While lower oil prices bring some happiness to consumers, they also hold dangers for the future. Oil producers are wary about spending billions of dollars to develop new oil facilities if they will not be profitable. The trick is in finding the right balance for and unpredictable future. This article from Saudi Gazette reports on efforts to find that balance. It notes that at current prices, oil producing states, including of course Saudi Arabia and Saudi ARAMCO, are pulling back from some of their plans to expand production.

Demand for oil will certainly rise over time. The growth of countries like China and India assure this. Simultaneously, efforts to find alternatives to oil will be working to decrease demand. Will steeply reduced demand in the West offset rising demand in the East? That is indeed the question. As of now, the Saudis are planning on delaying expansion beyond the 12 million barrels per day they had promised to achieve by the end of 2009. They are delaying, rather than canceling expansion because they cannot perfectly predict the future. Some analysts are saying that demand will again drive a crunch in supplies in the near future. Nobody seems to have the perfect crystal ball.

Aramco: price falls may curb investment

BEIJING – Saudi Aramco, the world’s biggest state-owned oil company, said a further drop in crude oil prices may curtail investments needed to offset declining output in aging fields.

Investment is also needed to expand production capacity to meet long-term demand growth, Chief Executive Officer Abdallah Jum’ah said in a statement at an industry summit here on Saturday.

Benchmark crude prices in New York have declined 58 percent since reaching a record $147.27 a barrel in July, because of concerns a slowing world economy will erode demand. The world will need to invest more than $26 trillion, almost twice the annual domestic product of the U.S., by 2030 to ensure energy supply, the International Energy Agency said on Nov. 6.

“It is clear that collapsing oil prices are not only detrimental to the economies of oil-producing states but also to future upstream investments to sustain future oil demand consumption,’’ Vienna-based consultant JBC Energy said in its weekly market report issued today.
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