Quote Of The Week: A Long-Term View on Oil Prices

chevron oil

They’re old hands: “This is the fifth time our management team has seen oil prices fell 50 percent or more,” says Chevron CEO.

What can the CEO of a major oil company tell us about what’s ahead for oil prices?

In a recent interview with Fortune magazine, John Watson, CEO of Chevron, explained what he’s learned over the past four decades in the oil business and why he’s taking the more than 50% plunge in oil prices with a grain of salt.

Fortune: How surprising has it been for you to see oil prices fall so dramatically?

Watson: I’ve been with the company 35 years. This is the fifth time in my career I’ve seen a 50%-plus drop in oil prices. So in that sense, it’s not surprising. While it’s happening, you’re always a little bit surprised. When you get an imbalance in what is being produced, either too much or too little, prices can move up or down very fast.

Fortune: When do you see supply and demand balancing out and oil prices rising again?

Watson: Our best guess is next year.

The Takeaway:  Chevron is the second largest energy company in the U.S. after Exxon Mobil. Earlier this year, Chevron – like other oil producers – slashed budgets and canceled projects in response to the plunge in crude oil prices.  CEO Watson feels those cutbacks will reduce supply and help push up the price of oil toward the end of the year. “The long-term outlook for the industry remains robust,” Watson says, with forecasts for 40 percent demand growth over the next 20 years.”

About Mari Adam

Mari Adam, Certified Financial Planner™ and President of Adam Financial Associates Inc, has been helping individuals and families chart their financial futures for over twenty-five years. Have a question about your financial situation? Ask Mari!

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