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STRATFOR.com
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After Enron: Higher Energy Prices
December 3, 2001
Summary
Reverberations from the collapse of Enron Corp., the United States' largest energy trader, will be felt for some time. The biggest winner is Dynegy Inc., the only company that can easily incorporate Enron's assets into its own operations. But U.S. consumers will lose: Enron developed an efficient method of getting energy to customers. As the power market reworks itself to compensate, natural gas and electricity prices are sure to rise sharply.
The slick financing that helped turn Enron into a mighty power-brokering dynamo became its Achilles' heel, leaving the energy trader teetering toward bankruptcy after a smaller rival abandoned plans to buy it.
Photo Credit: David J. Phillip / The Associated Press.
(More from MSNBC.com)
Analysis
Enron Corp., America's largest energy trader, collapsed spectacularly this week.
With analysts only now picking through the debris of the company, which was the United States' seventh-largest company and biggest energy trader, it is apparent that no company other than Dynegy can pick up more than tidbits from Enron. The company is simply too large to be replaced. That's great news for Dynegy, the new industry leader, but signals increased costs for power producers, distributors and consumers alike.
One immediate effect of the company's collapse will be higher heating bills this winter. The low price of oil had raised expectations that winter fuel costs would be much cheaper than the record highs of last year, but as the market reshapes itself around Enron's corpse, that hope is shrinking into oblivion. Neither the rising costs nor the collapse of one of its largest companies will help the United States as it attempts to shake off a recession.
Enron will enter the history books as a well-executed revolutionary idea that was sabotaged by cronyism and which left mixed results.
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(Story Source)
(c) 2001 Stratfor, Inc.
Dan
After Enron: Higher Energy Prices . . .