The World demands energy

The recent disaster in the Gulf highlights the need for safety and strategic planning.  Many have called for America to be more proactive in the development of renewable energy, however the fact remains that customers demand energy from petro based resources.

The moratorium on new drilling could slow oil production in the Gulf and boost oil prices. An e-mail obtained by The Associated Press from the Gulf Coast office of the Minerals Management Service said that "until further notice" no new drilling will be allowed in the Gulf, at any water depth.

The moratorium comes as the Energy Information Administration reported that stocks of crude oil shrank. Demand for crude products over the last four-week period is 8.1 percent higher than a year ago, including a 17.1 percent increase in distillates such as diesel fuel and heating oil.

IEA officials claim that "the market could easily become again more volatile once the world economy grows again and the supply tightens." They urged governments to open access to energy reserves, and said "encouraging investment on the production side could lessen volatility."

Northern Trust recently issued a bullish report on the energy sector noting that “Energy prices, especially the price of oil, face a supply-constrained future. Already, the increase in prices had led to an OPEC quota compliance of just 60%, as the Saudis are sensitive to the risk that high oil prices pose to global economic growth. In a scenario where the global economy continues to accelerate and the dollar resumes its decline, energy prices could move significantly higher from current levels.”

On a like note Bank of America and Barclays Capital, two leading oil traders, have told clients to brace for crude above $100 a barrel by next year, before it pushes higher over the decade. This would be in stark contrast from recessions in the 1980s and 1990s, when it took years to work off excess production capacity built in the boom.

"The groundwork for the next sustained step up in oil prices is now almost complete. Global spare capacity is likely to be reduced to low levels within a relatively short time. The global economic crisis has postponed, but not cancelled, a crunch which would otherwise be starting to bite now," said Barclays.