Oil supply surge could risk price collapse: Harvard analysis

Tue Jun 26, 2012 4:57pm EDT
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By Deborah Zabarenko

WASHINGTON (Reuters) - Global oil supplies are growing so fast that they could outstrip demand and lead to a collapse in world prices, a former energy executive who is now a Harvard research fellow said on Tuesday.

"Most analyses today are still marked by this obsession with oil running out," Leonardo Maugeri, formerly a senior manager at Italy-based oil and gas giant Eni SpA (ENI.MI: Quote), said at a discussion at the Center for Strategic and International Studies think tank in Washington.

In analyzing capacity at more than 1,000 oil fields around the world, he found that depletion of oil supplies was occurring "much more slowly and gently than expected."

He estimated that world oil production capacity could go up by 17.6 million barrels per day between now and 2020.

"Contrary to what most people believe, oil supply capacity is growing worldwide at such an unprecedented level that it might outpace consumption," he wrote in his analysis, published as a policy brief by Harvard's Belfer Center for Science and International Affairs. "This could lead to a glut of overproduction and a steep dip in prices."

Production capacity is expected to grow the most in Iraq, the United States, Canada, Brazil and Venezuela, while it could decline in Norway, the United Kingdom, Mexico and Iran, his analysis found.

Much of the surge in U.S. capacity is due to the boom in shale oil.

Unless oil demand grows at a sustained yearly rate of 1.6 percent -- compared with a bit less than 1 percent now -- overproduction and price collapse are possible, Maugeri said.   Continued...