With oil’s recent rally over the last couple weeks, Loews Corporation (NYSE:L) CEO Jim Tisch weighs in on whether it is sustainable.
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“I don’t know what oil prices are going to do over the next few weeks, but I can tell you, I strongly believe that oil prices two years from now will be 50% higher than where they are currently,” Tisch told the FOX Business Network’s Maria Bartiromo.
Tisch explained the factors behind the predicted rise in oil prices despite all the current supply on the market.
“All the supply is going to be used up. Depletion is real. Wells decline in productivity every year, shale wells particularly quickly. U.S. oil production is down 500,000 barrels a day from the peak. The world is dramatically under-investing in new productive capacity.”
Then Tisch discussed the key number that would motivate oil companies to produce more oil.
“And there is no doubt in my mind that two years from now, we are going to be short of oil and oil is going to have to get back to a price where oil producers will have the incentive for more oil. And that number that they need is about $65 a barrel.”
Tisch then weighed in on concerns of potential bankruptcies in the industry and their impact on company assets.
“Some companies will go bankrupt, but their assets will keep producing, so the question of bankruptcy is simply who is going to be the equity owner of those assets? Will it be the current debt holders, or will it continue to be the equity holders?” said Tisch.