‘Low oil prices affecting investments’
Concerns are rising that low oil prices are affecting investment sentiments in oil projects worldwide.
The drop oil prices has changed the longstanding laws of the energy market and made investors deeply insecure about financing expensive projects in the future, said a report by Sputnik news agency.
The report quoted a study by the Hamburg Research Office Energycomment as showing that the risk of a global oil crisis has increased and investors are becoming more and more cautious about financing expensive projects.
Results of the study, as presented by the German magazine “Der Spiegel”, show that low oil prices have led to a drastic cut of investments in long-term energy projects, including the development of the Arctic and production of synthetic and biological fuels.
Oil prices have almost halved since the summer of 2014, and currently lie below the level of 60 dollars per barrel. For the first time, the drop was caused not by an economic crisis, but tough competition in the global oil market, experts claim.
On the one hand, the United States has significantly increased its funding in the area. On the other hand, OPEC-countries have not cut their funding to counter an oversupply.
According to Energycomment’s expert Steffen Bukold, OPEC countries should change their policy in the long run. It especially concerns Saudi Arabia, the largest OPEC producing country, which uses the low selling prices to drive the competitors into bankruptcy and win new market shares.
If oil prices remain at current levels, the profits for investors would shrink by up to 1000 billion in 2015. In this case, they would have far less capital for new projects and would be more cautious about their investments.
Last week, Iran’s Petroleum Minister Bijan Zangeneh called for a five percent cut in OPEC production to help boost prices.
“Tehran believes that for the market to be balanced, there needs to be a reduction in production at 5 percent which is equal to 30 million barrels of OPEC’s production,” Zangeneh told reporters.
This, he said, is what almost 10 OPEC members presently agree on.
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