World Oil: The Lessons of 1986

Abstract

The petroleum industry requires long lead times to look for a petroleum prospect, drill it, evaluate it and ultimately produce from it. There is no way of substantially accelerating the process, particularly as new prospects are becoming increasingly hard to find. The world commercial and political climate are such that a) today's stock markets demand high and quick returns on investments. b) oil is temporarily abundant and low priced, and c) governments are reluctant to reduce taxes or improve incentives. This leaves the petroleum industry little option but to retrench, and as a result, exploration and synthetic fuels projects in importing countries are being cut. The vast majority of the world's conventional crude reserves lie within OPEC, mainly Saudi Arabia, and this proportion is increasing as importing countries deplete their own discovered reserves. Importing countries will again shortly have to pay whatever exporters demand for their crude and products. The lesson of earlier years has not been learned.