Publications: The Petroleum Economics Monthly

The Investment Drought (March 2014)

For a decade, energy pundits have warned of cataclysmic global hydrocarbon shortages if energy firms did not boost capital expenditures. Like jockeys whipping a flagging race horse, these "experts" have cautioned that more and more money must be poured into developing new, large-scale projects. In addition, blinders have been fixed to the heads of the multinational race horses as fracking fillies have appeared in the corral. The world has been told it must stay with the program and ignore the new horses because they will soon burn out. Again and again, the "experts" state that the new horses cannot make the grade.

However, there is a gnawing fear among many, particularly the punters who bet massively on the industry. Maybe the day of the large stables (the multinationals) is done. Maybe fewer people will come to the races (meaning global energy and oil use will fall well below anticipated needs). Maybe race lengths will be shortened to where the sprinting fillies, who can never cover long distances like the thoroughbred males, will win the race. Maybe the day when billons and trillions must be spent to seek, find, and develop large energy resources in remote parts of the world is over. Maybe, just maybe, the low-cost producers, the fillies, have won.

This issue of The Petroleum Economics Monthly presents a detailed analysis of the impediments confronting firms that seek to continue investing as they have over the past decade. Our view is that the fillies have triumphed. The days of mega projects and mega investments are over. In explanation, we describe seven factors behind the energy "investment drought."

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