price environment, the trend is often to focus on survival instead of expansion. If we place a low priority on preparing for the future, that lack of action can come back to haunt us through supply shortages and another round of high prices. Today's deep economic crisis has on many levels challenged conventional wisdom. It has become difficult to see when things will begin to turn around, or what long-term economic aftershocks we might encounter. In this uncertain environment, energy demand has pulled back, negatively impacting oil prices and impinging on the industry's long-term planning capability. This is also complicated by other factors, such as political rhetoric calling for reduced dependence on oil for perceived reasons of environmental sustainability, or seeking independence from a particular region. Time- and capital-intensive commitments rely on oil prices that are low enough to enable economic growth, especially for developing nations. However, prices should be high enough to provide sufficient return to producers, and allow for timely planning and acceptable risk. They should be at a level to incentivize energy efficiency among consumers; they should also be sufficient to encourage production from other sources, such as marginal fields, non-conventional sources and renewables. While volatile energy prices have heightened interest in the development of other sources of energy, called by some “alternatives” but in my opinion they should be called “supplemental”. These sources cannot contribute meaningfully to the world's energy mix until they have attained levels of affordability, accessibility, acceptance and sustainability that can come only with the investments that will enable their research, and later build and maintain their infrastructure. We frankly court disaster if these supplemental resources on which such high hopes for energy security and sustainability are pinned do not fulfill their high expectations. While all viable energies will ultimately have a role in meeting world demand, many of these sources are either in their infancy, or face too many unresolved sustainability issues, to serve as more than supplemental resources for some time. Just as the oil industry needs a long-term horizon, so do many alternatives. In years to come, if traditional energy supplies should prove inadequate because capital expenditure was curtailed due to unsustainable prices, unreliable indication of future demand, or hopes for a substitute for oil that cannot deliver, such a supply crunch would be catastrophic. The painful result would also be felt sooner rather than later: it would effectively take the wheels off an already derailed world economy. --More
