Future supply concerns grow as oil becomes cheaper
Part of an article from http://www.euractiv.com/en/energy/future-supply-concerns-grow-oil-cheaper/article-177634
Long-term investment cycles and lack of governance Published: Monday 1 December 2008
However, Keppler admitted that the economic slump presented risks for energy investment. Among these are the “long lag” between the short-term formation of expectations on the market and investment decisions, and their eventual impact on prices. “Everybody decides to invest which means that in five years’ time, prices will be low. If prices are low, nobody will invest and prices will be high.”
Oil prices were as low as $10 a barrel in 1998 and climbed back to a peak of $147 in July this year, Keppler pointed out. They have since fallen sharply, hovering around $50 a barrel end of November.
A second risk for energy investment, Keppler continued, comes from the “lack of governance” shown by both oil producing and consuming nations.
In producing countries, Keppler said the “not-in-my-backyard phenomenon” was hindering the implementation of new large-scale energy projects.
In Europe, Keppler said it was the “lack of priorities” and countries’ “inability to get their energy policy defined” which acted as “a source of uncertainty” and “a big barrier to investment”, particularly in the electricity sector. “At the European level, very clearly, it is the electricity sector that will have the greatest constraints in the next five to ten years.”