Chevron’s CEO Mike Wirth on Wednesday said that the world is facing high energy prices and supply crunch for the foreseeable future as upstream producers remained reluctant to spend more to raise output. Wirth believes that crude oil, gas, and LNG prices would be strong, at least “for a while.” Stagnation in the upstream oil and gas output has sparked concerns of shortages. Europe is already facing its worst gas crunch in decades, with prices rising to all-time highs even before the peak winter demand.
The main reason why producers are wary of ploughing cash into new supply is a lack of support from investors. Shareholders want the money returned to them immediately rather than letting it being spent on new developments. Oil and gas producers delivered low returns from their operations over the past decade, which made investors reluctant to back new projects. Some investors also prefer companies to pursue their energy transition push away from fossil fuels.
Despite having strong financial positions, Chevron itself is unlikely to buck the trend and ramp up production. The company slashed its capital expenditure by nearly a third in 2020 and vowed to keep it low through 2025. It has also pledged to progressively cut its emissions intensity over the coming decades.
