HOUSTON — One of the oil industry’s biggest challenges this year will be managing exploration and production amid the worst global recession in a generation, trying not to scale back so much that it sets the stage for another round of painful price spikes.
At the same time, industry leaders will certainly want a say as President Barack Obama shapes the nation’s energy policy and looks to reduce America’s dependence on fossil fuels.
Some of the energy sector’s heaviest hitters will meet in Houston this week at an annual conference organized by Cambridge Energy Research Associates, a consultancy. CERA is chaired by author and economic researcher Daniel Yergin.
The five-day conference, which began Monday, comes only a week after many oil and gas companies reported their worst quarterly earnings in years, dragged down by crude’s 60 percent price drop in the final three months of 2008.
So far, the world’s biggest oil companies aren’t scaling back spending on new oil and gas projects as much as smaller and midsize producers. But any curtailment of production could cause supply problems once the world’s economies start to rebound.
“You don’t want to fall into the type of situation we had after the 1998 price collapse, when Wall Street put enormous pressure on energy companies to cut back investments,” said Yergin, whose history of the oil industry, “The Prize,” won a Pulitzer in 1992. “When demand started again, people were running double-time to try and catch up.”
Where prices go in 2009 is anyone’s guess. Some forecasters see oil slipping below $30 a barrel, while others have it averaging about $50 a barrel. The biggest factor is the recession’s duration, and most economic news right now points to a protracted one.
