US companies potential victims

US companies potential victims, goats in energy crisis: report

New York (Platts)--1Apr2004


US companies, which are the largest users of energy supplies, "could find
themselves being both the victims of -- and blamed for -- rising prices and
energy shortages" occurring from an energy crisis, a new report by The
Conference Board claims. The report, which was based on a survey of 103 large
US companies, was released Thursday. It said that 80% of the surveyed
companies rated energy as either very or extremely important to their
business. While energy in the US "has long been a relatively low-cost and
generally abundant business commodity," the report notes that "traditional
assumptions of abundant supplies and low costs are threatened by more frequent
and more varied crises, ranging from prolonged regional blackouts to price
spikes and/or potential supply shortages due to aging distribution
infrastructure, to backlash from environmentalists and governments."

Looking at a variety of energy sources, the report said oil, which is the
backbone of the US transportation sector, "remains abundant but very unevenly
distributed," with reserves increasingly concentrated in politically high risk
regions of the globe. Natural gas, an increasingly important part of the US
energy mix, will continue to have ample supplies worldwide, although major
consuming nations such as the US will continue to have a domestic supply
deficit, the report said. It noted that gas prices in the US "have increased
dramatically, with little immediate relief in sight. At least part of the
decline in US manufacturing jobs and competitiveness in some industrial
sectors is increasingly attributed to this price rise." While US coal supplies
are both abundant and cheap, the report notes that both climate change and air
quality problems associated with its use could limit its expanded use.

Electricity, which is heavily dependent on gas and coal feedstocks, is likely
to see its costs continue to rise along with those of the underlying fuels,
the report says. And it notes that, "while supplies in the US are adequate,
the 2003 blackout experienced by more than 50-mil people underscores frailties
in the distribution system." Report co-author Meredith Whiting, a senior
research fellow at The Board, was quoted in a release as saying that,
"business' domination in energy consumption, with everything it implies in
terms of exposure, risk, responsibility, and reputation, will continue as
companies plan for growth and further globalization."

This story was first published in Platts real-time news and market reporting
service Platts Global Alert
(http://www.platts.com/Oil/Real-Time%20Information/Global%20Alert/ ).