Oil and gas supplies will struggle to keep up with world demand growth, making energy prices more expensive and more volatile in the long term, the head of Europe’s largest oil company has warned.
Peter Voser, the chief executive of Royal Dutch Shell, told the Financial Times: “We will have a lot of volatility ahead of us that we cannot avoid ... for energy prices in general.”
He added: “We most probably will see a tightening of the supply-demand balance and hence rising energy prices for the long term. I think we should just get used to that.”
His comments add to the pressure on US policymakers both to develop America’s own oil and gas resources and to invest in alternatives to fossil fuels.
Shell this week secured air quality permits from the US Environmental Protection Agency that it required to drill in the Arctic Chukchi Sea next summer, although it still needs to surmount further regulatory hurdles before it can proceed.
Mr Voser said he believed that the US administration and Congress now had a greater understanding of the benefits of allowing Arctic drilling, compared with last year when Shell was turned down for those permits after an appeal, and forced to put on hold its plans to drill in the summer of 2011.
Exploiting US resources would strengthen energy security, create jobs and generate more tax revenues, he said.
However, he added that there was still an immense challenge in meeting growing world demand for energy.
The problem was not a lack of oil and gas in the ground, he said, but inadequate investment, following cuts by many companies since the start of the financial crisis.
“While demand tends to pick up in one or two years, a typical cycle for a good big oil and gas project is six to eight years,” he said.
Oil output from fields in production declines by 5 per cent a year as reserves are depleted, so the world needed to add the equivalent of four Saudi Arabias or 10 North Seas over the next 10 years just to keep supply level, even before much of an increase in demand, Mr Voser said.
Economic development and production growth meant that demand would inevitably rise.
“Therefore countries like Iraq, like Russia: we need to develop those oil resources,” he said.
Benchmark US crude was $86 per barrel on Wednesday, down from its most recent peak of almost $115 in May, but up from a low of about $33 in 2009.
Natural gas prices have been subdued in the US because of abundant supplies of shale gas unlocked by improved production techniques but have risen along with oil in much of the rest of the world.