Reduced investments by oil producing nations in the context of lower crude prices may seriously challenge the global economy, which needs another 20mn barrels per day (bpd) of crude by 2040, when the world demand is expected to reach 111mn bpd.
A prolonged period of low oil and gas prices would depress investment in the industry and could lead to a shortage in supplies. The decline in oil prices is threatening not just the economy of one country or a region, but also risks discouraging investment in future.
At a recent conference of Asia’s energy ministers in Doha, HE the Minister of Energy and Industry  Dr Mohamed bin Saleh al-Sada said since the price slide began in mid-2014, there had been a shortfall of about $130bn in oil industry investments.
“When we talk about oil and gas in the long term, many prolific oil fields in Asia are declining - growth should be at a more moderate rate,” al-Sada said.
Obviously, oil and gas companies are striving to remain competitive in the face of a sustained low in global oil prices.  Many are re-evaluating their investments, and in particular, highly leveraged companies are looking to reduce their levels of debt.
Recently, several national and international oil companies reduced their investments and abandoned projects aimed at increasing production as a result of lower energy prices. This, energy experts say, will affect producers’ ability to meet any increase in demand, which is inevitable in the near future.
In Europe and the UK around £55bn-worth of oil and gas developments are under threat while prices remain at their current levels, according to estimates made by Wood MacKenzie.
Already, the decline in oil prices has led to budget deficits in many producing countries and economic slowdown in consuming countries because of the peculiar global situation.
According to Saudi Oil Minister Ali al-Naimi, crude demand was expected to rise by 1mn barrels a day every year in this decade and the world requires more investments in oil to compensate for declining recovery rates.
Countries in Opec that pump a third of the world’s oil had to invest heavily to replace an average 5-6% natural decline in oil production from existing wells.
Arab countries hold 57% of the world’s oil reserves, and that will grow on new discoveries, al-Naimi said. Arab nations need $700bn of energy investments over the next 10 years, while the region accounts for about 10% of global demand, he said.
While low energy prices may benefit consumers in the short term, these will hurt their interests in the longer term. This is clearly because project delays and spending cutbacks in the oil industry pose a risk to future supplies.
Clearly, market stability is essential not just for producers, but consumers as well. At stake is the global economy, which is struggling to get a kick-start following a protracted period of slowdown.
But to stabilise the market, the world needs billions of dollars to continue exploration and producing oil and invest in spare capacity. That’s a major challenge, which the world ought to address quickly.