Financial Crisis: Implications for the Energy Industry

The energy markets are clearly being impacted by the tremendous problems being faced by the financial industry, according to Peter Tumminello, executive vice president of Sequent Energy Management, a wholly owned subsidiary of AGL Resources Inc. (NYSE:AGL). Tumminello discussed the impacts and the road ahead in a speech, “Financial Crisis: Implications for the Energy Industry,” at the LDC Forum in Atlanta April 6.
 
The financial markets continue to be in disarray with the recession predicted to continue into next year, Tumminello noted. The upstream energy industry is suffering, midstream infrastructure projects are fighting delays and higher costs, and many companies are being forced to live within cash flow. Also reduced liquidity in financial derivatives and increased costs for trade credit are causing some companies to rethink their participation in the marketing and trading business. Reductions in demand and lower commodity prices, among other impacts, are hitting the industry at the same time.
 
“This will be a challenging year for the energy markets, in particular natural gas,” said Tumminello. “Although the natural gas industry is facing some serious challenges today, we need to be mindful that in the long term natural gas has the potential to lead supply growth to serve power generation and other sources of demand due to ongoing greenhouse gas legislation.  We are already seeing price signals that additional natural gas storage and pipeline transportation are still needed.”