Oil Production Won't Meet Demand in 5 Years

Former Shell CEO, John Hofmeister, recently predicted on CNBC that due to vast global capex cuts, in a few short years there won't even be enough oil to meet demand. Hofmeister's bold prediction revolves around the tens of billions of dollars that have been slashed from Producer budgets over the past several years. Exxon Mobile, for example, noted in March that it would cut capex to $23 billion, down 25% y/y. In total,  capex estimates for global oil firms including Shell, Exxon Mobile, Chevron, Total, BP, Statoil and Eni equal $144.8 billion for 2016, down from $211.5 billion in 2013 (32% lower). Exacerbating reduced spending globally is increasing consumer demand for cheap oil, which currently sits at around 94 to 95 million barrels of oil a day. Hofmeister's comments also highlight the fact that an equilibrium will have to be established, which sees an oil price high enough that companies can invest and can grow their supply. Should supply growth remain at current levels, and global oil demand continue to rise (particular in China and India), Hofmeister's predictions will likely ring true leading to significantly higher oil prices in the not to distant future.