In his 35 years watching oil markets — for Saudi Aramco, ExxonMobil, and now as an independent consultant — Yousuf Habib said he's never seen the "confluence of factors" that's adding to the uncertainty he sees over the horizon for the cartel of 12 major global oil exporters.
"Uncertainties are going to be tremendous going down the road three, five, seven years," Habib told a panel at the annual Global Business Forum in Banff, Alta., whose theme this year is "disruptive forces in the future economic era."
In Libya, for example, production rates have been erratic since a civil war began two and a half years ago. Before the conflict, it was producing around 1.6 million barrels per day, but six months later, output was zero. Within nine months of the ouster of dictator Moammar Gadhafi, output almost recovered to its pre-war rate before falling back significantly in the past few months.
"It's mind-boggling," he said. "What's the prognosis for this? I've been in this business a long time and I say I don't know."
In Iraq, some of the more conservative estimates peg potential production at five to six million barrels per day by 2020. But with sectarian strife rearing its head in the region, Habib said he's dubious.
"Production in my mind is an iffy situation all together," he said.
In Iran, sanctions have a big impact on that country's ability to develop its oil. In Nigeria, oil theft is a major factor. And despite being a huge oil producer, Venezeula is a "mess" financially.
Traditionally stable oil-rich Gulf countries like Saudi Arabia, the United Arab Emirates, Qatar and Kuwait aren't immune either. Habib sees a spillover effect from strife in other Middle Eastern countries, such as Syria.
"I would submit to you that the fallout on these four countries no longer should be considered a probability of zero."
OPEC members last year needed on average oil prices of US$100 per barrel to balance their budgets. If new technologies or other factors drive that price significantly lower, that's bad news for them, Habib said.
"These guys are in a heck of a lot of trouble unless they learn how to reduce their spending because their current fiscal expansion policies are unsustainable."
Not only does the cloudy outlook for OPEC affect its members abilities to fund government programs, there could be ripple effects in the broader world economy, he added.
"If you have significant, simultaneous and sustained shortfalls in the oil supply — and there is a likelihood —... you could have a tremendous impact on the global economic growth and of course that sort of perfect storm this world could do without."
Rich Kruger, CEO of Imperial Oil Ltd. (TSX:IMO), said the impact of technology on the globe's oil and gas production outlook is another wildcard.
He recalls reading a U.S. Department of Energy report from 1980 predicting that the world would run out of oil in 25 to 30 years, and that the United States would be tapped dry in 15.
While the report's projections for oil demand turned out to be spot-on, Kruger said, its outlook for production couldn't have been more wrong, with many now talking about the possibility of the United States becoming energy self-sufficient thanks in part to booming oil production in North Dakota.
"First and foremost, they missed the significance of the role that technology plays," said Kruger.
Back in 1980, forecasters didn't factor in deepwater drilling, Arctic exploration or even the oilsands.
ARC Financial economist Peter Tertzakian told the panellists he believes the world has run out of easy-to-obtain, low-cost oil.
"It's taken a five-fold increase in the price of oil to catalyze technological innovation and get into a new resource set," he said.
Kruger said it's not just about the cost of getting the oil out of the ground; political instability, labour cost inflation and other challenges are major factors.
"I've been in the oil business for 32 years. I missed the whole period of easy oil. I don't think it's ever been easy," he said.
Walter Van de Vijver, president and CEO of Reliance Holdings USA, said the business has gotten tougher.
"We all know even in our younger careers that there were oilfields that we could work on that were much cheaper to develop than the oilfields that we work on today. That's the reality," he said.
"But it's also the reality that we know that as soon as the oil price goes below $100 a barrel, it's not the Shells and Exxons that start crying, but it's the Venezuelas of this world that start to claim that they go bankrupt. So the world has become more complicated."