“It seems the era of cheap energy is over for the medium term. Within the last few months the oil price has topped the record levels we saw in the 1970’s and continues to hit new highs,” BP Chief Executive Tony Hayward told 1,300 delegates at the Asia Oil & Gas conference in Kuala Lumpur.
“Markets are anxiously facing the possibility of crude oil prices rising as high as $200 per barrel,” Malaysian Prime Minister Abdullah Ahmad Badawi warned in a keynote address.
Top oil industry executives blamed high oil prices on serious constraints in supply that are driven by low investment in the 1980s and 1990s in new production.
“In a well-functioning market where supply and demand are balanced, prices should be stable. Where prices are high however, they show that supply is not responding adequately to rising demand. And that is where we find ourselves today,” Mr Hayward explained
Demand growth has been driven by both rising incomes and rapid population growth, which has nullified gains in increased efficiency in energy use.
Tan Sri Hassan Marican, chief executive of Malaysian national and gas company Petronas, said that emerging economies were expected to drive demand growth by around 2.2% a year till 2030.
“The industry’s chronic levels of under-investment in the 1980s and 1990s have contributed significantly to today’s production constraints,” Tan Sri Hassan said.
Echoing this statement, Mr Hayward said; “We need to respond more effectively, and to bring on new production. That response is being somewhat hampered by 25 years of low investment because of low prices.
“The result is the supply chain is being stretched breaking point.”