OIL prices are beginning to stabilize at a comfortable level within the $70 range, which is making everyone happy including the American administration.
It was because of the combined efforts of all producers that oil prices were brought to a stable acceptable range, with USA hinting about using its oil reserve in case of emergency if oil price hits $80 level, which currently seems unlikely. However, on the long run, international oil companies should be investing more in exploration activities in search of more oil instead of sitting back and focusing on USA’s shale oils.
The level of expenditures for oil explorations has been drastically cut back from its peak of slightly below $36 billion in 2014 by ExxonMobil and Chevron to current level of $12 billion focused on certain areas. Such low investments should be challenged and addressed by oil-consuming countries, as the world cannot rely on OPEC alone despite its effort in meeting the global demand, as seen recently. The world should not be at the mercy of OPEC, as it has its own limitations and capacity when it comes to assured stable income.
The oil organization today does not have enough spare capacity — maximum of three million barrels combined but mainly from Saudi Arabia — which is not sustainable. Such being the case, international oil companies, which are making billions of cash annually, should contribute to easing the pressures on global markets and pushing for further downstream investments. The collapse of oil prices in 2014 will not be repeated — a lesson earned and learned.
However, cutting down on investments by more than 50 percent is not the right direction and decision. The growth of demand from Asia such as India, China and other rising Asian countries can surprise us.
The current tight oil situation is a clear sign, and the USA administration is reluctantly agreeing to waive its boycott conditions on countries like China, India and Turkey to continue importing Iranian oil. Investments in oil must be made but OPEC cannot do it alone. Our message is clear for the oil-consuming nations to observe.
By Kamel Al-Harami
Independent Oil Analyst