(Bloomberg) — It’s the second day of CERAWeek by S&P Global in Houston, one of the energy industry’s biggest annual gatherings and one that hasn’t been held in person in three years because of the pandemic.

The event is taking place amid massive gyrations in global energy markets following Russia’s invasion of Ukraine. On Monday, Exxon Mobil Corp. Chief Executive Officer Darren Woods warned conference attendees that oil and other energy markets are in for more turbulence. Hess Corp.’s CEO John Hess called on the U.S. and its international allies to release more oil from strategic reserves, while Chevron CEO Mike Wirth said there’s no evidence of physical oil or gas shortages yet.

Aramco CEO says world needs more spare crude capacity

Saudi Aramco Chief Executive Officer Amin Nasser said the world needs more than the current spare crude capacity of about 2 million barrels per day in order to absorb economic shocks, such as Russia’s invasion of Ukraine.

The head of the world’s largest oil producer said at CERAWeek by S&P Global that he’s concerned about the lack of investment in oil and gas projects and declining supplies in an increasingly volatile energy market.

“Today, we only have 2% of effective spare capacity, which is an imbalance,” Nasser said. “You need a resilient and strong spare capacity to make sure that you can absorb any supply shocks. Look at what’s happening. Before the Ukraine crisis, the spare capacity was declining fast.”

Occidental CEO says don’t rely on Permian

The world’s energy markets can’t rely on major growth in the Permian Basin U.S. shale patch to ease oil prices, according to Occidental Petroleum Corp. Chief Executive Officer Vicki Hollub.

It’s a “dire situation,” she said, adding that supply-chain constraints are severely limiting companies’ efforts to grow in the world’s largest shale basin. 

The Permian is also suffering from labor shortages, she said. Companies also don’t have enough rigs to support strong growth, and they’ve already used up most of the drilled-but-uncompleted wells that provided a quick uplift in growth in previous up cycles.

“The call for increased production from the U.S. at this point, especially with supply-chain challenges, can’t happen at the level that’s needed,” Hollub said.

OPEC meets with U.S. shale

Outgoing head of OPEC Mohammad Barkindo met with U.S. shale producers Monday night in Houston and said both groups are aligned in how they see the challenges posed to the oil industry by underinvestment.

“There’s no doubt we need to engage the investment community, the financial community, to address the encumbrances that are turning out to be obstacles on our way to access capital,” Barkindo said in an interview following the dinner meeting.

“The world is gradually but dangerously running out of spare capacity,” he said. “This is a function of the massive underinvestment in the industry in the last 10, 15 years.”

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