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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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Oil Supply Adequate For Now, But Larger Supply Crunch Looms

Global oil supply will be enough to meet demand in the short and medium term, but the world is headed towards a supply shortage after 2026 unless the oil industry boosts investment in new projects, participants at last week’s Energy Intelligence Forum 2021 said.

In the immediate future and in the next few years, global oil supply will be adequate to meet demand, because of the available spare capacity which the OPEC+ group is currently idling in their deal and the supply expected to come from already sanctioned new projects, according to most of the industry professionals who took part in the forum.                                               

However, after the mid-2020s, the world will need either more new supply to meet growing demand or a reduction in demand if it is to stave off a supply crisis, industry officials and analysts said.

Some of those officials have already started to call for more investment in new supply, considering the long lead times in conventional projects from discovery to production.

For example, Patrick Pouyanné, chief executive at France’s TotalEnergies, said at the Energy Intelligence Forum that oil prices would “rocket to the roof” by 2030 if the industry were to stop investments in new supply, as some scenarios for net-zero by 2050 suggest. 

“If we stop investing in 2020, we leave all these resources in the ground ... and then the price will rocket to the roof. And even in developed countries it will be a big issue,” Pouyanné said at the forum, as carried by Energy Intelligence.

Global annual upstream spending needs to increase by as much as 54 percent to $542 billion if the oil market is to avert the next supply shortage shock, Moody’s said last week.

“Our analysis demonstrates that upstream companies will need to increase their spending considerably for the medium term to fully replace reserves and avoid declines in future production,” Moody’s Vice President Sajjad Alam said.

By Tsvetana Paraskova for Oilprice.com

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  • Mamdouh Salameh on October 11 2021 said:
    Global oil supplies are facing a vicious circle. To meet global demand well into the future, hundreds of billions of investments in exploring for oil and expanding production capacity are needed every year.

    Yet, governments around the world are legislating against oil and gas, investments banks are competing among themselves in not extending credit to the global oil industry and environmental activists and divestment campaigners are given a free hand to pressure and harass the global oil industry to divest of oil and gas assets.

    Whatever spare capacity OPEC+ has will be a thing of the past by 2022 once it has eased the remaining cuts it made during the height of the pandemic in 2020. Furthermore, the global oil market shouldn’t bank on Saudi spare capacity because Saudi Arabia doesn’t have any spare capacity.

    Moreover, proven reserves won’t stay underground because producing nations in the Arab Gulf, Russia and Venezuela who have the bulk of global proven reserves will enhance their production to satisfy global demand and in so doing shower themselves with huge oil revenues.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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