Tuesday, June 15, 2010
Gulf spill may lead to higher oil prices
The BP oil spill in the Gulf is all over the news these days. It is tough to not turn on the television and flick through stations that depict the ecological devastation and destruction.
Sadly it is likely to take years for this unmitigated disaster to be cleaned up. The long term social, ecological and economic effects will be horrendous.
Behind the surface of this fiasco lurk other issues and opportunities.
The US moratorium on offshore drilling may set the stage for a much higher oil prices in a few years time. The Gulf of Mexico (GOM) makes up approximately 25 percent of the world's deep/ultra deep offshore oil. In fact, more new oil was produced last year from fields in the US GOM than any other region in the world.
By placing a moratorium on deepwater drilling the naturally steep decline rates of deepwater oil wells will result in much lower production by 2011. Morgan Stanley estimates that if GOM drilling is permanently banned, production from the GOM would be virtually zero in a four- to five-year period. More >>>