Global Financial Credit Crunch: Will it lead to a Global Oil and Gas Supply Crunch?

A Supply Crunch In The Next 4 – 6 Years Is A Strong Possibility

The current bout of investment cutbacks and project delays and cancellations will put additional pressure on the crude oil supplies. As a consequence of relatively few new major projects in the previous 2-3 years, even if, investments recover positively following the economic recovery and high oil prices, crude oil production capacity additions are likely to remain low in the short to medium term. Further, any supply outage as in the previous market disruptions will create a strong case for a supply crunch. Incidentally, there are a number of economic and geopolitical possibilities that might lead to a supply outage.

A possibility of an internal political conflict or an external attack on Iran, security threats to major oil facilities including a terrorist attack on oil facilities, piracy threats to the crude oil transportation, internal conflicts in Iraq and Nigeria in addition to the weather related problems are only some of the possibilities that might affect the supply of crude oil. Even without any of these threats becoming apparent, the high and the normal growth projections present a scenario wherein there is a considerable risk of a supply crunch in the period between 2013 and 2015.

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