The past few years of sharp price declines in the oil industry had a corresponding effect on the amount of investment that companies and countries like Saudi Arabia made in finding new sources of this still-valuable commodity. That response may end up causing havoc within three years, according to the Saudi Energy Minister.
Khalid al-Falih indicated that the combination of the lack of investment with his assessment of increased current demand of anywhere from 1.2 million to 1.5 million barrels per year could put basic economics to the test by 2020. A potential shortage by that time could occur, thereby raising prices, though al-Falih has serious doubts about prices again breaking the $100-per-barrel threshold.
The reason for that increased level of demand stems primarily from China’s seemingly unquenchable thirst for finding new sources. Their growth in this area since the beginning of the 21st Century has largely been unabated over that time frame, with no end currently in sight. In addition, other massively populated countries like India are also growing their economies that end up boosting their demand.
Al- Falih is far from the only major oil figure to make such an assessment, though he may be the most prominent, given the Kingdom’s status and importance within the industry. Amin Nasser, the CEO of Saudi Aramco, essentially spoke for the Saudi government at the annual Davos World Economic Forum on January 17 by saying that over the next quarter-century, an investment of $25 trillion will be required.
The Saudis have been focusing on branching out their energy interests, looking at certain areas of the renewable markets. One of the key reasons for the drop in oil demand was the rapid growth in American shale markets. A specific area that the Kingdom is focusing on is in geothermal energy.