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"Governance"
Report offers dire warning on oil costs
A lack of investment in oil production will lead to a serious “supply crunch” in the global market within the next five to ten years, a leading think tank has claimed.
The warning, which comes amid a backdrop of falling oil prices, will come as a fresh blow to procurement organisations who have been working to stave off the potentially ruinous consequences of sky-high oil costs.
The Chatham House report ‘The Coming Oil Supply Crunch’, warned that the cost of oil could rise beyond the $200-a-barrel mark.
"In reality, the only possibility of avoiding such a crunch appears to be if a major recession reduces demand - and even then such an outcome may only postpone the problem," report author Paul Stevens said.
The report said that while there were plentiful supplies in the ground, the reluctance of companies and government to plough money in to ensure production would have a disastrous knock-on effect on supply.
"While the forecast is controversial and extremely bullish, even allowing for some increase in capacity over the next few years, a supply crunch appears likely around 2013," he said.
"The implication is that it will quickly translate into a price spike although there is a question over how strategic stocks might be used to alleviate this."
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