Could Global Producers Be Hit with a Decade Long Oil Price Slump?

Those with high hopes for an oil price recovery were hit with a disappointing blow this week, with the world’s largest independent oil-trading house predicting that prices will stay low for up to a decade. So what’s fuelling the slump? According to Vitol Group BV Chief Executive Officer Ian Taylor, slowing Chinese economic growth and a booming U.S. shale industry both work together to stop the possibility of a price recovery in its tracks. A supply surplus teamed with the return of Iran to the market is also contributing to the stunted growth.

The future isn’t looking all that bright, with Taylor explaining that "It’s hard to see a dramatic price increase" in a recent interview with Bloomberg.

Instead, he predicts that prices will bounce above and below a US$50 midpoint for the next 10 years, revealing "We really do imagine a band, probably between $40 and $60 a barrel. I can see that band lasting for five to ten years. I think it’s fundamentally different."

A ‘lose-lose’ scenario for the oil economy

For Brent crude, the lower median would represent a weak recovery, as the global benchmark is currently trading at around US$33-34 a barrel. The upper limit is still not ideal, and would bring prices back up to figures seen in July 2015, when the oil industry was already in crisis.

The Vitol Group BV forecast kick-started the industry’s annual IP Week gathering, where key persons converge in London to discuss all things oil and gas. If the company’s dire predictions do come to light, it will mean both oil-rich countries and the energy industry as a whole will be plunged into the longest stretch of rock bottom oil prices since the 1986-1999 disaster, when crude hit a low of $10 and $20 a barrel.

As the world’s biggest oil trader, Vitol moves up to 5 million barrels a day. This is enough to meet the daily needs of Germany, France and Spain combined! For them, the 10-year slump would be a huge financial blow.

Regardless of demand, oil producers are always faced with the same quality control processes. ‘A World First – Verification of Petroleum Analysers According to ISO-Standards’ looks at the imposed quality standards in closer detail, and explores how the modern petroleum industry now relies entirely on the proficiency of QC laboratories to meet benchmarks.

Image via Flickr Creative Commons. Photo credits: Mike Bitzenhofer