[ad_1]
(Bloomberg) – The world faces high energy prices for the foreseeable future as oil and gas producers resist the urge to drill again, according to the top executive of Chevron Corp.
“There are things that are interfering with market signals right now that we haven’t seen before. Eventually things work out, but in the end it can take a long time, ”CEO Mike Wirth said in an interview at Bloomberg News headquarters in New York on Wednesday. He expects high prices for gas, liquefied natural gas and oil, at least “for a while,” without specifying a timetable.
Even though oil and gas prices have jumped this year as the world recovers from the Covid-19 pandemic, major producers have been reluctant to invest their money in new projects, a change in behavior from previous recoveries . This raises concerns about shortages. Already Europe is facing its worst natural gas crisis in decades, with prices reaching record highs even before winter, when demand is usually at its peak.
One of the reasons executives are reluctant to invest money in a new offering is that shareholders haven’t shown they are up to it. They want the money to come back to them immediately rather than having it reinvested in new developments. Although the surge in commodity markets “signals that we could invest more,” stock prices send boards of directors a different sign, Wirth said.
“There are two signals I’m looking for and I only see one” right now, he said. “We could afford to invest more. The stock market is not sending a signal that they think we should. “
Some investors are unwilling to back new projects after oil and gas companies squandered billions of dollars on low-performing operations over the past decade. Others are watching for signs of climate change and trying to determine if companies are making changes fast enough. The risks are real: Royal Dutch Shell Plc was ordered to cut its carbon emissions by 45% by 2030 by a Dutch court earlier this year, and Exxon Mobil Corp. was forced to backtrack on an aggressive expansion plan amid Covid-19 and shareholder unrest.
“You have a real new dynamic, whether it’s government policy, efforts to restrict capital in industry, to make it harder for industry to access capital markets,” Wirth said. . “This, in the short term, could create a risk for the global economy.”
Chevron, the second-largest western oil major, is unlikely to reverse the trend and seek new production, despite its strongest financial position among its peers. It cut its capital spending by almost a third last year and, exceptionally, pledged to keep it low until 2025. An announcement earlier this week to increase spending in energy transition technologies only offset part of these reductions.
When new projects hit the table, their future shows are “a big part of our decision-making process,” Wirth said. Chevron has pledged to gradually reduce its emissions intensity over the next decades, suggesting higher carbon operations such as the oil sands may have a harder time receiving the green light.
There could be some relief for oil prices, at least in the short term. OPEC’s ability to bring previously reduced barrels back to the market will help stabilize prices over the coming months. But with sharply limited production outside the cartel, prices in the medium term could remain high, Wirth said. Shale producers, who have kept prices in check for much of the past decade with oil flooding, are now focusing much more on harvesting profits rather than drilling new wells.
“Looking for a few years to see if the global economy continues to grow and recover after Covid, is there enough reinvestment in energy that is running the world today? Said Wirth. “Or are we turning so quickly to the energy that will work tomorrow that we have created a problem in the short term?” “
More stories like this are available at bloomberg.com
Subscribe now to stay ahead of the game with the most trusted source of business information.
© 2021 Bloomberg LP
[ad_2]
Source link