Fmr. Shell Oil president: Oil industry is in a depression

Former Shell Oil President John Hofmeister weighs in on the state of the oil industry.

Fmr. Shell Oil President Hofmeister: $60 Oil On The Way

Oil FOXBusiness

U.S. oil prices will reach the $60-per-barrel mark by the end of 2016, predicts former Shell Oil President John Hofmeister.

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In an interview with FOX Business Network’s Stuart Varney, Hofmeister said oil prices must go higher in order for the industry to make any money.

“The industry cannot make money below $50 a barrel, and it’s not really going to make money until we get back to the $70-$80 per-barrel mark,” he said on Varney & Co.

Hofmeister cited a “man-made recession” caused by Saudi Arabia, Iran, and Russia after they refused to cut prices in the wake of a global price drop that started in the summer of 2014.

“They’re taking from their own sovereign wealth because they’re fighting each other for market supply,” Hofmeister said.

In the meantime, the global oil market faces three problems, according to Hofmeister. The first is a lack of capital spending thanks to the severe cutback in prices. Second is a lack of ability to borrow money from banks hesitant to loan to oil companies in an ultra-low price environment, and a huge drop in the number of industry workers who may have permanently left the industry’s workforce unable to find jobs as prices remain low.

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Global oil prices tumbled more than 5% over the last two days as renewed concerns about the balance between global supply and demand have hit the market. Energy stocks were among Wall Street’s worst performers on Wednesday.

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