Conditions Ripe for Oil Price Boom
As a result of the Covid-19 crisis, conditions are ripe for an oil price boom during the next two years.
That’s according to a new report published by Boston Consulting Group (BCG) on Monday, which outlined that the company sees high potential for vaccination programs to “unleash huge pent-up demand for oil in key areas of the global economy”. The company said this surging demand will coincide with a supply shortfall created by producers that cut capital expenditure (CAPEX) sharply when oil prices fell last year.
Given the rapid development of the upcoming boom, the next supercycle will likely occur on a time scale that will be shorter than the ones associated with prior price booms, BCG noted in the report. The company highlighted that this quick rise will put pressure on suppliers and end users.
“We therefore see a high probability that a price boom will occur but also that it could be over quite quickly - within 18 months, or even less,” BCG stated in the report.
“Perhaps more important, this oil boom could be the world’s last. The oil market system continues to become more flexible, with both supply and demand more elastic than in the past, making booms less likely to happen. And even if they do occur, peak prices are likely to be lower,” BCG added in the report.
BCG warned that several factors could affect the timing of a boom and either curb or exacerbate future price rises. Further lockdown restrictions or the appearance of new Covid-19 variants could immediately halt upward demand movement and delay or even end any emerging oil price boom, the company highlighted.
BCG’s latest report was authored by several company directors. Founded in 1963, the company employs 22,000 people and is present in more than 50 countries around the world, its website shows.
As of June 14, 6.45pm CEST, there have been 175.6 million confirmed cases of Covid-19 globally, with 3.8 million deaths, according to the latest information from the World Health Organization (WHO). More than 2.1 billion vaccine doses have been administered around the world, as of June 14, WHO’s latest data shows.
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