Reaction to the Gulf oil spill has been intense. Pictures of oil-covered seagulls and dead fish have made BP the most hated company in the U.S. But little attention has been paid to the higher energy costs that will likely be the disaster's broadest economic consequence.
The Gulf spill will make energy production, particularly off-shore drilling, more regulated. This will make it more expensive for investment firms to look for energy and to produce it.
“Consumers will bear the costs of the regulations,” said Dan Revers, managing partner of ArcLight Capital, which invests in oil, gas and coal power.
Kenneth Hersh, CEO of NGP Energy Capital Management, believes it’s naïve to think there will be no investor ramification. “Both the amount of capital available for investment as well as returns will suffer in the short to medium term,” he said, adding that the recent moratorium on off-shore drilling has put off-shore investments in “total jeopardy.”