(Reuters) – President Barack Obama on Tuesday pledged to do all he could to contain the BP Plc oil spill and help the Gulf Coast recover.
“We will fight this spill with everything we’ve got for as long it takes. We will make BP pay for the damage their company has caused,” Obama said in a televised address.
Obama also said he was happy to take ideas from Democrats and Republicans on broad energy legislation but said the United States could not afford to avoid changes in its energy use.
The high-stakes address to the nation is seen as an attempt to restore public confidence in his handling of the Gulf of Mexico oil spill and drive forward his ambitious plans to cut U.S. dependence on fossil fuels.
BP’s efforts to curb the flow of oil into the sea suffered another setback when a fire aboard a ship collecting the gushing crude forced suspension of siphoning from the ruptured underwater well. But operations were restarted before Obama spoke.
Commentary:
Toby Hassall, Chief Analyst, CWA Global Markets Pty Ltd in Sydney:
“It’s certainly a case that the longer the spill continues, the more pressure it will be on Obama to really make a significant policy response. The U.S. oil industry will certainly face tighter regulation and that is why we’ve seen oil prices respond at the back-end of the forward curve. The immediate implication of tighter regulations would be higher cost of production and potentially reduced supply relative to the status quo.”
“The main dilemma for the Obama administration will be to balance the public calls for a tight regulation and making sure that the new policy wouldn’t stifle the industry. Because overly-strict regulations would not just affect production but could also affect jobs if exploration in the Gulf slows down.”
Ken Hasegawa, Commodity Derivatives Manager at Broker Newedge in Tokyo:
“I don’t think that they can recover 90 percent of the leaking oil within days. Obama is sounding an alarm for BP, and his stance is urging BP to promise compensation to the U.S. losses.”
“I don’t think this would have immediate impact for those doing business in crude, but a negative impact to oil development is expected in the future.”
Michelle Quek, Analyst, Informa Global Markets in Singapore:
“From when the BP oil spill has emerged, it has had very minimal impact on short-term oil prices.
“The main focus for the industry is still what new energy regulations the Obama administration will introduce and how stringent they will be. In the medium term, there will definitely be a crimp in oil production, which will be gradually factored into the prices.”
Ben Westmore, Commodities Economist, National Australia Bank:
“What they do with BP is of less consequence than the regulatory impact on production and exploration in the Gulf.”
“The Gulf contributes 2.5 million barrels a day to global oil production. In the March quarter, global production outpaced demand by 700,000 barrels a day so a one third cut in Gulf output would quickly bring the market back to balance.”
“Reviewing what’s coming online and what’s falling off is a medium to longer-term dynamic but this is likely to tighten supply.”
“Obama is going to peddle this for all it’s worth. If you think there will be supply-side pressure from shutting down offshore drilling then it makes sense to look at onshore production — things like oil sands — which have a higher cost.”
Ben Pang, Analyst, Caris & Company in the U.S:
“Basically, a non-event here. It was really backwards looking. When he talked about alternative energy, he talked about what he already did — and not what he needed to do.
“I don’t think it’s going to do too much for the alternative energy sector tomorrow, that’s for sure.”
Paul Gahdmar, Group Financial Controller and Company Secretary, Petsec Energy Ltd in Australia:
“It’s not going to affect Petsec directly on the basis we are a shallow water driller and the moratorium in place is for deep water, anything above 500 feet, but where it may impact us in the regulatory permitting for new wells in the Gulf.”
“It might take longer to get that through.”
Market Reaction:
— U.S. crude futures were up slightly in Asian trade on Wednesday as the speech started to $77.14 a barrel, while Brent traded higher as well at $77.40 a barrel.
Ahead of the speech, U.S. crude futures rose $1.82, or 2.42 percent, to settle at $76.94 a barrel, the highest since the $77.11 close on May 6. It traded as high as $77.16 on Tuesday, highest intraday since $77.68 was struck on May 11.
In London, expiring front-month July ICE Brent crude futures rose $1 to settle at $76.20, going off the board at a deficit to it’s U.S. crude counterpart.
Background:
— Public opinion polls show a majority of Americans believe Obama has been too detached in his handling of the spill, and he has come under intense pressure to show more leadership.
Adding a fresh sense of urgency, a team of U.S. scientists on Tuesday upped their high-end estimate of the amount of crude oil flowing from the well by 50 percent, to a range of 35,000 to 60,000 barrels (1.47 million and 2.52 million gallons/5.57 million and 9.54 million liters) per day.
The address is also seen as an important benchmark for the oil industry and investors worried about the future of offshore drilling in the United States, in particular the possibility of tighter regulations that could impose new financial costs.
The speech has caught the attention of advocates who want to jump-start alternative energy initiatives such as solar, wind and geothermal that are now stalled in Congress.
Shares in U.S. solar companies rose ahead of the speech.
Article by Fayen Wong, Osamu Tsukimori, Nick Trevethan, Dana Ford, James Regan; Edited by Ed Lane; appearing courtesy Reuters.
photo: DonkeyHotey
