FINANCIAL CRISES IN ENERGY SECTOR

Financial Crises in Energy Sector

Financial Crises in Energy Sector

Introduction

The global financial crunch has had a profound negative impact on the energy sector the world over. This paper is based on a case study regarding WHL Energy Ltd, the company which had to bore a significant loss due to financial crises. The Investment in infrastructure is needed to meet the demand and replace the aging infrastructure. Tense situations between supply and demand ensued with power cuts and even blackouts have had a tremendous impact on energy sector in Europe (Schmölders, 2008, 53). In addition, the majority of newly built power plants and planned use of fossil fuels, including gas, increasing dependence on Russia and generating CO2 emissionsm; the economic and financial crisis of the last eighteen months has changed the balance between supply and demand in Europe. The latter fell, calm situation in the short term, but investment in infrastructure has also fallen, which is worrying for the long term (Schmidt, 2009, 72).

In recent years, the energy industry has been under very strong pressure processing as managing environmental challenges and regulatory forces, securing supply sources and income generation with profitability, among others. Today, like the rest of the business world, this industry is facing the worst financial crisis since the Great Depression.

Macroeconomic Indicators

The companies in the energy sector (such as WHL Energy in this case), have suffered downturns better than many other sectors but can they remain immune to the prevailing tight credit markets? Or speed up the plight of the global financial markets change in this industry? The reality is that there is unprecedented volatility in the energy sector (Rorty, 2009, 49).

An increase in interest rates could seriously impact operations and prices. Many of the smaller companies in the sector (such as WHL in this case), are highly leveraged. Refinancing and debt service of those in the prevailing financial environment will be expensive, but it is not clear that this increase in costs can be recovered through prices. Most operators in the sector is regulated and could be in serious trouble if regulators oppose an increase in prices (Paul, 2007, 23).

Most financial analysts are trying to reassure and reassure the public by stating that "economic fundamentals" are good. This opinion is at least questionable: the traditional economic indicators (ACC or the Dow Jones, GDP), sufficient to characterise the fundamentals of an economy? The crisis could be aggravated by a fundamentally weak economy because of rising tensions on energy, raw materials and natural resources. More generally, systemic risks in the current period are very high: the pressure on natural resources, health risks, the risks of climate catastrophe, as in China in January 2008, terrorist risks, all of these issues can compose and enhance the current crisis of confidence. It is also very likely that even in times of crisis triggered high-voltage oil inevitable in the coming years, given the imminent arrival of peak oil- would probably have been uncontrollable by central banks (Paliwoda, 2009, ...