Oil 'supply crunch' expected in 2013

10 August 2008
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11 August 2008 | Paul Snell

A lack of investment by national and global oil companies will create a "supply crunch" within the next five to 10 years, a report has warned.

According to professor Paul Stevens, senior research fellow for energy at think-tank Chatham House, those assuming oil companies will simply up production to meet demand needed in the future are likely to be disappointed.

He argued the ensuing "supply crunch", where excess production capacity falling to low levels is followed by a lack of oil, caused by this lack of investment is likely to happen around 2013. One implication of the crunch is a spike in the oil price, with the commodity possibly reaching more than $200 (£104) a barrel.

The report blames both large international oil firms, for returning investment to shareholders, rather than investing in the industry, and nationalised oil companies, motivated by the theory that "oil in the ground is worth more than money in the bank".

But Stevens also argued that a major price rise would force governments and industry into action. "It might do for energy policy what 9/11 did for US military and security policy," he added.



SMaug2008

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