cancel2 2022
Canceled
The International Energy Agency warns against rash decisions being made in the light of the Gulf oil spill. Sadly, I doubt that anybody in the US will listen to them. Currently 29% of US oil is derived from offshore wells and if it has the knock on effect of other countries like Norway, Brazil and Angola reconsidering deepwater drilling then it is virtually guaranteed that oil prices will rise, maybe back to the levels of $150 or even more. You have been warned, so don't bellyache if and when it happens. Never has the maxim about winning the battle and losing the war been more true!
IEA warns against US oil spill over-reaction
By Carola Hoyos in London
Published: May 12 2010 13:09 * Last updated: May 12 2010 13:09
The International Energy Agency has warned US law makers against making rash decisions in the wake of BP’s oil spill off the coast of Louisiana .
“A knee-jerk reaction by regulators, banning new offshore licensing altogether, as some are proposing, risks pushing companies to ever more precarious locations in search of hydrocarbons. The law of unintended consequences may apply,” the IEA, the rich countries’ energy watchdog, said in its monthly market report released on Wednesday.
“The catastrophic explosion at the Deepwater Horizon rig in the Gulf of Mexico has had a minimal impact on actual production in the region so far but there could be far-reaching implications. Operational safety and regulatory issues have raised the spectre of significantly higher development costs, a possible curbing of offshore leasing and slower growth in offshore production. Combined, these critical issues could lead to a strengthening of the long-term forward price curve,” the IEA said.
Transocean’s Deepwater Horizon rig, drilling on behalf of BP, exploded on April 20 and sank two days later, killing 11 people and causing one of the largest recent oil spills in US waters.
BP executives and those of other companies, such as Halliburton and Transocean, which were involved in the drilling, were grilled by US lawmakers this week.
Lisa Murkowski, the ranking Republican on the energy committee and a senator from Alaska, the site of the 1989 Exxon Valdez spill, scolded the executives for their efforts to shift blame.
“I would suggest to all three of you that we are all in this together because this incident will have an impact on the energy policy of our country,” she said.
Yet, even as they blamed faulty equipment, lack of technical expertise and sloppy regulation for the spill, several senators from both parties reiterated their commitment to expand offshore drilling.
While the oil spill is grabbing almost all the attention, a second, older discussion about how to regulate the industry is also about to have an impact on the industry.
The IEA warned that regulation resulting from the rise and then collapse in oil prices in 2008 could cause more, rather than less, volatility in the markets.
“Despite a lack of clear evidence that crude oil prices move in lock-step with either open interest or net non-commercial positions, wide-ranging curbs on market activity now look likely,” the IEA said.
It added: “Meanwhile, physical players warn of the risks to investment if they have to divert a greater share of capital to meeting the higher costs of hedging. This is not to argue against oversight and regulation, merely to observe that moves aimed at avoiding market manipulation and price volatility, if hastily formulated, could reinforce volatility if they hamper investment and price discovery.”
Also in its report, the IEA revised downward substantially its estimates for how much oil was used last year and its forecast for this year. The changes, which on average cut 190,000 barrels a day off previous forecasts, were prompted by new, higher oil price assumptions and lower demand figures from developing countries.
Global oil demand is now thought to have been 84.8m b/d in 2009, a drop of 1.4 per cent from the year before. This year, the IEA expects oil demand to grow by 1.9 per cent to 86.4m b/d.
Calculating demand, even retrospectively, can be difficult because data, especially from developing countries, are often unreliable, with more accurate figures sometimes only becoming available a year later.
IEA warns against US oil spill over-reaction
By Carola Hoyos in London
Published: May 12 2010 13:09 * Last updated: May 12 2010 13:09
The International Energy Agency has warned US law makers against making rash decisions in the wake of BP’s oil spill off the coast of Louisiana .
“A knee-jerk reaction by regulators, banning new offshore licensing altogether, as some are proposing, risks pushing companies to ever more precarious locations in search of hydrocarbons. The law of unintended consequences may apply,” the IEA, the rich countries’ energy watchdog, said in its monthly market report released on Wednesday.
“The catastrophic explosion at the Deepwater Horizon rig in the Gulf of Mexico has had a minimal impact on actual production in the region so far but there could be far-reaching implications. Operational safety and regulatory issues have raised the spectre of significantly higher development costs, a possible curbing of offshore leasing and slower growth in offshore production. Combined, these critical issues could lead to a strengthening of the long-term forward price curve,” the IEA said.
Transocean’s Deepwater Horizon rig, drilling on behalf of BP, exploded on April 20 and sank two days later, killing 11 people and causing one of the largest recent oil spills in US waters.
BP executives and those of other companies, such as Halliburton and Transocean, which were involved in the drilling, were grilled by US lawmakers this week.
Lisa Murkowski, the ranking Republican on the energy committee and a senator from Alaska, the site of the 1989 Exxon Valdez spill, scolded the executives for their efforts to shift blame.
“I would suggest to all three of you that we are all in this together because this incident will have an impact on the energy policy of our country,” she said.
Yet, even as they blamed faulty equipment, lack of technical expertise and sloppy regulation for the spill, several senators from both parties reiterated their commitment to expand offshore drilling.
While the oil spill is grabbing almost all the attention, a second, older discussion about how to regulate the industry is also about to have an impact on the industry.
The IEA warned that regulation resulting from the rise and then collapse in oil prices in 2008 could cause more, rather than less, volatility in the markets.
“Despite a lack of clear evidence that crude oil prices move in lock-step with either open interest or net non-commercial positions, wide-ranging curbs on market activity now look likely,” the IEA said.
It added: “Meanwhile, physical players warn of the risks to investment if they have to divert a greater share of capital to meeting the higher costs of hedging. This is not to argue against oversight and regulation, merely to observe that moves aimed at avoiding market manipulation and price volatility, if hastily formulated, could reinforce volatility if they hamper investment and price discovery.”
Also in its report, the IEA revised downward substantially its estimates for how much oil was used last year and its forecast for this year. The changes, which on average cut 190,000 barrels a day off previous forecasts, were prompted by new, higher oil price assumptions and lower demand figures from developing countries.
Global oil demand is now thought to have been 84.8m b/d in 2009, a drop of 1.4 per cent from the year before. This year, the IEA expects oil demand to grow by 1.9 per cent to 86.4m b/d.
Calculating demand, even retrospectively, can be difficult because data, especially from developing countries, are often unreliable, with more accurate figures sometimes only becoming available a year later.
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