An investment slump in the global oil industry is delaying projects worldwide, and raising concerns about future production shortfalls and another bout of record high prices in coming years.

Even conservative estimates suggest global crude production could be 7 per cent below previously forecast levels in 2014 if current investment trends continue. As demand picks up, the supply shortfall would drive prices higher, says a recent report from the Cambridge Energy Research Associates, a Massachusetts-based consultancy.

But the price spike may be coming sooner than many people expect, said Matthew Simmons, a Houston-based investment banker who has become the most prominent prophet of looming oil shortages.

"We're on the verge of having a shortage and that would really send the prices soaring," Mr. Simmons said in a telephone interview. "How soon could the shortage happen? Our stocks are already too low in too many areas."

To keep up with normal depletion rates and meet rising demand, the industry has been spending nearly $400-billion (U.S.) annually to develop new fields and improve recovery techniques to keep production in the world's largest and aging oil fields from dropping precipitously.

Due to low prices and the credit crunch, that spending has fallen dramatically, Mr. Simmons said. As a result, he expects productive capacity to drop even more quickly than global demand.

"Now, we've pretty well stopped any incremental spending and are only doing the bare minimum stuff," he said.

He calculates that within three years, crude oil production could actually fall by more than six million barrels a day from current levels of 88 million barrels of oil and oil equivalents.

While Mr. Simmons is the most pessimistic about future production levels, he is not alone in raising alarms about the impact of low prices on global capacity.

The International Energy Agency, which advises rich countries on energy matters, has been warning for months that depressed industry activity is setting the stage for a runup in prices when demand begins to recover.

Cambridge Energy Research Associates (CERA) had expected global production to grow to 109 million barrels a day by 2014, but lowered that estimate to 101.4 million barrels in the report released Friday.

The study's author, Peter Jackson, said the price impact may be more muted than some fear, because OPEC producers are building up spare capacity as they ratchet back production due to dwindling demand.

It will also depend on how quickly demand picks up as the global economy recovers, he added.

"The longer oil prices stay at the levels they're at - which is below the marginal cost of a barrel at the moment - the more supply will actually be postponed," Mr. Jackson said.

He estimated that the global industry's break-even price for new production is roughly $70 a barrel on average, and significantly more in high-cost projects like the oil sands and extra deep offshore drilling. Crude oil closed on the New York Mercantile Exchange at $49.66 a barrel after hitting its 2009 peak of $54.66 last week.

Mr. Jackson disagreed strongly with Mr. Simmons on the annual rate of depletion from existing fields. CERA has studied more than 1,000 of the world's largest fields and the global average rate is about 4.5 per cent, he said, not the 15- to 20-per-cent rate that Mr. Simmons assumes.

The CERA analyst said prices will bounce back from current lows, but the pace depends on how strongly the economy recovers from the current slump and how quickly the industry can respond when prices do start moving higher.

Canada's oil sands producers are particularly vulnerable if the economy rebounds more slowly than forecasters now predict. Already, the Canadian Association of Petroleum Producers has slashed its June forecast for the country's production in 2014 by about 300,000 barrels a day, or 8 per cent, as companies announce the postponement of new projects.

"Projects that are under construction or just ramping up are going to continue to bring more supply on for the next three to four to five years," association vice-president Greg Stringham said. "But all of the new projects have been pushed out into the future given the uncertainty that we have out there now."