The chief executive of oil giant Shell predicted that the cost of oil will continue to rise long-term in an interview with CNBC Tuesday.
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Volatility has returned to the oil price in recent months amid unrest in the Middle East.
“These volatilities are short-medium term. In the longer term we will get back to normal market-driven pricing, which is really a supply-demand function," Peter Voser said in the interview.
“Longer term you will see demand rising and we will need all investments to cope with that demand. In the very long term we will see prices going up because of high demand and as it gets more expensive to get the resources out of the ground.”
The key risks for oil companies like Shell - the second biggest company in the world last year according to Forbes - in 2012 are inflation in costs and a downturn in the global economy, Voser said.
“A lot of investments are being done and in some areas the cost base is rising,” he said.
“The other (risk) is the economic outlook. If commodity prices stay very high, that will impact the economy over time and slow things down. These are the two effects we need to keep an eye on.”
Shell’s outlook for 2012 is positive, according to Voser.
“2012 should be a good year. We have growing production because of major projects coming on stream, and we have high commodity prices which will give us large cash flows that will allow us to invest in future growth whilst paying a competitive dividend,” he said.