Oil industry locked in boom and bust

LONDON (Reuters) – After oil prices crashed to $10 a barrel in 1998, they more than tripled two years later as lower investment and higher demand strained supply.

The signs are the industry, now reeling from a $100 crash, is still locked in a cycle of boom and bust.

A difference this time is high prices have permanently curbed energy use in many developed countries and the question is the extent to which Asia will continue to consume.

“Demand will eventually recover and delays in supply investment may be just sowing the seeds of a future price rally,” said Harry Tchilinguirian of BNP Paribas.

Back in 2000, world demand reached more than 76 million barrels per day (bpd), up from nearly 74 million bpd in 1998 when low prices led to reduced investment, though much less than current consumption of roughly 85 million bpd.

For now, the likely scenario is that oil use in China, the world’s second biggest energy user after the United States, will continue to increase, although reliable data is elusive.

Reuters