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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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Oil Executives: Higher Energy Prices Are Here To Stay

  • Big oil executives expect that higher energy prices are here to stay.
  • Underinvestment in new production is seen as one of the driving factors behind higher energy prices in the mid-term.
  • Low global inventories and limited spare production capacity are driving crude prices in the short term.
Energy Prices

We are just at the beginning of consumers' energy bill troubles, Big Oil executives have warned as they reported bumper earnings thanks to higher oil and gas prices. 

"I've no good news to deliver, oil prices will remain high," TotalEnergies' chief executive Patrick Pouyanne told media recently in comments on the current situation with energy costs in Europe.

The comment was echoed by the Asian head of commodity major Vitol, Mike Miller, who earlier this month noted low global oil inventories and limited spare production capacity as the reason for his expectations that oil will yet go up.

BP's Bernard Looney also projected higher energy prices. He called it "volatility" and said oil supply could decline further this year, supporting prices of over $90 per barrel.

"We expect a tight gas market going forward and we expect volatility in power price development," Equinor's chief executive, Andres Opedal chimed in at the release of the company's latest financial results, as quoted by Reuters.

There are two things that all the Big Oil majors quoted share. The first is strong profits resulting from that very same tight supply, coupled with strong demand. The second is the absence of plans to ramp up oil production.

Europe's Big Oil has been under growing pressure to reduce its emission footprint. Shell even got sued for it and was ordered to slash its emissions. The way to do it: cut oil production.

So, when industry executives are warning about high energy prices that are here to stay they are, for a change, not being evil polluters but reporters of what was inevitable and what Shells' van Beurden succinctly explained following the Dutch court's verdict that the company had to cut oil production.

"Imagine Shell decided to stop selling petrol and diesel today," Ben van Beurden wrote in a LinkedIn post in June last year. "This would certainly cut Shell's carbon emissions. But it would not help the world one bit. Demand for fuel would not change. People would fill up their cars and delivery trucks at other service stations."

Big Oil has been reducing its investments in new oil and gas exploration in line with calls to that effect by activist investors, environmentalists, and even the International Energy Agency, which said last year in its Road Map to Net Zero that more oil and gas exploration was unnecessary since we were firmly on the path to net-zero.

Saudi Arabia's energy minister famously dismissed the road map saying, "It (the IEA report) is a sequel of the La La Land movie. Why should I take it seriously?", per a Reuters report, while Russia's Alexander Novak simply called it unrealistic. The latest trends in both oil and gas prices seem to point to the fact that the IEA was either engaged in wishful thinking or had seriously underestimated demand for oil and gas in the supply context.

This context is not going to change anytime soon, either, it seems. While Big Oil majors are reducing their oil and gas investments, with plans to either increase production only modestly—Equinor—or not at all—BP—OPEC+ is having trouble boosting its production enough.

Some, like Saudi Arabia, don't want to. But others, like Nigeria, Angola, and Iraq simply cannot boost production fast enough, and Russia is reportedly pumping at capacity already.

It's not just about fundamentals, either, as Saxo Bank's Ole Hansen said in a recent analysis.

"Both WTI and Brent reached new cycle highs above $90 with rising front-month spreads signaling increased tightness. The combination of tight supply, inflation, the weaker dollar, and the current turmoil in stocks and bonds are likely to have driven increased demand from paper investors, with asset managers and speculators at large funds seeking a haven to help weather the storm currently blowing across their traditional investment portfolios," Hansen wrote.


The financial markets' turmoil will end sooner or later, depending on how proactive central banks want to be in their efforts to stem inflation. The fundamentals of the oil market, however, do not look good for consumers.

Supermajor oil production plans, as presented by Reuters, envisage a steady decline after 2025. That's all European supermajors, who pump several million barrels daily collectively. And their plans will be difficult to reverse—they are related to less investment in new exploration as the supermajors direct more funds towards low-carbon energy. This means several million fewer barrels of oil daily in a couple of years, while the outlook on demand remains an open question.

Some researchers of human evolution have argued that the latest burst in technological progress is confusing our brains because they cannot evolve as fast as technology, and they are falling behind. We might have a similar situation in energy: the transition towards net zero may be moving a bit too fast for regular energy consumers.

By Irina Slav for Oilprice.com

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