The Edinburgh-based Royal Bank of Scotland has issued a doom-laden global economic forecast, which predicts the price of benchmark North Sea Brent crude oil could fall to $16-barrel this year.
This could effectively sound the death-knell for the North Sea oil and gas industry as this price would make it uneconomic for oil companies to invest in exploring for new oil fields, or drilling for identified by not-yet recovered, ‘reserves’.
Without either innovating and/or collaborating to cut costs, the oil companies would pump their N.Sea fields dry – but without having invested in new exploration and drilling.
In the latest analysis of global debt and interest rates by Andrew Roberts, the bank’s Head of European Economics, said:
“On Brent, we have been oil bears for more than a year and lowered our $42-barrel 2015 target to $26-barrell and $16-barrel for 2016 with the only meaningful support on the way at $34.40-barrel.
“As the latter was broken on a sustained basis, it implies we don’t have any significant obstacles on the way to our 2016 target of $26-barrel. There may be some near-term consolidation, as a reaction from the $34.40 support area, but the trend remains in place”.
Yesterday Brent crude dropped another 1% to $31.18 – its lowest level since April 2004.
The Royal Bank analysis also forecasts that increased automation is ‘on its way to destroying up to 50% of all jobs’ in the western world.
In an exceedingly gloomy note, the bank advises investors: “This all looks similar to 2008. Sell everything except high quality bonds. This is about return of capital, not return on capital. In a crowded hall, exit doors are small”.