As demand for oil bounces back to pre-pandemic levels, the world could face a new challenge: crude oil shortages, warns Ryan Lance, CEO of ConocoPhillips, the largest independent oil producer in the United States.
Lance warned that the Organization of the Petroleum Exporting Countries (OPEC) lacks the spare capacity to pump more oil and the United States will soon hit a production plateau, according to Reuters News Agency.
"If you are going to be in the business, be prepared for a lot of volatility," he told the audience at the Houston Producers conference stating that “a supply crunch is coming.”
Since Russia’s invasion of Ukraine, oil prices have soared and created a major headache for U.S. President Joe Biden as inflation rises and consumers feel the pain at the pump.
Last week, Biden embarked on a controversial tour of the Middle East where he says that he got Saudi Arabia to agree to production increases that could help reduce oil prices in the near term. However, some experts have expressed concerns that Saudi Arabia’s ability to actually deliver on that promise.
The Washington Street Journal cites sources that say the country’s production capability is already stretched thin. Additionally, Saudi Arabia is currently bound by OPEC production quotas and will need to wait until the end of August to lift production.
ConocoPhillips CEO says that he believes that Saudi Arabia and the United Arab Emirates, two key OPEC members, could add up to 1-2 million barrels per day but “the rest of the OPEC+ alliance is struggling” to keep up.
OPEC+ had cut production when demand for oil collapsed during the start of the COVID-19 pandemic. It has agreed to production increases as demand recovers. However, underinvestment in oilfields by some members is preventing rapid increases in supply.
Meanwhile, U.S. oil production is also expected to expand slowly. Lance stated that the country will “grow close to another million barrels next year” but then start to “plateau” after that.
