Oil price spike highlights need for green energy development
Numerous factors are transpiring that have resulted in strikingly higher petroleum prices, and businesses and consumers need to prepare themselves. Oil prices had crashed in 2008 due to the financial crisis and subsequent recession. The global economy continues to recover, the U.S. Federal Reserve just revised their 2011 US GDP forecast from 3.4% to 3.9%. This is in addition to emerging economies such as China and India that were relatively unscathed by the 2008 crisis and have seen GDP growth of 10%. Higher global economic activity increases demand for petroleum products which will in turn lead to higher prices.
The second and more immediate concern is the wave of political turmoil sweeping the Middle East, with populist revolts having struck Tunisia, Egypt, Libya, Bahrain, Yemen, Iran and Morocco. Oil prices have already risen from $82.00 per barrel in January to over $100.00 per barrel as of February 24, 2011. Upward price pressure is expected to continue, particularly as the long-term impact of the revolts is unknown. It is possible that decidedly anti-US governments may arise, particularly in Bahrain where the US Fifth Fleet is based. The loss of such a key base would leave a vacuum in the Persian Gulf which a hostile Iran would certainly try to exploit.
Given the prospect of higher oil prices, businesses and consumers should take appropriate measures to protect themselves. Some prudent steps include:
- Identify mission-critical business processes that would need to be kept running in the event of a severe oil price shock?
- Do employees have the ability to work remotely via laptops or web-accessed company networks?
- Arrange for workers to carpool?
- Can you secure needed raw materials in advance, or lock in prices via contracts?
- Is your business purchasing energy-efficient vehicles, HVAC systems and weatherizing your buildings? Are you giving employees incentives to do the same at home?
The U.S. dependence on imported petroleum must be decreased to reduce the threat to our economy and society as a whole. Expedited development and use of replacement and alternative energy sources such as natural gas, biomass, wind, solar, geothermal and nuclear power are prudent steps.
William Gallagher Associates is a leading provider of insurance brokerage, risk management and employee benefits services to firms with complex risks and dynamic needs, within industries that include technology, life sciences, financial risks, health care, renewable energy & clean technology, and environmental services. WGA has offices in Boston, MA; New York, NY; Hartford, CT; Princeton, NJ; Columbia, MD; and Atlanta, GA.