274 PETROLEUM TECHNOLOGY, ECONOMICS, AND POLITICS
A catastrophic event in general is an event which has severe
losses, injury, or property damage, affects large population of exposures and is caused by natural or handmade events (Fisher and
Kist 2001). Examples of catastrophic events include natural disasters, such as hurricanes, earthquakes, floods, and terrorist attacks.
Over the last 20 years, natural catastrophes have been happening
with increasing intensity.
Catastrophic events in the energy context have a slightly different meaning. They can be events with low frequency of occurrence
that cause the spot price of the energy commodity to soar. Usually
a price increase due to the catastrophic event does not have a lasting effect and the spot price tends to return to or close to its initial
value. To combat such events, it will be necessary for the non-oil
producing nations to commence development of sources of energy
other than oil.
Once all risk indicators associated with catastrophic events have
been identified and properly estimated in terms of frequency of
occurrence and impact in the underlying spot price, then the respective premium can be calculated under the common assumptions of
derivatives pricing.
In the longer term, there are many possible alternatives to using
oil, including using biofuels and improving automotive fuel efficiency, but these alternatives will require large investments, and in
some cases, major changes in infrastructure or break-through technological advances. In the past, the private sector has responded
to higher oil prices by investing in alternatives, and it is doing so
now. However, investment, however, is determined largely by
price expectations, so unless high oil prices are sustained, we cannot expect private investment in alternatives to continue at current
levels. If a peak were anticipated, oil prices would rise, signaling
industry to increase efforts to develop alternatives and consumers
of energy to conserve and look for more energy-efficient products.
Finally, with the onset of the 21
st
century, petroleum technology
is driven by the increasing supply of heavy oils with decreasing
quality and the fast increases in the demand for clean and ultraclean vehicle fuels and petrochemical raw materials. As feedstocks
to refineries change, there must be an accompanying change in
refinery technology. This means a movement from conventional
means of refining heavy feedstocks, typically using coking technologies to more innovative processes, including hydrogen management, that will produce the ultimate amounts liquid fuels from
A catastrophic event in general is an event which has severe
losses, injury, or property damage, affects large population of exposures and is caused by natural or handmade events (Fisher and
Kist 2001). Examples of catastrophic events include natural disasters, such as hurricanes, earthquakes, floods, and terrorist attacks.
Over the last 20 years, natural catastrophes have been happening
with increasing intensity.
Catastrophic events in the energy context have a slightly different meaning. They can be events with low frequency of occurrence
that cause the spot price of the energy commodity to soar. Usually
a price increase due to the catastrophic event does not have a lasting effect and the spot price tends to return to or close to its initial
value. To combat such events, it will be necessary for the non-oil
producing nations to commence development of sources of energy
other than oil.
Once all risk indicators associated with catastrophic events have
been identified and properly estimated in terms of frequency of
occurrence and impact in the underlying spot price, then the respective premium can be calculated under the common assumptions of
derivatives pricing.
In the longer term, there are many possible alternatives to using
oil, including using biofuels and improving automotive fuel efficiency, but these alternatives will require large investments, and in
some cases, major changes in infrastructure or break-through technological advances. In the past, the private sector has responded
to higher oil prices by investing in alternatives, and it is doing so
now. However, investment, however, is determined largely by
price expectations, so unless high oil prices are sustained, we cannot expect private investment in alternatives to continue at current
levels. If a peak were anticipated, oil prices would rise, signaling
industry to increase efforts to develop alternatives and consumers
of energy to conserve and look for more energy-efficient products.
Finally, with the onset of the 21
st
century, petroleum technology
is driven by the increasing supply of heavy oils with decreasing
quality and the fast increases in the demand for clean and ultraclean vehicle fuels and petrochemical raw materials. As feedstocks
to refineries change, there must be an accompanying change in
refinery technology. This means a movement from conventional
means of refining heavy feedstocks, typically using coking technologies to more innovative processes, including hydrogen management, that will produce the ultimate amounts liquid fuels from