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Energy companies will need to start finding more oil soon

If prices aren’t going to start shooting up again, that is.

LONG-TERM PRICES FOR oil and gas are expected to rise unless energy companies start discovering more of the resources or finding better production methods.

Bord Gáis Energy’s latest wholesale price index went up for all the main energy commodities – oil, gas, coal and electricity – last month, the first time overall costs increased since September last year.

The price of Brent oil rose from below $50 a barrel to back over $60 last month, although it has since started to drop again.

Bord Gáis Energy’s power trading manager, John Heffernan, said conventional discoveries of oil and natural gas were still sliding despite “plentiful stocks” of the raw products currently being available.

“(That) potentially sets the seeds for higher prices in the future,” he said.

The number of conventional oil and gas technical discoveries peaked in 2008 and have been falling since. The current six-year decline is the longest downward trend on record. In a scenario in which the world requires conventional oil production to satisfy demand, more exploration, a higher success rate, higher volumes and most importantly higher prices may be required.”

Oil Source: Nasdaq.com

A shifting landscape

Major oil companies like BP, as well as junior explorers like Ireland’s Petroceltic, have been shedding staff and shelving expansion plans because of low prices.

The supply glut has been driven by both the US shale-oil boom and the OPEC consortium’s decision not to scale back output during the production war.

Recently US producers have been taking rigs offline because of the oversupply, but Bord Gáis Energy said that hadn’t been enough to slow down output growth yet.

Germany Europe Economy A BP refinery in Germany Source: AP Photo/Martin Meissner

Meanwhile, the average price of petrol across Ireland has gone up to €1.36 from €1.28 only two months ago, according to the latest figures from Pumps.ie.

The cost to the consumer at the pump generally lags behind changes in the raw commodity price, while the benefits of cheaper global oil have also been partially eaten up because of the falling euro.

First published 12.44pm

READ: There are some major holes in Ireland’s renewable energy plans >

READ: Your electricity bills are going to get more expensive in a couple of years >

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About the author:

Peter Bodkin  / Editor, Fora

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