September 18 ,2015 | by Thiago Kiwi

Oil price too volatile to predict, claims Shell boss

Ben van Beurden, chief executive of Royal Dutch Shell, has admitted that he hasn't a clue what will happen to oil prices in the coming months.

When posed the question by the BBC, Van Beurden replied: "The honest answer to that is I don't know."

Volatile prices

Earlier this month, Goldman Sachs predicted the price of a barrel of crude oil on the global markets could fall as low as $20, having already halved over the past year to its current cost of $50 (£32) per barrel.

On the BBC Radio 4's Today programme, van Beurden commented: "It is a very, very volatile business in terms of supply and demand. The oil price responds to very small mismatches between supply and demand."

Going on to explain the dramatic fall so far in prices, Shell's chief said it came "on the back of just a few percent of oversupply, and it shows how inelastic the whole system is, and simply because oil is so cheap - its not as if demand is going to respond."

Supply and demand

However, the oil industry's ideas of supply and demand are different from many others.

Van Beurden added that consumers would not be tempted to use more oil in response to its cheapening price, as can happen with other products. "People don't drive to work twice because it's more economical to do so", he said.

North American production of shale products through fracking and OPEC countries maintaining high levels of production in response are two of the factors involved in the current glut of oil on the world markets.

Thiago Kiwi

Thiago is the LSBF Blog Editor who manages news and features content on the site, and writes about business, finance, technology, education and careers.

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