This is an excerpt from EERE Network News, a weekly electronic newsletter.

April 08, 2009

Report: Today's Low Oil Prices are Slowing a Growth in Supply

The steep decline in oil prices near the end of 2008 was not matched by a decline in the cost of developing new oil fields, leading oil companies to slow, defer, or cancel many of their projects to find new oil supplies, according to a new study by Cambridge Economic Research Associates (CERA). CERA expects oil demand to pick up in 2010, at which time today's slow growth in oil production could lead to a period of tight supply and strongly rising oil prices. The report notes, however, that future oil demand remains highly uncertain, in part because of "demand destruction" in 2008, as people started buying more fuel-efficient cars and adopting practices that could become long-term habits, such as driving less and using mass transit more. The report also notes that new policies for energy and climate change could significantly dampen future demand for oil, making future oil prices highly uncertain. See the CERA press release.