Chevron CEO warns of high energy prices and supply crunches
The world is facing high energy prices for the foreseeable future as oil and natural-gas producers resist the urge to drill again, according to Chevron’s top executive.
“There are things that are interfering with market signals right now that we haven’t seen before. Eventually things work out, but eventually can be a long time,” Chief Executive Officer Mike Wirth said Wednesday in an interview at Bloomberg News headquarters in New York. He expects strong prices for gas, liquefied natural gas and oil, at least “for a while,” without specifying a time frame.
Even though oil and gas prices have surged this year, major producers have been reluctant to invest in new projects, a shift in behavior from previous upswings. That’s leading to concerns of shortages. Already, Europe is facing its worst natural-gas crunch in decades, with prices rising to record levels even before winter when demand is typically at its strongest.
One reason executives are wary to plow investment dollars into new supply is shareholders haven’t shown they’re in their corner. They want cash returned to them immediately rather than seeing it re-invested in new developments. Although soaring commodities markets are “signaling we could invest more,” equity prices are sending boardrooms a different sign, Wirth said.
“There are two signals I’m looking for and I’m only seeing one of them” now, he said. “We could afford to invest more. The equity market is not sending a signal that says they think we ought to be doing that.”
Some investors are unwilling to back new projects after oil and gas companies wasted billions of dollars on low-return operations during the past decade. Others are watching signs of climate change and trying to gauge whether companies are making changes fast enough.