Saturday, June 19, 2010

The BP Oil Spill and Higher Oil Prices

Common sense would dictate that the BP Gulf oil spill would wake up someone in this country concerning American energy policy. But it hasn't.....

All we see is political theatre and sleazy lawyers lining up to make BP stand for Big Payments. But America is about to get another sobering slap in the face. That slap will come in the form of much higher energy prices in the years ahead.

With the current talk in our nation's capital from our politicians, it looks like offshore drilling will be banned for a lot longer than the six month ban put in place by President Obama.

My best guess is that it will be at least a 3-year ban and perhaps a permanent ban.

The owners of the oil rigs are not going to let their multi-million dollar rigs sit idly. These rigs are already on the move - to western Africa, to Brazil, to offshore China.

By the way, the safety regulations regarding offshore deep water oil rigs in places like Brazil are much stricter than here in the United States. So the rigs drilling here in US waters may have to be modified a bit. But that only benefits companies like Keppel of Singapore which does such work.

Stopping deep water drilling will hurt US oil production...a full 20% of our oil is produced in our waters offshore. If the oil is not produced, that means only one thing. America will have to import even more oil - we already import 56% - from overseas.

And the United States will have to compete for that oil (and pay a hefty price) against the likes of China, India and the other emerging markets whose energy demand is just starting to ramp up.

And add to that the anti-foreigner rhetoric that has been hurled at BP. There has been a real fury in the British press about this and about America's wasteful energy habits.

Don't think that the other foreign oil companies like Royal Dutch Shell haven't noticed. Do not be surprised that if, within several years, all the foreign oil firms pull out and will refuse to do business in the United States.

With all these problems brewing, the United States still does NOT have a coherent energy policy coming out of Washington. We need a plan that emphasizes ALL forms of alternative energy including natural gas in addition to energy conservation.

But with the lack of leadership, particularly from Congress, do not be surprised if we see oil at well over $100 a barrel in the next few years.

1 comment:

  1. A very accurate prediction I think, but you also need to factor in the risk of tacking a full oiltanker into US waters, that is going to have a huge insurance premium loaded on it.

    You pay at the pump.