Guest Editor's Note

It's all in the fundamentals. That's the message from world energy markets throughout 2006, according to Platts' senior editors who've surveyed their markets for this issue of Insight. Government policies can spur markets, as is occurring with renewables; or retard them, as continued regulatory uncertainty is doing for electricity; or create them, as is happening with emissions.

But in the end, it comes down to the basics of supply and demand, and 2006 has given new evidence that markets, given the opportunity, function brilliantly.

Markets worked after hurricanes Katrina and Rita devastated the U.S. Gulf Coast in 2005. Dire predictions of disaster in the oil and natural gas industries just didn't come true. Prices went up, worldwide markets kicked into gear, and in the end, shortages were few.

Markets are working in renewables. As evidence of global warming takes on measurable economic dimensions, businesses see looming costs in their carbon footprints and seek profitable ways of reducing them.

The outlook for 2007 in every sector speaks to the increasing interconnectedness of world markets. Transparency and market integrity take on new importance globally. Risk management techniques pioneered in markets like foreign exchange are increasingly being applied to energy and related commodities, creating innovative business tools for producers, consumers, and the entire supply chain in between.

Challenges for 2007 include governments' increasing strategic focus on energy resources. Will international oil and gas companies, which effectively represented Western interests in the past, be shut out of new resources by national energy companies? Energy markets look to be a tactical battleground in the worldwide maneuvering.

Margaret L. Ryan Editorial Director, Platts Global Nuclear & Coal

Margaret L. Ryan