Friday, September 24, 2004

Lord Browne Speaks
I've devoted a lot of space this week to concerns about future oil supply and some possible solutions. My regular readers know that I've formed the view that we face a prolonged period of tight oil supply in the future, though I'm skeptical that what we are now experiencing is it. I think it's worth capping the week with a very clear and articulate argument for the view that things will be OK. Who better than Lord Browne, Chairman of BP--arguably the world's most successful oil company at the moment--to provide it in this article from the Financial Times (subscription may be required).

In particular, his discussion of the situation in the key OPEC producers is well-reasoned, encompassing both their domestic needs and their wherewithal to build capacity when they perceive the need. He also makes some insightful comments about the distinction in roles between the international oil majors, such as BP, and the national oil companies of the countries from which much of the world's incremental oil supply must come.

His shareholder focus is also apparent and appropriate, urging caution about rushing into potentially unprofitable projects around the world. And he shows real passion in defending the industry's record of investment, stating categorically that the needed infrastructure is in fact being built. Finally, he ascribes the current high prices to a surge in demand, more than a shortfall in capacity.

None of this can be dismissed out of hand, but I think even Lord Browne would agree that his responsibilities and perspective are fundamentally different from those of someone charged with looking after the public's interests. He has given us a highly credible description of the successful status quo scenario for energy. We just can't forget that there are other, less comforting scenarios, which, even if less likely, have serious potential consequences for our economy and security.

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