Demand fuels oil industry confidence

At last week’s annual gathering of global oil industry executives and academics at the Cambridge Energy Research Associates conference in Houston, Texas, climate change and energy security were high on the agenda. A US recession was not.

The surge in commodity prices to record levels in recent years has left the leading oil companies flush with cash, which they intend to continue spending.
“We are making investments for a long period of time. It doesn’t alter our investment programme,”‘ says Jim Mulva, chief executive of ConocoPhillips. Meanwhile, Linda Cook, Royal Dutch Shell’s executive director of gas and power, says Shell would only be affected by a recession if it was so broad that it spilled into the global economy.

For an industry operating at or near capacity, with strong demand forcing energy prices to record levels, a recession might even give companies a much-needed breather.

“It would take away one of the most important props for prices being at the levels they have been the last few months,” says Daniel Yergin, Cera chairman.

Taking away this prop would free oil companies to divert money to meeting demand rather than on to the increasing costs of labour and supplies.

This would then have a knock-on effect on prices. “Lower energy prices [would in turn] take some of the pressure out of the market, so it [could] keep pace with the strength in demand,” Mr Yergin said.

Financial Times