for Upstream Investment
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The current environment is ideal for the oil majors: Lower production costs, consolidation, and cautious spending allow them to post massive returns.
Total capital and exploration spending on global oil and gas will likely bottom out in 2018, and investment may not recover to levels seen before the 2014 market downturn until the mid-2020s.
The world still needs massive investment—all along the supply chain—to keep future price spikes from occurring and for countries to improve their energy security. But many in the industry have become more restrained in making big investments.
It’s Déjà Vu All Over Again: OPEC, Petroleum Investment, and the Threat to U.S. Consumers and Energy Security
Over the decades, a key to these extreme shortages and surpluses in the global oil market is OPEC’s role in structurally either undersupplying the market or mismanaging its investment function.
If oil demand were to peak, the industry would likely see a good bit of consolidation, but the situation would not bring about a collapse.
Exxon has dismissed the probes of its accounting practices as unwarranted and politically motivated, but they could mark a watershed moment for the oil and gas industry.
Lost in the talk about the decrease in upstream spending is how Middle East producers, most notably Saudi Arabia, have not cut back in investment, setting the stage for them to see sharp gains in market share when tighter fundamentals are realized.
"What is lacking, particularly in the US, is a robust public conversation about breaking oil’s monopoly and replacing it with cleaner transportation energy."
In addition to its role as the top importer, China is one of the world's top five producers of oil. But its contributions to the global market are dwinding this year as its oil companies slash upstream investment.