Daily Management Review

An Impending Oil Supply Shortage In 2020s Predicted By Goldman Sachs


11/09/2018




An Impending Oil Supply Shortage In 2020s Predicted By Goldman Sachs
According to an estimate by Goldman Sachs, there can be a global shortage in the oil industry in the 2020s because “nobody is allowed to fully invest in future oil production.”
 
Goldman Sachs’ head of EMEA natural resources research, Michele Della Vigna said to a television channel about the projection that global oil prices would be high instead of the expected low cost environment during the period of transition of the energy market from high carbon to low carbon fuels. According to the report, this higher price of oil would encourage and hasten faster shift from high carbon to cleaner fuels.
 
But the Goldman Sachs researcher also said that oil would not be as much replaced by the so-called bridge fuel. Primarily coal power would be replaced by the transition gas. Della Vigna said that the most effective and cheapest alternative to reduce emissions from coal usage would be gas. However, that transition would require companies and governments to make huge investments in pipelines and LNG terminals to allow for this transition. The Goldman analyst further added that such huge investments would most probably be made by a few companies or the “new Seven Sisters” because there is but a handful of companies which posses the resources that would be required to make investments in projects of such large scale. .
 
Hence the analysts believe that oil is not going away so soon from the energy market. However it would be necessary for oil majors to make more investments in order to maintain production at the levels required for ensuring the oil is made available at affordable rates. This appears to be the message from Goldman Sachs’ EMEA energy research head.
 
This report also bears similarity with the warning of OPEC about the need of the oil industry to increase its exploration activities because of an anticipated continued increase in global demand for oil even though the rate of increase in demand would be slower than earlier forecast.
 
But neither Goldman Sachs nor OPEC is bullish about the global oil market over the short term. Contrary to what many analysts have predicted and warned, S&P Global Platts Crude oil was unlikely to reach US$100 a barrel, said the bank’s head of commodities research, Jeffrey Currie last month. And the latest price movements in the market lend credence to this view - WTI just entered a bear market and Brent slipped below US$70 a barrel this week.
 
On the other hand, its short-term global demand outlook has been brought down by OPEC for the third consecutive month. In its latest forecast in the September Monthly Oil Market Report, the oil cartel has predicted growth of the oil demand for this year at about 80,000 bpd
 
(Source:www.oilpoint.com)






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