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Shell chief Peter Voser warns oil demand could outstrip supply

Peter Voser, the chief executive of Royal Dutch Shell, believes the $116 oil price caused by the Middle East crisis will soon ease back, but warned of a longer-term shock where “supply cannot meet demand”.

Peter Voser said he had confidence in the ability of OPEC to compensate for the loss of 1m barrels per day of production from Libya Photo: BLOOMBERG
Rowena Mason
By Rowena Mason 6:31PM GMT 04 Mar 2011

Lack of investment over the past two to three years will most likely be the biggest driver of high oil prices, he said on Friday.

“We may face a situation at one stage where supply cannot meet demand,” Mr Voser said. “That’s where OPEC spare capacity will help but we have to replace significant barrels because of natural decline over time.”

The boss of Europe’s biggest oil company said he had confidence in the ability of OPEC, the oil cartel, to compensate for the loss of 1m barrels per day of production from Libya. More than half the North African country’s production has been lost as uprisings worsens and the nation heads towards civil war.

“I think as OPEC has highlighted there is enough spare capacity to actually replace the shortage of oil out of Libya and it will over time balance itself again,” Mr Voser said.

“Once the Middle East calms down, the oil price will be in the area where it is determined by supply and demand.

“Hopefully in the longer term it will not have substantial impact on economy. I still see economic growth in 2011.”The oil price rose again on Friday as tensions in Libya showed no signs of abating, having dropped down on Thursday on hopes of peace talks. The London benchmark, Brent crude, increased by $1.25, or 1pc, to $116.04 in barrel, as dozens more people were killed in clashes across the country.

The contract price has risen by 3.5pc this week and is up by more than 16pc since the beginning of the crisis in North Africa and the wider Gulf region.

Andrew Horstead, risk analyst at Utilyx, said: “Oil has soared to a two-and-a-half-year high of $116 a barrel and we expect prices to test new highs over the coming weeks if there is no sign of a political breakthrough. Prolonged instability in Libya and the prospect of an all-out civil war spilling over into neighbouring countries is the immediate concern. Any indications that Saudi Arabia is being dragged into the picture will raise immediate alarm bells and will almost certainly mean oil prices soaring further.

The Saudi Arabian stock market has plunged 20pc since mid-February on fears that it could also see insurrection. Shell is holding meetings with major investors about further changes to its executive pay, two years after a serious shareholder revolt.

On Friday, Hans Wijers, remuneration committee chairman, wrote to investors outlining changes to pacify them. The oil group froze executive pay last year and aligned bonuses more with performance.

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