On the surface, U.S. policy in promoting an oil pipeline from Baku to Turkey's Mediterranean port of Ceyhan is making great strides in spite of delays. There is equal interest in a trans-Caspian gas line from Turkmenistan to Turkey, a project that seemed incredible a year ago. The problem is that the policy has not kept pace with the numbers. With oil below 10 dollars a barrel, it makes no difference whether the projects involve the development of oil, gas or pipelines. Companies are already cutting their capital spending, and the Caspian projects are some of the costliest in the world.
Financing is likely to be scarce until energy profits improve.
Many participants at the conference argued that pipeline systems are designed to last for 30 years or more. It should follow that today's oil prices are less important than those a decade from now. But the average price of oil in 1998 has already sunk to the lowest point in 22 years. As a result of depressed prices, U.S. production has tumbled to a 44-year low. It seems clear that the depth of the industry's difficulties will be considered when investment decisions are made.