Slide in oil prices could hamper investment in production

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Slide in oil prices could hamper investment in production

oilpricesDampened oil prices could mean less investment in exploration and production, the U.S. Energy Information Administration reports.

Data released Oct. 1 by the EIA showed average crude oil prices down in all sales categories in July.

The average domestic crude oil first purchase price fell 14.6 percent, or $8.18, to $47.70 per barrel.

“Low oil prices, if sustained, could mark the beginning of a long-term drop in upstream investment,” the EIA reports. “Oil prices reflect supply and demand balances, with increasing prices often suggesting a need for greater supply. Greater oilinvestmentsupply, in turn, typically requires increased investment in exploration and production activities. Lower prices reduce investment activity.”

A boom in investment, cresting at $100 billion (in 2014 dollars), occurred with the rise in oil prices in 1981 and 1982. But in the early 2000s, investment averaged $30 billion to $40 billion per year, reflecting the fall in crude oil prices. Projections of prices of $70 per barrel in 2020 “could result in substantially lower annual oil and gas investment” in the next five years, EIA says.

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By |2018-10-10T11:22:48-04:00November 17th, 2015|Fuel Supply 101, Industry News|

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