French-based oil major Total has said that the world may experience a shortfall of about 10 million barrels per day (bpd) in the supply of crude oil due to underinvestment in oil exploration and production, combined with some other factors.
Speaking on the fourth quarter earnings call, Total’s Helle Kristoffersen pointed out that as demand recovers in the wake of the pandemic, there was:
“A risk of supply crunch in the mid-term and that’s the message of this chart. We have seen in 2020 how OPEC managed to bring back market discipline. We’ve seen the cracks in the US shale model, and we’ve seen a continued underinvestment in the oil industry as a whole.”
Kristoffersen added that new oil projects were clearly needed, but she pointed out that a 10 million bpd shortfall would be hard to fill in just a few years.
Like many other European oil majors, Total, which also makes industrial lubricants like hydraulic oil, is looking to diversify more into renewable energy generation as crude oil becomes a less significant part of the energy mix. Nevertheless, her comments indicate a continuing need for crude oil in the medium term.
Shortages are unlikely in the short term, though. The OPEC+ group has plenty of scope to relax its quotas when demand returns, and many member countries will be happy to return to normal production levels and even grow their capacities. Forecasters warn, however, that the world may sleepwalk into a supply shortage without sustained investment in oil and gas projects.