OREANDA-NEWS. June 11, 2015. John Watson, chairman and CEO of Chevron Corp. (NYSE:CVX), the second-largest oil and gas company in the U.S., was in Washington, D.C., last week to meet with policy leaders. He also made himself available to discuss energy issues confronting his company.

IBD: Is the low price of oil a new normal for the United States?

Watson: It's clear that when oil and gas fell (to \\$40 a barrel earlier this year), that wasn't a sustainable world price based on global supplies. Only a few producers can make money at that price, so when the price fell to that level, marginal producers dropped out, supplies fell, and the price has risen back up to a more sustainable level.

With lower prices, some oil drilling is not economic. The world market produces 93 million barrels a day. All producers are taking action, and with natural declines investment slows (and) supply and demand come into better balance.

Prices are rising, and some shales will be economic (and) some conventional activity will be economic. But around the world, the degree of reinvestment could vary. My own view is that it's going to take somewhat higher prices to justify a lot of the incremental drilling activity we're seeing.

IBD: President Obama and others have long said we have to invest in green energy because we are running out of oil. Are they right?

Watson: Statistically we have expanded the resource base that's available to be developed. The shale revolution has been remarkable. Technology keeps advancing. You can go back 50 years, and the expectation was that we were going to run out of oil in 10 years. The advancements in technology have consistently resulted in us finding more.

If you look around the world, there is no shortage of oil. Most of the impediments to developing oil and natural gas are above ground, not below ground.

IBD: Is there truth to the conspiracy claim that the Saudis intentionally drove down the price of oil to put shale oil producers out of business?

Watson: The Saudis and OPEC have recognized that their market share has fallen from about half 20 to 25 years ago to about a third. As we've had higher prices, other sources of supply have been stimulated.

Saudi Arabia is the only one with surplus capacity. The ability for OPEC to constrain production and keep prices up for a long period of time has become more difficult. Producers that are less economic are having to cut back, whether that's shale producers in the U.S. or others around the world. The market will come back into balance.