The announcement that new oil production has been succesfully tested in the deep waters of the Gulf of Mexico was hailed by experts as proof that oil has not yet reached its peak production, but many questions and concerns remain.
In the past few years, oil prices have risen dramatically as a result of several factors:
- rising demand from growing economies (China and India);
- shrinking capacity;
- underinvestments in refineries, increasing energy nationalism (the big six oil companies own only 16% of the reserves, the rest is in the hands of nationalised companies such as Saudi Aramco), and;
- market speculation.
One of the main drivers of the oil-price hike has been the fear that oil production might be coming close to its peak, just at the moment when new growing economies are creating extra demand. Although a theory initially proposed by industry ‘rebels’ such as former BP expert Colin Campbell, the “peak oil” argument has won over a lot of followers in recent years, even among market watchers and investors. For an overview of the arguments for and against the ‘peak oilers’, see recent coverage by Bloomberg.
Western oil companies are betting on advanced exploration, drilling and extraction technologies to find the new oil reserves that would be needed to feed the world’s growing economies. If the new drilling technologies are succesful, it could open up possibilities for further exploration of areas that are currently off limits. In Europe, the so-called “High North” Arctic area could become a target for new European oil findings (see EURACTIV 29 August 2006).
Security of energy supply has become one of the EU’s main priorities in recent years. The Commission published a Green Paper on a European Strategy for Sustainable, Competitive and Secure Energy in March 2006.