Lack of investments, particularly in oil production, will not ensure adequate crude supplies and obviously lead to further price spikes and shortages.
Boosting investment is important to ensure secure oil supplies in future, energy economists say and note that failing to invest now would have consequences in two to three years.
A shortfall in investments could also threaten the reliability of electricity supplies globally, which are crucial in maintaining industrial output and economic growth worldwide.
The required investment in oil production would reach at least $11tn between now and 2040, estimated HE the Minister of Energy and Industry Dr Mohamed bin Saleh al-Sada.
At a recent conference, he said the expected demand for oil will continue to increase to reach a peak of 113mn barrels per day by 2040.
Without further investment, liquids supply would decline steeply, leading to major price fluctuations down the line.
Oil would continue to be the driving force behind the world’s economic prosperity and that world demand on oil will continue to grow, with an average rate of about 0.8% a year over the next two decades.
This will be driven mainly by transportation needs and the petrochemical industry, especially in emerging Asia.
The great challenge facing the world today is ensuring the availability of reliable sources of energy. It is necessary to strengthen efforts to achieve oil security to secure future investments.
Investment has been insufficient in the last three years in existing and new fields, experts say and argue that if the situation is not reversed it will lead to price spikes and shortages.
An estimate is that by 2025, the world will be using around 3.2mn gallons of oil-based liquid fuels, every single minute. Hence, the weak global investment picture remains a serious concern.
For instance, the world will need enough investments to add 20-25mn bpd to the global supply chain over the next five years alone.
Unfortunately for 2018, the Paris-based International Energy Agency (IEA) sees just a 6% uptick in oil investments, which comes on the heels of 25% reductions in 2015 and 2016.
To avoid a potential shortfall, IEA concludes that around $640bn is needed in exploration and production (E&P) spending every year through at least 2040.
In 2016, just $430bn was invested, figures show. The world’s top energy consumer – the US needs an annual $120bn in E&P alone, not to mention investments in new pipelines and other supply infrastructure.
In a recent report, Bernstein Research said, “The risk for the oil industry in reducing investment today is creating a shortfall in oil supply tomorrow. Oil remains an essential part of our lives.”
“Any shortfall in supply will result in a super-spike in prices, potentially much larger than the $150/b spike witnessed in 2008. Production declines mean another super-cycle in oil prices,” Bernstein Research said.
Lack of oil investments in any part of the world can lead to higher prices globally, so investments need to be encouraged everywhere. If production does not increase as needed, it will result in a further spike in oil prices.