Low Oil Prices Through 2018 Could Produce $4.4 Trillion in Losses
Oil prices are likely to stay low at least until 2018, Moody’s Investment Service reported in mid-August, based on a financial review of several dozen energy companies.
“We expect prices for oil, natural gas and natural gas liquids—and particularly oil—to remain below recent historical highs through 2018,” the agency stated. The report projected average oil prices of $50 per barrel through 2015 and $60 for 2016.
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As a rule of thumb, analysts say Canada’s tar sands/oil sands operations can cover their costs when oil sells for at least $80 per barrel.
“In the early days of the slowdown that began in the late summer of 2014, the strategy for many oil producers was to ride out the storm: cut costs, put new drilling on hold, and keep your head above water until prices come back to near where they were,” CBC reports.
“However, the reality of the race to stay ahead of oil’s swoon is that it’s proving to be more of a marathon than a sprint.”
If prices stay this low for that long, “the global oil industry and the countries it finances will be out $4.4 trillion in revenues,” resilience.org reported, citing analysis by the Wall Street Journal.
“If global oil production does reach some kind of a peak this year and is lower in 2016, can it recover to reach new highs in the years following?” writes correspondent Tom Whipple. “Anything from inadequate investment stemming from persistently low oil prices to a major conflict in the Middle East could keep production from rebounding to new all-time highs. We are living in interesting times and could just see peak oil before we realize it.”