CEO of Oil Giant Warns of Shortage Within Next 5 Years

The Chief Executive Officer of one of the largest oil companies in the world, the French-based Total S.A., has warned that there is a danger of an oil shortage within the next five years.

Speaking separately to the BBC and Bloomberg Christophe de Margerie emphasized to both that currently oil prices were at a higher level that they ought to be based on present demand because the market is fearful that a lack of investment will create a shortage of oil within the next five or six years. Interviewed on Bloomberg Television Mr de Margerie said:

If it was purely offer and demand, prices would be lower than the $60 we are seeing. The market is anticipating in the long term there won’t be enough oil, some people would say speculating

The BBC says that Mr de Margerie predicts that oil could reach $100 a barrel if money is not spent on opening up oil reserves that he appears to be indicating are sufficient to meet global demand in the future. With the New York Mercantile Exchange at present seeing crude oil futures for 2015 delivery trading at around $85 a barrel it seems that the man in charge of a company which made a profit of €10.59 billion ($15.56 billion) in 2008 has a more than reasonable chance of seeing his prediction come true. Mr de Margerie is not alone in believing that such a shortage could transpire. In April the International Energy Agency, an organization which operates under the auspices of the OECD, suggested that oil supplies could run low by 2013 if investment is not stepped up. Not that Mr de Margerie blames those countries who have cut production, in part because of falling demand but also to boost falling oil prices, for the action they have taken. He explained:

You cannot ask those countries who are also facing a crisis to continue to invest for a potential recovery of demand, and to do this for the benefit of the world

He added that he thought governments, more specifically the leaders of government, need to get involved to tackle the potential problem. The 12-member Organization of Petroleum Exporting Countries (OPEC) has more than a little influence over the daily output of oil, and the price of that oil. In the latter part of 2008 a drop in demand for oil, which produced a dramatic slide in prices from those seen in the summer of 2008, when the price reached over $147 a barrel, saw OPEC cut production by 4.2 million barrels a day. Saudi Arabia is the largest producer within OPEC and Saudi Aramco is the state-owned company which is said to be the largest oil corporation in the world. But even though it has vast reserves of crude oil Mr de Margerie does not believe that Saudi Aramco can alone meet any shortfall in supply. According to Bloomberg he noted:

There is a need for other operators and producers to do their part. We need other companies to invest in new sources of energies and to be there to be sure that not only one country is there to fill shortfalls