Japan nuclear disaster to change global energy market

NEW DELHI: Japanese nuclear disaster is set to achieve a dynamic change in the global energy market, which may force countries to reconsider their choice of fuel.
"Rising energy prices, coupled with high interest rates is toxic for any economy that was last seen in late 1970, and is now playing out for the first time since then," said chief economist British Petroleum, Christof Ruehl ET shortly after the presentation of BP Energy Outlook 2030.
And interest rates began to rise in countries that are not members of the Organization for Economic Cooperation and Development (OECD) countries such as India, China, Brazil and some European countries. The disaster in Japan lead to a slowdown in new or additional nuclear capacity, and in the short term, lead to an increase in demand for gas and coal. Since a large number of U.S. consumers, Japan, China and India have to rely on imported gas is expected to boost natural gas (LNG) trade, which had fallen after the global recession and the increased use of gas shale in the markets USA.
"The contracts of long-term gas will now be further indexed to crude oil. But now that Japan and Korea will focus on energy security and long-term contracts, vendors are to be linked to crude oil prices," Ruehl said.
The nuclear disaster will lead to increased demand in the short term, that can be met easily. But the linkage with crude oil is likely to keep upward pressure on gasoline prices. The natural gas market has undergone some significant changes in recent years after the reforms in the European electricity market and the development of shale gas in the U.S..
Energy reforms in Europe has allowed the utilities to demand re-worked contracts that were not linked to oil.
The geopolitical issue could affect supplies of crude oil and countries like Saudi Arabia, the strength to put their unused capacities. The volatility of crude oil prices has been a factor and is expected to remain so, even in the future. Geopolitics also play an important role in fuel prices in the troubled nation. "No matter who wins individual or regime, there is a growing tendency to subsidize fuel prices in the new governments will be forced to offer cheap fuel to keep the people calm," said Ruehl.

(SOurce: http://articles.economictimes.indiatimes.com/2011-03-23/news/29178194_1_shale-gas-energy-prices-bp-energy-outlook)