In many cases for unconventional production low prices are acceptable

Horhe Montepeke

Global Markets and Market Information Director, Platts

– Speaking about the reasons of oil prices fall, I would like to mention that low energy prices are very favorable for the economy on a global scale, as they act as a release of adrenaline into the bloodstream. Do not forget that world prices fell for almost all commodities – from iron ore to gas and food products. It will stimulate accelerated economic growth and increased consumption.

As for oil, while production is growing faster than consumption, the prices will keep going down. This is a natural reaction. If you look in the short term, the world economy has not fully recovered yet from the catastrophic events of 2008, and Western countries demonstrate steady little dynamic potential. The big concern is China; this economic growth engine in the East is also slowing down.

At the same time oil production in the United States is steadily growing approaching 9 billion barrel per day (almost twice more than in 2008). This trend is directly tied to record high prices in the previous decade, and development is ongoing due to still relatively high oil prices. Many fields remain cost-effective at a price below $80 per barrel. When the project investments are made, it becomes less sensitive from investment payback perspective but more sensitive in terms of generated cash flow.