A look of "industry specialist" on the rising price of oil in the magazine "L'Usine Nouvelle" this week.
Abstract: World oil consumption is increasing. In 2004, it increased 3.2% over 2003. With the popularity of the 4-4 big cars, the development of China, India and other emerging countries, the trend will further accelerate.
Two questions dominate the market:
- What is the real production capacity of Saudi Arabia, which could serve as a safety valve in case of crisis?
- What will be the consequences of the scarcity of investment opportunities for productions at low cost?
Saudi Arabia (whose production is exclusively the responsibility of national companies with public capital) has always claimed to have the ability to increase rapidly (weeks or months) production with minimal investment required. But the reassuring statements towards Western no longer enough. No giant fields have been found since thirty years older deposits and extraction techniques have found their limits. With the approach of the test of truth, Saudi Arabia has just admitted that in reality 2-3 years it would take to increase production, the huge investments price for an unsatisfactory amount and probably oil bad quality.
Second source of concern: the lack of investment by the majors. The International Energy Agency estimates that 6200 billion of the investments that should be made in the next 25 years to hope to provide for the demand. So 180 billion dollars a year, or 50 billion more than what oil tankers currently do. Moreover, nobody knows if Yukos (Russian company) will escape the bankruptcy, bringing with it all its infrastructure projects. The trend in the oil companies is therefore to the downturn, to the redemption of shares rather than to the hyperrisked investments with low visibility.
"The current prosperity, it is true, does not push to the painful efforts of productivity in the western oil companies. All know, however, that they have eaten their white bread for a long time. The new territories of exploration and production, whether very deep or very cold, would require massive investment. Nobody, for now does not want to take huge risks "
Conclusion: quite disturbing.