Tight Outlook for Energy Stocks
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The fundamentals for increasing energy prices are still strong and it is hurting businesses, economies and the man in the street.
Available surplus capacity is low as Organization for Economic Cooperation and Development (OECD) inventories are below 5-year average levels. In addition, recent events such as Turkey’s incursion into northern Iraq against Kurdish rebels, militant attacks against Nigeria’s oil infrastructure, and Venezuela’s threat to disrupt exports to the United States over its dispute with ExxonMobil have contributed to upward price pressure.
With the slowdown in economy and hence consumption, and OPEC countries complete expansion projects on time, global surplus capacity could reach 4 million bbl/d by end 2009, and prices should ease downwards.
Total electricity consumption is expected to grow by only 0.4 percent in 2008, then return to a growth rate of 1.5 percent in 200. Growth in natural-gas-fired generation is expected to be relatively flat this year.
On the other hand, generation by wind power is expected to grow by 37 percent in 2008. Power generators have responded to renewable portfolio standards by rapidly installing wind turbines, which accounted for 25 percent of new electric generating capacity in 2007.
