The oil price will stay low for some time as supply exceeds demand and the current situation on global oil markets is reminiscent of the 1980s oil glut, former BP boss John Browne said on Tuesday.
U.S. crude prices dropped below $0 for the first time ever on Monday, with May futures for U.S. crude CLc1 plummeting to -$37.63 a barrel, though the prices returned to positive territory on Tuesday.
Browne, who ran BP from 1995 to 2007, said the negative prices were a U.S. issue due to a lack of storage, though he said across the world demand was down while production was still high.
“The prices will be very low and I think they will remain low and very volatile for some considerable time,” Browne told the BBC. “There is still a lot of oil being produced that is going into storage and not being used.
“This is very reminiscent of a time in the mid-1980s when exactly the same situation happened – too much supply, too little demand and prices of oil stayed low for 17 years.”
The 1980s glut – when oil prices tumbled in the mid 1980s – ultimately led to geopolitical tremors across the world: the Soviet Union collapsed in 1991 while Algeria faced a political crisis that spawned a deadly civil war.
Browne said the demand for hydrocarbons would continue to be weak, partly as a result of a greater awareness of climate change.
“Demand for hydrocarbons will continue to be weak,” he said. “And that demand will be filled primarily by those who have no choice but to produce oil – so the state oil companies of the world.”