Monday, December 20, 2004

The Changing Future of Energy
As we approach the end of the year, it's appropriate to think about how our picture of the energy future has changed in the last twelve months. Here are some thoughts, in no particular order:

  • OPEC still matters, if only as a constraint on Saudi Arabia, which left to its own devices might choose to produce at much higher levels. Nor is there any visible sign that the Kingdom intends to offer the international oil companies access to its undeveloped reserves, despite a growing chorus in the industry that this will be necessary to meet future demand.
  • Thanks to the insurgency's calculated attacks on contractors and the generally poor security environment, development of Iraq's hundred billion plus barrels of oil may be delayed for years. More new oil will probably flow out of Libya than Iraq in the next five years.
  • The future of the most promising non-OPEC producer, Russia, is now under a cloud. At this point we don't even know the identity of the winner of the auction for Yukos's largest subsidiary.
  • Although nearly everyone now realizes the necessity for importing large quantities of LNG into the US to prevent a serious shortfall of natural gas supply, most of the proposed import terminal locations face uphill--if not entirely futile--battles for approval.
  • Hybrid cars have gone from a novelty driven by Toyota to a mainstream trend that all the carmakers are rushing to follow.
  • Climate change looms as yet another EU/US political crisis, thanks to our apparent unwillingness even to engage in a reasonable conversation on the subject.
  • While fuel cell vehicles may look even further off than they did a year ago, small fuel cells are going to start turning up in consumer devices, raising at least awareness of the technology.

The biggest surprise for me in 2004 is that we could see $50/barrel oil and end the year with oil and natural gas prices roughly double their long-term averages (in nominal dollars) without seeing any consequences more serious than a lot of complaining. Are energy issues simply trumped by security concerns in the post-9/11 world, or are we really that confident that the market will deliver the energy supplies we need?

My blogging is going to be a lot more sporadic over the next week, as the holidays approach, but I'll be on the alert for any news the really demands comment.

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