The Car and Truck Fleet and Leasing Management Magazine

Credit Crunch Expected to Slow Investment in Oil Exploration

November 10, 2008

WASHINGTON, D.C. --- The ongoing credit crunch and recent decline in prices for oil and natural gas are likely to discourage exploration and production investment in both OPEC and non-OPEC countries, according to the U.S. Energy Department.

"Some countries with nationalized oil sectors will be under considerable pressure to maintain the flow of oil revenue to social programs, reducing resources available for reinvestment in the oil sector," the department's Energy Information Administration (EIA) noted in its weekly report released Nov. 5. "High-cost projects such as Canada's oil sands or Brazil's subsalt, already technically and financially demanding, could face additional challenges to their profitability. (In fact, delays in some new oil sands projects in Canada have already been reported.)"

In non-OPEC nations, the major investor-owned oil companies will probably be less affected by the credit crunch than independent producers.

"The greater the delays in investment in existing and new oil fields, the lower production will be once the world economy and oil demand recover, increasing the risk that we will return to a tight supply situation," EIA said.

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