The chief executive of Saudi Aramco said that the oil market is not paying attention to the fact that the world’s spare capacity to increase oil output is very low, and the chief executive of Shell claimed that investments will not change because of the high price of oil, Reuters reported.
“(The market is) focusing on what will happen to demand if recession happens in different parts of the world, they are not focusing on supply fundamentals,” Aramco Chief Executive Amin Nasser said at the Energy Intelligence Forum in London.
He estimated spare capacity at 1.5% of total demand and stated that Saudi Aramco was not the only one responsible for providing a reserve of spare capacity, which will be depleted once China’s economy is freed from coronavirus limitations.
Speaking at the same occasion, Shell Chief Executive Ben van Beurden said that given the time it can take for oil and gas projects to produce and begin paying off, the current high prices do not easily transfer into a change in capital allocation.
“You cannot have a quick response to the market signals we are seeing today,” van Beurden said, adding that Shell’s overall strategy remained to pivot away from oil and gas products. “We cannot live in this world without spare capacity.”
Van Beurden, who is leaving Shell next year, said that if he had an extra $1 billion, he would invest it in the “energy system of the future.”