A tough economy and falling prices have hit oil firms hard, forcing them to cut back capital spending and delay projects. So when demand again increases, supply could be short, the Wall Street Journal reports, driving prices back up. Slowing investment could hamper future supply growth by some 8 million barrels a day in the next few years, a new study says.
The capacity plunge is a “potentially powerful and long-lasting aftershock” of last year’s price drop,“ say Cambridge Energy Research Associates. A price collapse of this magnitude really registers on the Richter scale, and its impact on levels of future investment will be felt for years,” says an analyst.