projecting that the world will consume 94.7 million barrels a day of crude in the fourth quarter, a potential increase of almost 1 million barrels over the same period in 2014.

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4 comments:

Anonymous said...

if the price of oil has dropped so low why has not the gas they incress gas as price of oil went up but now its down they don't lower it

Anonymous said...

now we're being threatened....manipulation is what's being done

Anonymous said...

This exemplifies why they should receive no more government subsidies - regardless of how they are applied!

They do make enough on each gallon already - and are expected to do sufficient R&D work to continue their current rate of business. They're threatening to cut back just to drive up the prices (again)...

Glad I have a higher efficiency vehicle and can purchase less of their products by choice!

Concerned Retiree said...

They know the Politian will not do anything. They have investments in the Oil industry. that is why they blatantly admit to price gouging better known as having a monopoly on the product. They also know they will keep getting their government subsidies because they contribute to their reelection fund.