Energy-Investment Cuts Spark Talk Of Next Price Spike

ConocoPhillips (COP) Chief Executive Jim Mulva didn’t mince words with Wall Street analysts when, in the face of a slowing economy and lower oil prices, he outlined the oil major’s nearly $2 billion cut in capital spending for 2009 and other belt-tightening measures.

“We believe our decisions, actions and plans will enable us to live within our means,” Mulva said following the company’s fourth-quarter results in February.

ConocoPhillips is far from alone in its effort to scale back spending to deal with the harsh economic realities, as energy-infrastructure projects around the world are put on hold in the wake of oil’s slide to $50 a barrel from more than $100 last year.

U.S. petroleum inventories sit at about 360 million barrels, their highest level since 1993, and natural-gas supplies remain at 1.65 trillion cubic feet, some 32% more than a year ago and 22% above the five-year average.

Against this backdrop, experts and energy company officials are now debating whether the cutbacks in production and infrastructure spending could lead to energy shortages and to another price spike down the road.

MarketWatch