Oil industry leaders already warning of future oil price spike | News OK

Oil industry leaders already warning of future oil price spike | News OK: "Domestic oil companies late last year slashed their drilling budgets and mothballed more than half the country's rigs. Low oil prices have made many projects uneconomic, forcing companies to delay drilling plans. 

For several months, though, oil production continued to grow, both because it takes time for new wells to drop in production and because companies dropped the least profitable drilling prospects, focusing instead on the most promising, highest-producing wells. Companies also have spent the past year improving their processes, allowing them to increase production per well while reducing expenses.

Still, the more than 50 percent reduction in drilling activity was guaranteed to eventually lead to a drop in production. We're starting to see it now.

Domestic production in September was down 514,000 barrels per day from the 40-year high set in June.

International flavor

Low oil prices have led to drilling reductions and delays worldwide.

Speaking at the Oil and Money conference in London this week, International Energy Agency Executive Director Fatih Birol said global oil and natural gas investment is at least 20 percent less than one year ago. He said the year-over-year drop is the largest in history.

Abdalla El Badri, secretary general of the Organization of Petroleum Exporting Countries, said global oil investment has dropped by about $650 billion this year.

“I am very concerned about investment,” he said. “I'm not happy at all. It means less supply in the future. Less supply means higher costs in the future.”

Higher prices would be welcome throughout the global oil industry, but only to a point. If energy prices climb too much, demand could tumble and economies could be forced into recession."



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