(ICIS) -- Investment in oil supply is not keeping pace with the global demand growth of around 1m bbl/day, setting up a shortfall that puts the energy balance in peril, said the head of independent US oil company Hess on Tuesday. "An energy crisis is coming, likely to be triggered by oil," said John Hess, who serves as the company's CEO and chairman.
"Supply will then have to ration demand and prices will skyrocket - with the likely outcome of bringing the world economy to its knees," Hess told the Cambridge Energy Research Associates (CERA) conference in Houston. "The $140/bbl oil price of three years ago was not an aberration, it was a warning," Hess contended.
The problem is not one of a lack of oil resources, but a lack of new investment in accessing those deposits, Hess said. The US in particular needs to maintain existing tax incentives for drilling, and also encourage more upstream activity in the Gulf of Mexico.
On the demand front, oil represents 37% of US energy demand, of which 71% is used for transportation, he noted. The US should hike the vehicle performance standard to 50 miles/gal, much higher than the 35 miles/gal target set for 2016, Hess said.
That greater efficiency could be achieved through a mix of engine downsizing, using more diesel engines, reducing vehicle mass and pursuing advanced technologies such as hybrid cars.
It would take 15 years to replace the US fleet of 230m cars and light-duty trucks with more economical vehicles, but the change could save 3m bbl/day of oil, for an annual savings of more than $100bn (┬72bn) at current oil prices, Hess said.