A recent article in CNBC has Bernstein Research warning that as energy companies invest too little money in new production, Oil prices could surge past all-time highs to near $150 a barrel.
Bernstein is not alone in this prediction, with other oil market watchdogs such as OPEC & the IEA suggesting that companies are under investing in big, long-cycle projects that yield huge payloads in crude, favoring short term gains.
These are the sorts of projects typical of oil's major players such as Exxon Mobil & Chevron.
According to Bernstein, 15 companies account for some 80% of the world's oil reserves, and only two of these are showing improvements in this area: Exxon & BP. In fact, the industry's reinvestment ratio, which measures cash flow against investment in oil and gas exploration and production, is the lowest in a generation.
A research note Bernstein provided Friday said that "The risk for the oil industry in reducing investment today, is creating a shortfall in oil supply tomorrow. Oil remains an essential part of our lives" and that "Any shortfall in supply will result in a super-spike in prices, potentially much larger than the US$150/bbl spike witnessed in 2008."
International benchmark Brent crude and U.S. crude hit their highest-ever levels just above $147 a barrel in July 2008. Brent presently sits at just shy of $80/barrel.
"At some point the proverbial 'chickens will come home to roost'. The impact will be production declines and another super-cycle in oil prices," Bernstein analysts concluded.