Falling oil price is part of the business cycle, “not oil Armageddon or the end of fossil fuels,” believes Shaikh Nawaf Al-Sabah, CEO of Kuwait Petroleum Exploration Company. He told a CERAWeek opening plenary session that low prices are the new normal that will extend into the medium term. “Oil prices will not snap back to USD100/barrel,” he said, urging businesses to plan for a strategy that includes acquisitions, collaboration, and investment in innovation.
LUKoil president Vagit Alekperov agreed that the low price environment brought new opportunities for investment. As head of Russia’s largest private oil company, Alekperov saw prices settling around USD75 in the medium term. This, however, was rejected as far too optimistic by Stephen Chazon, president and CEO of Occidental Petroleum. Chazon acknowledged he was preparing for a medium-term price of USD60, similar to today’s level.
Earlier, ConocoPhillips chairman and CEO Ryan Lance had warned that “the vast majority of US [energy] projects are uneconomic with oil at USD40/barrel” and called on the US government to lift the ban on crude oil exports, which he said was “anti-consumer”.
IHS chief economist Nariman Behravesh supported the outlook for a long period of low oil prices and low interest rates, suggesting that period could last for five or even 10 years. He told CERAWeek delegates he saw economic fortunes changing as developed economies raise their GDP growth from 1% to 2.5% a year while developing economies weaken from 7% to just 3.5%.