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Falling oil prices could slow investment in new exploration

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World Bank Group has indicated that if lower oil prices persist, they could also undermine investment in oil development.

According to World Bank, the fall in the prices of oil reflects a confluence of factors, including several years of upward surprises in oil supply and downward surprises in demand.

The Bank also stated receding geopolitical risks in some areas of the world, a significant change in policy objectives of the Organization of the Petroleum Exporting Countries and appreciation of the US dollar as some of the contributing factors.

In its analysis, World Bank indicated that soft oil prices are expected to persist in 2015 and will be accompanied by significant real income shifts from oil-exporting to oil-importing countries.

For many oil-importing countries, lower prices contribute to growth and reduce inflationary, external and fiscal pressures. However, weak oil prices present significant challenges for major oil-exporting countries, which will be adversely impacted by weakening growth prospects and fiscal and external positions.

It said that if lower oil prices persist, they could also undermine investment in new exploration or development. This would especially put at risk investment in some low-income countries, or in unconventional sources such as shale oil, tar sands and deep sea oil fields.

Source – Spy Ghana

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