Saudi Aramco says a further fall in oil prices could hurt oil investments

November 9, 2008 by · Leave a Comment
Filed under: Commodities News 

No doubt that this is the double-edge of low oil prices.  Yes, it is nice that the price has fallen and consumption can rise.  The negative effect is the low price will reduce production and investments in exploration and investments in alternatives.  The market works great to respond to high prices by making other investments more attractive because they start to make economic sense.


Oil supplies are “more than comfortable” given a global economic environment which is hitting demand, but low prices threaten investment to secure longer-term supplies, Saudi Aramco’s chief executive was quoted as saying.


 “Considering the present financial and economic turmoil in the markets and especially the falling growth in petroleum demand, the supply situation is more than comfortable,” Abdallah Jumah said, according to a newsletter published for the 5th National Oil Company Forum in Beijing.


“A further fall in oil prices could hurt large investments required to offset the natural decline in oilfields, beside the need to expand capacity to meet the long term growth in demand,” he added.


Jumah also complained the world made unfair demands on national oil companies, expecting them to guarantee a steady flow of oil during boom times, but leaving them with a collection of unprofitable projects when consumption fell off.


The world’s biggest state-owned oil companies are weathering the global financial crisis and the dive in crude prices for now, many of the top executives at the conference said on Friday, but they issued similar warnings about the potential threat to investments from a slide in oil prices to $60 a barrel.

Source: Reuters


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