Publications: Papers

Gathering Storm II (The International Economy, Fall 2015)


Eleven years ago, Dr. Verleger wrote "Energy: A Gathering Storm" for a volume edited by Fred Bergsten and published in early 2005 by the Peterson Institute for International Economics. The book highlighted the issues Bergsten and others at the Peterson Institute thought would be critical in the next decade. He was concerned that crude oil might rise from $40 per barrel, the price at that time, to an unbelievable $160. Today, a new storm is on the horizon. It will form out of the collapse of investment in oil and gas production. A year ago, the International Energy Agency projected that the oil and gas industries must invest as much as $800 billion per year in exploration activities to develop the capacity needed for future demand. Today, it is clear that such investment will fall 50 percent to 60 percent below this level in 2015 and 2016. This underinvestment will inevitably bring oil and gas production to levels that do not meet consumer demand. While the date of the tipping point is indefinite, Dr. Verleger suggests a pinch could occur as early as 2018.