The price to be paid

The price to be paid

Elisa Maria Giannetto
The fall in oil prices and its consequences at the center of the 2016 edition of the EIA Energy Conference

The near future will be driven by fossil fuel. This is what the analysts assembled in Washington DC for the 2016 EIA Energy Conference agree upon. Two days to discuss the most pressing issues in the energy field: from the Supreme Court’s stop to Obama's plan to reduce emissions, to the new technologies to address climate change. Although the major world economies are moving towards green energy - oil, gas and coal will remain the main sources to power the economy for several decades more. Especially in the face of soaring energy consumption led by China, a country that in less than 10 years will hold the record forlargest energy consumer. The imperative is to curb, through the use of cutting edge technologies, the impact of this demand on climate change and the greenhouse effect. There is only one way to do this, though it entails an agreement at a global level.

Energy produces wellbeing

"Without energy there is no economy, without climate there is no environment and without economy and environment there’s no well-being, there’s no civil society, there’s no personal or national security, there’s no economic growth," as stated by John P. Holdren, scientific adviser to President Barack Obama,  who opened the conference immediately following the greeting from EIA Administrator Adam Sieminski. A clear axiom that allows us to understand that, in order to live well, it is important to have energy that is sustainable and guaranteed for all. Which is why we cannot do without traditional energy sources. The debate focused on the steep fall in oil prices and the reasonable expectation that, in the mid-term, they will not return to much more than $50/ bbl. Some point fingers towards the OPEC countries and make comparisons to 1986, when oil prices collapsed and the main producing countries did not reduce production. A situation similar to the present even if, as head of Rystad Energy,  Lars Eirik Nicolaisen predicts, "what we expect will be quite different to what we experienced in the 90s. In 2015," Nicolaissen continued, "we registered a significant contraction of E&P capex, and it is estimated that this year it will fall another 20%." The scenario that lies before us is not among the most inspiring because the current oil prices make it hard to stimulate new projects. "One solution might be to bring shale oil, of which the United States is rich, back into the game, " as Columbia Center Global Energy Policy analyst Jamie Webster suggested.

Export elsewhere

For a market like North America, rich in LNG, it is time to "look elsewhere," this the advice of Ernie Megginson, head of Megginson & Associates. And not only because, in contrast to other major economies, demand for LNG from the EU is falling, but because we are faced with a steady fall in LNG prices. As general manager of PetroChina International, Keo Lukefahr, explains, "LNG spot prices are not affected by Brent and may continue to fall even if oil prices begin to recover." While the global curve in demand for natural gas continues to decrease, supply is rising. This mix is leading to a fall in prices that are forcing US producers to cut their exports. "The EU has witnessed a sharp drop in demand for gas ever since 2010, in part due to warm winters, in part to the increase of renewable sources, especially wind and solar power. At the same time, coal, a cheaper source, has retained its market share, "as Michael Lynch, president of Strategic Energy and Economic Research Inc sums up. According to Lynch, "the future lies in the ability of governments to invest in R&D in order to make traditional sources more sustainable and renewable resources more efficient." Otherwise the bill will be steep for everyone.