World needs a 'Goldilocks oil price'

27/10/2008

The world is in need of a stable oil price which is affordable while still allowing oil companies to invest in new extraction projects, one analyst has claimed.

Writing for the Times, David Strahan has insisted that while a tumbling crude oil price may bring short term benefits such as a reduction in DERV, petrol and heating oil prices, longer term problems will soon emerge.

He explained that while prices are low, there is little incentive for oil companies to push ahead with expensive extraction projects that will not guarantee a return on investment.

The author explained that already, plans for many new facilities are being shelved while crude oil tumbles.

This, in turn, could lead to an eventual shortfall in supply, which would again push prices up in a sharp spike.

As such, he insisted that a "Goldilocks" oil price is needed, at a level which is not too high and not too low.

Oil is currently trading at a 17-month low.