Royal Dutch Shell chief executive Ben van Beurden just admitted that he has no idea about whether oil prices will ever recover.
Van Beurden told the BBC in a BBC Radio 4 interview on the Today programme “the honest answer to that is I don’t know,” when asked where he sees oil prices going.
“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,” he added.
Oil prices have plunged by over 50% since the summer of 2014. West Texas Intermediate (WTI) oil tumbled late last year from over $US100 a barrel to just around $US45 a barrel early this year.
After a recovery back to around $US60 a barrel during the early summer, prices have gone through the floor again, down to $US47.14 on Thursday.
Last week, analysts led by global commodities research chief Jeffrey Currie, released a note warning that oil prices could sink as low as $US20 per barrel.
“The oil market is even more oversupplied than we had expected and we now forecast this surplus to persist in 2016 on further OPEC production growth, resilient non-OPEC supply and slowing demand growth,” said the analysts.
Van Beurden explained to the BBC how fragile the oil pricing structure is because when oil becomes cheaper, people don’t necessarily buy more of it unlike other consumer products.
“On the back of just a few per cent 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,” he said.
“People don’t drive to work twice because it’s more economical to do so.”