Royal Dutch Shell has suddenly found itself unable to go ahead with plans to immediately drill an offshore Alaskan well, and that the industry as a whole will face rising costs:
“A clear outcome of the Macondo well blow out will be higher offshore drilling costs in the future,” said Evolution Securities in a research note. “Changes are likely to include tougher permitting systems; tougher inspection regimes for safety equipment; higher specification for key safety components and more redundancy features; more extensive clean up plans.”
Insurance premiums for deepwater drilling have already jumped 40% and may rise further if U.S. lawmakers raise the liability cap for oil spills from $75 million to $10 billion, Evolution said.
Rising costs for the industry, at a time of oil price volatility – oil dropped to $70-per-barel due to the European debt crisis, and currently stands at $73 – spell trouble. All it would take is a pronounced market downturn to make deepwater ventures untenable, and the world’s markets are in deep trouble. Europe is awash in debt, China’s economic miracle, based on a housing bubble, is beginning to look shaky, and the US is printing money to bail its own economy out.
Things may be coming into place for a more upfront discussion about the reality of peak oil. The oil industry has nothing to lose by talking about just why it is forced to look to extract oil from mile deep seabed. It's probably time for oil companies, and governments, to admit that this is where the last oil reserves, outside of Opec,
are to be found.
And at the same time, for those of us that object to deepwater drilling and oil sands extraction to face up to the fact that - like it or not - our modern world runs of such environmentally destructive energy. That's not to let BP off the hook for apparently cutting corners, but to admit the realities of peak oil.
[source: Wall Street Journal blog The Source, headlined Oil Industry Suffers First Blowback From BP Spill.]
