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Andy Tully

Andy Tully

Andy Tully is a veteran news reporter who is now the news editor for Oilprice.com

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BP’s CEO Finally Sees Oil Prices Bottoming Out

BP’s CEO Finally Sees Oil Prices Bottoming Out

Since last summer, Bob Dudley, the CEO of the British oil giant BP, has been cautioning that he expects oil prices to stay “lower for longer.” Now he believes he’s determined how much longer those prices may decline, and when they may start rising again.

“A low point could be in the first quarter [of 2016],” Dudley said in an interview broadcast Saturday by the BBC. “But 2016’s third and fourth quarters could witness a more natural balance between supply and demand, after which stock levels could start to wear off.”

But Dudley stressed that that doesn’t mean a rebound by the end of this year. “Prices are going to stay lower for longer, we have said it and I think we are in this for a couple of years,” he said. “For sure, there is a boom-and-bust cycle here.” Related: Is 2016 The Year Of Wind And Solar?

This good news/bad news forecast from one of the industry’s leaders could wind up being net bad news. Yes, a bottoming-out of oil prices would be welcome, but not if prices stay at or near that level for another two years. After all, the energy business already has been beset by a price decline of nearly 70 percent since the summer of 2014, plunging to an 11-year low of $36 per barrel last month.

In the same interview, Dudley took issue with a warning by Mark Carney, the governor of the Bank of England, who said in a speech in London on Sept. 29 that investors face “potentially huge” losses as energy companies try to fight climate change by limiting their use of fossil fuels, making them “literally unburnable.” Related: Oil Companies Shun South China Sea As Geopolitical Tensions Rise

In his address, Carney urged oil companies to be more transparent about how they intend to address climate change in an effort to prevent abrupt changes in the prices of these assets, which could destabilize energy markets.

“I think the term overstates it, quite frankly, and I have spoken to the governor about it and I have questioned that term,” Dudley said.

In the wide-ranging BBC interview, Dudley also acknowledged that the 2010 oil spill from BP’s Deepwater Horizon oil rig in the Gulf of Mexico off Louisiana was “a near-death experience” that had shaken his company “to its core” and prompted it to made deep changes in operations. “It was a forced focusing down of what we do,” Dudley said. “It was ‘this is what we need to do to survive.’ ” Related: $10 Trillion Investment Needed To Avoid Massive Oil Price Spike Says OPEC

The oil rig exploded on April 20, 2010, killing 11 workers and spilling an estimated 134 million gallons of crude into the gulf, a valuable natural resource and a key source of revenue from seafood and tourism for five U.S. states that share its coastline: Alabama, Florida, Louisiana, Mississippi and Texas.

In 2012 BP accepted responsibility for the spill, the worst offshore oil disaster in U.S. history, and must pay $53.8 billion in liabilities, including $20.8 billion in fines to the federal government for the cleanup and restoration of the gulf and its coastline.

To help defray these damages and fines, BP has been forced to sell off some valuable assets. For example, in October it announced plans to sell 15 of its fuel storage terminals to the Houston-based pipeline company Kinder Morgan for $350 million.

By Andy Tully of Oilprice.com

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