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New energy resources must be explored says API

Analysts also agree that key to any economic rebound will be the price of fuel
By Patrick Burnson, Executive Editor
December 03, 2010

The nation’s supply chain may be at risk if new sources of energy are not tapped in the near future, said the American Petroleum Institute (API).

According to API’s President and CEO Jack Gerard, the Obama Administration’s position of domestic offshore drilling is untenable and risky.

“This reversal on new lease sales off America’s coasts comes on top of a de facto moratorium, which has all but stopped new drilling in the Gulf of Mexico.”

Gerard also warned that the administration’s decision could result in the loss of American jobs, billions less in government revenues and an increasing dependence on foreign energy sources.

Analysts also agree that key to any economic rebound will be the price of fuel. Derik Andreoli, an energy analyst and doctoral candidate at the University of Washington, said there is deep uncertainty in how energy for power, heat, and mobility will be sourced, and how it will be paid for.

“The potential consequences of failing to plan for the unfolding energy paradigm could be catastrophic,” he said.

At the same time, said Andreoli, shippers must address energy-related risks to supply chains and the increasing vulnerability of just-in-time models reliant energy constantly available throughout the supply chain.

“On my radar, the hot topic at the current moment is China’s diesel shortage and how an increase in demand for diesel imports will impact prices through the rest of the year and into 2011,” he said. “It is unclear whether the diesel shortage will reverse in the spring.”

What we do know, said Andreoli, is that refined oil stocks of China’s two largest oil companies have fallen for eight consecutive months and diesel stocks fell by double digits in December alone.

Analysts also expect that the crude and diesel markets will remain volatile, because the recession and the temporary drop in the price of crude caused some investments to be put on hold.

“Crude production peaked in 2006, and net oil exports declined for a variety of reason between 2005 and 2009,” said Andreoli. At the same time, consumption is rising in China.”

About the Author

Patrick Burnson
Executive Editor

Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at .(JavaScript must be enabled to view this email address).

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