BP Oil Spill Has Potentially Large Implications For Oil Prices And Alternative Energy, Says ETF Securities

The BP oil spill in the Gulf of Mexico has potentially large implications for the energy sector with the cost of the spill being estimated at US$32.2 billion. With current International Energy Agency (IEA) estimates putting offshore production at around half of oil production towards 2015, and if the US tightens regulations on offshore oil drilling and other countries follow suit, the implications for longer-dated oil prices and the alternative energy sector could be significant.

Commenting on the trends and potential implications for the oil, alternative and nuclear industries, Daniel Wills, Senior Analyst at ETF Securities, said:

"The BP oil spill cannot be looked at as a one-off isolated event. The spill has potential implications for the oil industry as a whole and for global policies towards alternative and nuclear energy. With BP estimating that the cost of the spill may be as much as US$32.2 billion, the spill will likely increase the industry-wide cost of offshore oil production as companies are forced to reassess their potential liabilities from these types of activities - not just in the US Gulf but globally. This is a potentially significant development given that the IEA projects that around half of oil production towards 2015 will come from offshore sources.

In addition, recent rhetoric indicates that the spill is giving new impetus to US and international policies to boost alternative and nuclear energy sources at the expense of fossil fuels."<