Higher oil prices have masked a slowdown in production among the biggest oil companies.
Exxon Mobil, Royal Dutch Shell and BP reported a surge in quarterly profits this week even though they're producing less oil from fields around the world, including a combined 7 percent decline in the third quarter that just ended. Each company has devoted billions of dollars to finding new petroleum deposits, but it could be years, even decades, before those investments translate to more oil and natural gas.
Experts say smaller companies will need to step up to satisfy growing world demand. China, India and other developing nations are expected to push the global appetite for oil to a record 90 million barrels per day next year, enough to outstrip supplies.
Three years ago, a severe drop in oil supplies helped push oil prices to above $147 per barrel, saddling airlines and shipping companies with high fuel costs. Gasoline prices soared above a national average $4 per gallon.
"We're not at the point where oil prices are going to go bananas" and spike like they did in 2008, said Ken Medlock, an energy expert at Rice University. "But if we saw production declines like this for five or six years, then it's time to worry."
Big Oil's third-quarter financial results highlight a growing problem within the industry. New petroleum sources are increasingly tough -- and expensive -- to find. The best new deposits are found more than a mile under the ocean, or in vast layers of sticky Canadian sand, or in the frigid Arctic.
Costs have increased dramatically as the industry digs deeper.
A decade ago, tapping a new well used to cost about $10 to $20 for every barrel of oil produced. Now it's estimated at about $50 or $60 for wells in the Gulf of Mexico and $70 or $80 in the Canadian oil sands.
Exxon Mobil Corp. on Thursday said profits jumped 41 percent in the third quarter to $10.33 billion, or $2.13 per share, as higher oil and natural gas prices made up for lower production. Profits doubled for Shell and BP for the same reason. Chevron Corp., the second-largest U.S. oil company, is expected to report its financial results today.