OPEC has defended its decision not to intervene to halt the oil price collapse, shrugging off warnings by top energy firms that the cartel’s policy could lead to a huge supply shortage as investments dry up, Reuters reports.
Oil prices have collapsed to below $50 a barrel as a result of a large supply glut, due mostly to a sharp rise in U.S. shale production as well as weaker global demand. The rapid decline has left several smaller oil producing countries reeling and has forced oil companies to slash budgets.
While speaking at the World Economic Forum in Davos, Switzerland, the heads of two of the world’s largest oil firms, Eni Spa and Total, warned that the decline in investments in future production could lead to a supply shortage and a dramatic price increase.
Claudio Descalzi, the chief executive of Italian oil company Eni Spa, said that unless OPEC acts to restore stability in oil prices, these could overshoot to $200 per barrel several years down the line.
The chief executive of French oil major Total Patrick Pouyanne echoed Descalzi’s warnings. “There is a natural decline of five percent a year from existing fields around the world. That means by 2030 more than half of the existing global oil production will disappear” he said.
Total joins a raft of international oil companies, including BP and ConocoPhillips, that have slashed 2015 budgets due to lower prices.
However, both OPEC and Saudi Arabia, the group’s largest producer, stuck to their guns. OPEC Secretary General Abdullah al-Badri said in Davos that “If we had cut in November we would have to cut again and again as non-OPEC would be increasing production”. He also went on to say; “Prices will rebound. I saw this 3-4 times in my life.”
State-run oil company Saudi Aramco Chief Executive Khalid al-Falih also appeared unfazed, saying that although it could take some time, the oil market will eventually balance itself.