Efforts to expand oil production are constrained by shortages and rising costs for materials and labor, as well as widespread project delays.

As fears of a US recession ripple across the globe, analysts and energy experts are wondering whether the great oil boom of the past five years is finally coming to an end--or whether it is simply taking a break.
While an economic slowdown might lead to lower oil demand, as consumers scale back their gasoline consumption and businesses cut air travel, some economists say this might not necessarily produce lower energy prices. Global oil supplies are tight, geopolitical tensions remain high, and producers are counting on higher prices to offset rising costs.
After briefly touching the $100-a-barrel mark twice, oil prices have shed 13 percent since the beginning of the year. Crude oil futures on the New York Mercantile Exchange dropped $2.22 a barrel, or 2.5 percent, to close at $86.99 a barrel on January 23, their lowest level since October, International Herald Tribune reported.
Even as economic growth slows in the United States, some experts fear the world might still find itself confronted with high energy costs, a situation that would be reminiscent of the mid-1970s or the early 1990s.
Despite the clouds hanging over the economy, and recent stock-market losses, several energy analysts said they believed that oil prices would average $80 a barrel this year, $8 a barrel higher than last year’s average--and nearly double the figure of 2004.
The prospect of a collapse in oil prices, like the one that drove oil to $10 a barrel after the Asian financial crisis in the late 1990s, remains fairly remote. In fact, energy traders are betting on historically high prices into 2010, paying around $83 a barrel for futures contacts that call for delivery of oil in two years.
“The rally of the past few years seems like it is coming to an end,“ said Antoine Halff, the head of commodities research at Newedge, a brokerage firm.
“But does it mean we’re reverting to the lows we had previously? There are other factors that are providing a floor to prices.“
Efforts to expand oil production are constrained by shortages and rising costs for materials and labor, as well as widespread project delays.
And geopolitical tensions in Iraq and Nigeria--and more restrictive policies in Russia and Venezuela toward foreign investment in oil fields--have hampered production growth from some of the world’s most important suppliers.
“I don’t think we will have a day of reckoning for oil prices, because I don’t think we have a bubble,“ Halff said.
Experts are concerned that high energy prices could begin to weigh more heavily on the economy, now that lower growth appears to be at hand. On a visit to Cairo, Samuel Bodman, the US energy secretary, told reporters that high prices were starting to hurt the US economy.
“The economy has been able to withstand it until now,“ Bodman said. “I believe the $100 price of oil is starting to have an impact.“
For the moment, the economic slowdown has yet to translate into a significant drop in oil consumption.
Barclays Capital analysts, for example, noted that in China refineries were boosting diesel imports to address severe supply shortages.
The analysts say that a series of factors that have pushed up prices in recent years are still in play: Commercial oil inventories in industrial nations are lower than their five-year average; new production growth from non-OPEC producers is weak; and slower economic growth means that OPEC nations have little incentive to boost production.
Other commodities also seem to be resisting the economic headwinds.
Precious metals like gold, which traditionally act as refuge investments, have benefited from the latest interest rate cut by the Federal Reserve, while demand for aluminum, nickel and iron ore remains robust thanks to developing economies.
Experts say they simply are not sure how the economic slowdown will affect developing countries like China, India, Brazil and Russia, which have been a major source of rising commodity demand.
“There is an awful lot of ambiguity,“ said Bart Melek, the global commodity strategist at BMO Capital Markets.
Global demand for oil is still likely to grow this year by about 1.4 million barrels a day, according to forecasts by Lehman Brothers.
But some experts believe lower economic growth will drive down demand, and therefore prices. Lawrence Goldstein, an economist at the Energy Policy Research Foundation, said that from 2005 through 2007, higher prices had driven down oil demand in the United States, Europe and Japan by 700,000 barrels a day. He expects global demand to grow by fewer than a million barrels a day this year.

Around 1,666 MW of wind turbines were installed in Germany in 2007, down 25 percent from a year earlier.

Global wind energy market is set to keep growing in 2008, despite pressure on turbine makers from raw materials prices, but it is likely to slow in Germany, the German Engineering Federation (VDMA) said.
Thorsten Herdan, head of VDMA power systems, said Germany, one of the world’s biggest markets, would probably experience a further slowdown after shrinking by 25 percent in 2007, Enn.com reported.
“Worldwide we see further growth,“ Herdan said.
“The situation in the supply markets is a little tight and that has to do with the fact that lots of companies have invested in new capacity,“ he told a news conference.
The world market for wind energy grew by 30 percent in 2007, with around 20,000 megawatts (MW) installed, the VDMA said. This was compared with 32 percent growth in 2006.
Herdan said China had experienced three-fold growth while the US market had doubled in size.
Debate over European Union plans on how to share the burden of cutting carbon dioxide emissions in Europe and the planning rehaul of the emissions trading system (ETS) had, however, caused some uncertainty among investors, Herdan said.
“This current discussion is not necessarily beneficial for potential investors in the market,“ he said.
Herdan said the German outlook was gloomy, despite a draft law that seeks to make wind energy production more attractive amid plans to shut down the country’s nuclear power plants.
“Even respective of this, there will be a fall, definitely. It could happen that we have a fall of around 1,000 MW,“ Herdan said. Germany is the world’s largest producer of electricity from wind power and has 22,247 MW installed.
Hermann Albers, President of the German Wind Energy Association, said the German market was under pressure from high raw material and energy costs, which make up around 10-20 percent of total manufacturing costs, according to the VDMA.
Around 1,666 MW worth of wind turbines were installed in Germany in 2007, down 25 percent from a year earlier.
Albers said the turbine industry was not planning to move production to other countries, unlike Finnish cellphone maker Nokia, which last week it announced the closure of a German plant.
“Our policy at present is that Germany continues to be an attractive market,“ Albers said.
He added that while Germany’s first offshore wind farms should be running by 2010, they were not going to be the answer to Germany’s energy needs.
“The wind industry and power companies are in agreement that we are going to have relatively small capacity, even taking into account climate protection,“ he said, estimating that around 500 to 1,000 MW were expected to be produced from offshore in 2010.
“The onshore market remains and will remain of central importance for the industry and the government’s climate protection program,“ he said.

Two decades after Americans abandoned diesels as smelly, loud and unreliable, German and Japanese automakers are placing bets that they can entice a new generation of drivers with clean diesel technology.
Japan’s Honda Motor recently announced plans to introduce clean diesel under its luxury Acura brand next year, while Toyota Motor said it would bring diesel versions of its Tundra truck and Sequoia sports utility vehicle to the US in the near future.
According to AFP, Germany’s Daimler has reported strong diesel sales among buyers of its luxury Mercedes brand and is bringing three new diesel SUVs to the US market this year, while both BMW and Volkswagen will bring diesel cars to US showrooms this fall.
But, while foreign automakers are trying to entice consumers to buy the performance and fuel economy of diesel, US automakers are shaking their heads.
“It’s not something I see being a major factor in the US car market,“ GM chief executive officer, Rick Wagoner, told reporters on the sideline of the Detroit auto show.
“You will see us expanding our diesel offer, primarily for heavier vehicles because we see that’s where the application is clearest,“ he said, adding that GM could rapidly introduce the diesels it currently sells in Europe to the United States if conditions change.
While Ford Motor Co., is planning on bringing diesel to its lighter duty Ford F-150 pickup truck in 2010, it has no plans yet to introduce clean-diesel into smaller vehicles, a spokesman said Tuesday.
Instead, it plans to build half a million vehicles a year with its newly introduced Ecoboost system that can provide fuel economy savings of up to 20 percent at a more affordable cost.
Diesel offers about a 30 to 35 percent improvement in fuel economy compared to gasoline, but the technology needed to meet stringent new emissions rules imposed here last year adds between two and three thousand dollars to the cost.
That’s less than the three to five thousand dollar markup on most gas-electric hybrids, which often fail to deliver equivalent fuel economy savings in typical US driving conditions.
But unlike in Europe, where higher gas taxes pushed consumers towards diesel, American consumers have been reluctant to buy diesels in anything but heavy-duty trucks following a disastrous introduction in the early 1980’s.
In response to an onslaught of small cars from Asian automakers during the last oil crisis, US automakers rushed diesel engines to market which were so poorly designed they would break down after about 30,000 miles.
Diesels currently only account for about 3.5 percent of vehicles sales in the US, compared to around 60 percent in Europe.
“When Honda is committed to a diesel, now I know it’s time for diesels,“ Karl Brauer, editor in chief of Edmunds.com, said in a recent interview.
“We’re seeing enough items align in terms of fuel prices and really good versions of diesels that aren’t loud and clackety and smelly and smoky that diesel’s got a better chance now then it’s ever had in the past.“
The biggest threat to the expansion of diesel in the United States is the concern among automakers that emissions regulations could be tightened even further, said John Wolkonowicz, an analyst with Global Insight.
“Because diesels are very torquey at low speeds, they’re really fun to drive, so I think diesels could be a way to both maintain the fun to drive that Americans like so much while improving the overall fuel efficiency of the vehicle,“ he told AFP.
“But the auto manufacturers are hesitant to bring lots of diesels into the US because the legislative picture isn’t clear yet.“