The oil industry might not be able to produce enough oil to meet global demand in a few years’ time.
To be sure, much of the oil world is focused on the supply fears in the near-term. The outages in several OPEC nations, plus the tightening noose on Iran from the U.S. government, could lead to a supply shortfall towards the end of this year, a hole so big that Saudi Arabia could struggle to fill it, even if it burned through much of its spare capacity.
But over the long-term, there are also questions about the global oil industry’s ability to supply enough oil to the market.
It isn’t the same “peak oil” theory as yesteryear, but there certainly seem to be echoes of that argument bubbling up the surface once again. While the world isn’t running out of oil, there could be a shortage of cheap oil by the early part of the next decade. The majors have cut spending on exploration and development so drastically that there will be a dearth of new large-scale projects coming online in the next few years.
And the new hyper-focus on profitability at the expense of growth, a mantra pressed upon oil companies by restive shareholders, could keep supply constrained.
The IEA has repeatedly warned over the past few years that U.S. shale growth would likely plateau in the 2020s, which means that the world would be right back to where it started – dependent on oil-producing nations in the Middle East. There are some shale boosters that see nothing but sunny days ahead for U.S. shale, but a lot of other market watchers see shale flattening out in the next decade before entering into an extended period of decline. After that, as the IEA has argued, the Middle East will once again be the supplier of last resort.