Peak Oil Debate Piques Interest at Davos
The oil speculation [PDF file] cat is out of the bag. Tony Hayward, group chief executive of BP, made the tallest claim at the World Economic Forum in Davos, that there was a "supply challenge" for the energy industry, which would have to increase output to 100mbd - a new peak for oil from the current capacities of 83-84mbd. Peter Voser, the chief executive of Shell, said that the industry would have to find up to US$27 trillion of investment over the next 20 years to meet demand.
'Group Europe’s' claim was promptly labeled as bluff by Khalid al Falih, Aramco's chairman and chief executive, dismissing claims of a shortage, or a demand surge in oil. The head of the largest oil producing corporation in the world hit out at "misleading" rhetoric that the world was weaning itself off fossil fuels, saying this did not give producers confidence to keep investing in production. Saudi Aramco’s CEO was dismissive of Europe’s stark concerns. “We don't believe in peak oil”, he said in a candid statement made after his speech.
The BP-Shell duo have a long road to go to convince all markets of their point of view. It is said that the oil majors are creating speculative pressure on the commodity markets with the help of commodity speculators and banks like Goldman Sachs and Morgan Stanley . Europe’s falling oil output at North Sea has been the talk of the energy circles during the last few years, even as intense speculative activity around Brent Oil at the London Exchange has been driving oil prices upwards.
Future contracts of oil and gas at the ICE and NYMEX (with 6% margin money) are changing hands several thousand times a day, at times in "round trip trading", to fuel speculation, which is not new for the energy industry.
Oil is a commodity for which OECD demand is dropping but stocks rising. It is apparent that locking up billions in oil stocks and speculation is not approved by many, as ten major, recent oil discoveries could use those locked up funds. Besides, the resultant price rise is hurting the consumer during the coldest winter of the decade, that led to the highest net - long positions in the futures market since the early Eighties.