The effect of the 2010 oil spill in the Gulf of Mexico has consequences for both the demand and supply side of the oil market, but to varying degrees. Policy on

demand-side measures, carbon legislation, supply substitution, and energy reg­ulation are all likely to be affected. Overall, however, we think that the supply-side consequences are likely to be more severe.

Despite the oil spill, the large oil companies remain, by far and large, focused on oil. Even before the spill, most of them were devoting a lot of their research and development to alternative energies; for example, Exxon put in $500 000 into an electric car-sharing program in Baltimore, participated in the development of unconventional natural gas plays in Canada, and announced a $600 million partnership to develop next-generation biofuels from algae in 2009.

BP, in fact, pioneered much of the investments in the renewable sector, announcing in 2005 that it had plans to double its investment in alternative and renewable energies to create a new low-carbon power business with the growth potential to deliver revenues of around $6 billion a year within the next decade.

However, alternatives have remained a minor contributor of revenues compared to oil and this is unlikely to change soon. There might well be a step-up in the amount of work done in the renewable sector, but as long as oil remains the key transport fuel in the world, these large oil corporations are unlikely to move away from the production of crude.

The big push in renewable energy will not come from the oil majors. Feed­stock development will come from companies specialized in all aspects of agri­culture. In addition, high-tech companies with research in biotechnologies will support the development of new energy sources like waste, grass, woodchips, and algae.

Table 1.1 shows how much it costs to fill up a tank: from a luxury sports car to a cruise liner.