Welcome to the ODAC Newsletter, a weekly roundup from the Oil Depletion Analysis Centre, the UK registered charity dedicated to raising awareness of peak oil.
The world could soon be short of oil again, despite the worsening fiscal crisis, says the IEA. Although the turmoil in Europe threatened to engulf Italy — with the world’s third largest bond market – and the US budget standoff threatened its AAA credit rating, the Agency raised its 2012 oil demand growth forecast by 270,000 barrels/day. It also hinted that even with a 700,000 barrel hike in Saudi production in June, another emergency stock release may be on the cards to ease the supply crunch created by the war in Libya. The agency described OPECs current production as “well short” of what is required in Q3 to keep markets supplied.
Yet the world still has far more fossil fuels than it can afford to burn, and this could hammer oil company valuations, according to a report from the Carbon Tracker Initiative this week. Unburnable Carbon — Are the world’s financial markets carrying a carbon bubble? argues that the fossil fuel industry is vastly overvalued since, according to global pledges to keep global warming to under 2oC, 80% of its assets could be unusable. The report calls for a review of the way in which fossil fuel companies are valued to take carbon budgets into account rather than simply rely on reserves.
Energy Secretary Chris Huhne launched his Energy Market Review white paper this week to mixed reviews. Billed as the biggest shakeup in the electricity market since privatisation, it is intended to accelerate decarbonisation while keeping the lights on, and the big winners include offshore wind and nuclear. Existing nuclear operators — largely EDF — are handed a huge windfall, through the carbon floor price, money which surely could have been better spent elsewhere.
The government has also set the emissions performance standard at 450g CO2/kWh, making new gas power stations a feasible option. The government claims this is essential in order to provide a bridge fuel and to balance intermittency — the wrong price signals will however risk strengthening UK dependence on gas, which is increasingly reliant on imports, and risk making emissions reductions unattainable.
Oil
Crude Heads for First Weekly Decline in Three Weeks on U.S. Debt Concern
Oil slipped, heading for its first weekly decline in three weeks, as concern U.S. debt ratings may be downgraded outweighed prospects for economic expansion in the world’s biggest crude user.
Futures have declined 2.5 percent in London and 1 percent in New York this week. Treasury Secretary Timothy F. Geithner said yesterday that there’s no possible extension to the time limit to raise the debt ceiling, while Standard & Poor’s joined Moody’s Investors Service in reviewing the U.S. rating. Crude may rebound next week, according to a Bloomberg News survey of traders and analysts…
Saudis Deliver on More Output
Saudi Arabia is delivering on its promise to unilaterally boost oil production in response to OPEC’s failure to agree to a collective output increase last month, according to the International Energy Agency.
The IEA said the kingdom’s oil production had increased substantially last month, up 700,000 barrels a day to 9.7 million barrels a day—the highest monthly level since February 2006. The agency, which advises industrialized nations on energy policy, said July production might rise to as much as 10 million barrels a day…
OPEC sees world oil demand slowing in 2012
World oil demand is likely to grow more slowly in 2012 because of a fragile global economy and deepening decline in consumption in Europe, the Organization of the Petroleum Exporting Countries said in its first forecast for next year.
Oil prices could draw some support from a lingering supply shortfall of more than 1 million bpd between the anticipated demand for OPEC crude and the amount pumped by the 12-member group, although increased output from top producer Saudi Arabia has narrowed the gap…
UK oil and gas drilling falls 52% in second quarter
Drilling for oil and gas in British waters fell sharply in the second quarter of this year, according to industry figures.
Exploration for new reserves was down by more than 50% when compared with April to June of last year…
US solution to oil crisis simulation: drill more
November 17, 2011: A helicopter gunship attack, possibly by al-Qaida militants, has disabled the world’s largest crude processing facility in Saudi Arabia, turning the sky a bright fiery orange and knocking out a significant chunk of global oil supply.
In Washington, the national security team assembles to advise the president on how best to reassure the public and stop the US sliding back into recession. Their solution? Drill more American oil…
China halts drilling at leaking oil platforms
China has ordered US oil company ConocoPhillips to halt drilling at two leaking oil platforms in the Bohai Sea, with a warning that further spills posed “a huge threat to the oceanic ecological environment”.
The injunction comes amid rising public anger over a slick that has spread at least 840 sq km, despite corporate reassurances that the situation was under control and government delays in releasing information…
Gas
Rival Claims to Sea Territory Made by Israel and Lebanon
Israel is to submit a claim to the United Nations in the next few days demarcating its maritime boundary with Lebanon, officials here said Sunday, amid a dispute between the countries over an area of the Mediterranean Sea that is potentially rich with energy resources.
The Israeli cabinet approved a map of the Israeli-proposed line on Sunday. “This boundary will delineate the area in which the state enjoys exclusive economic rights, including the right to exploit the sea’s natural resources,” Prime Minister Benjamin Netanyahu told his cabinet. “Our goal,” he said, “is to determine Israel’s position regarding its maritime border, in keeping with the principles of international maritime law.”…
Drilling Into New York’s Fracking Report
The New York Department of Environmental Conservation has posted the voluminous draft document laying out how the state plans to regulate the controversial gas drilling method known as fracking.
As was noted last week, this revised version of the state’s environmental impact statement calls for a ban on horizontal drilling with hydraulic fracturing in the watersheds and aquifers that supply drinking water to residents as well as in state parklands…
Fracking Water Killed Trees, Study Finds
A study that argues for more research into the safe disposal of chemical-laced wastewater resulting from natural gas drilling found that a patch of national forest in West Virginia suffered quick and serious loss of vegetation after it was sprayed with hydraulic fracturing fluids.
The study, by researchers from the United States Forest Service, was published this month in the Journal of Environmental Quality. It said that two years after liquids were legally spread on a section of the Fernow Experimental Forest, within the Monongahela National Forest, more than half of the trees in the affected area were dead…
Electricity
Energy giant RWE puts brakes on new coal and gas plants
German energy concern RWE says it will not start building any more gas or coal-fired power plants after ones already under construction are completed. But additional investments in renewables will have to wait a while.
Essen-based energy concern RWE is moving away from conventional power generation as of 2014 to focus on renewable energy sources like wind power, the company announced earlier this week…
France aims to rebalance its energy mix
France will on Monday begin a big push on renewable energy that could signal a weakening in the traditional hold of nuclear power over a country that has long led the field in atomic energy.
“Our objective is to rebalance the energy mix in favour of renewables,” said Nathalie Kosciusko-Morizet, ecology minister, in an interview with the Financial Times as she prepared to launch a €10bn ($14.2bn) tender for five new offshore windpower farms. “France remains attached to nuclear power, but we are also weighing up the markets of the future and their new technologies.”…
Nuclear
Japan Premier Wants Shift Away From Nuclear Power
Prime Minister Naoto Kan said Wednesday that Japanshould reduce and eventually eliminate its dependence on nuclear energy in what would be a radical shift in the country’s energy policy, saying that the Fukushima accident had demonstrated the dangers of the technology.
It was Mr. Kan’s strongest stand yet against nuclear energy in the aftermath of the multiple meltdowns at the Fukushima Daiichi nuclear power plant, which was ravaged in the March 11 tsunami and suffered a substantial radiation leak. At least 80,000 people have been evacuated from around the plant, and radioactive materials have been detected in tap water as far away as Tokyo, as well as in agricultural produce like vegetables, tea and beef…
Germany Could Restart Nuclear Plant to Plug Energy Gap
Germany’s energy agency is warning that one of the German reactors mothballed in the wake of Fukushima may have to be restarted to make up for possible power shortages this winter and next. Berlin is also using money earmarked for energy efficiency to subsidize coal-fired power plants.
Nuclear energy, as has become abundantly clear this year, has no future in Germany. For once the government, the parliament and the public all agree: Atomic reactors in the country will be history a decade from now…
Biofuels
US ethanol refiners use more corn than farmers
US ethanol refiners are consuming more domestic corn than livestock and poultry farmers for the first time, underscoring how a government-supported biofuels industry has contributed to surging grain demand.
The US Department of Agriculture estimated that in the year to August 31 ethanol producers will have consumed 5.05bn bushels of corn, or more than 40 per cent of last year’s harvest. Animal feed and residual demand accounted for 5bn bushels…
Brazil looks to US to kickstart biofuels
Moves by the US to scrap ethanol subsidies and tariffs could prove to be the catalyst that transforms Brazil’s biofuel industry from a sprawl of debt-ridden family farms into the world’s alternative energy hub.
However, it is a transformation that could also heighten tensions over food security and cause deep social changes in Brazil as air-conditioned harvesting machines replace thousands of low-income manual labourers…
Food
China’s Hunger for Corn Turns Market on Ear
A Chinese buying spree for U.S. corn is putting on display the ability of Beijing to reshape grain markets as well as the cost of food globally.
China this past week bought 540,000 metric tons of U.S. corn for delivery after August, according to the U.S. Department of Agriculture, more than the 500,000 tons the agency forecast that nation would buy in an entire year. The news drove corn prices higher on Thursday and Friday, to settle at about $6.75 a bushel, giving new life to the market after a three-week slump…
UK
Offshore wind the big winner in government’s renewables roadmap
The government has set its sights on slashing the costs of offshore wind, aiming to deliver as much as 18GW of energy capacity from wind farms off the UK coast by 2020.
The target forms the centrepiece of a new UK Renewable Energy Roadmap published alongside today’s Electricity Market Reforms, which details how the government plans to draw on eight low carbon technologies to help ensure its legally-binding renewables targets are met…
Green groups fear electricity reforms will spark “dash for gas”
Green groups have today voiced concerns the most immediate impact of the wide-ranging electricity market reforms announced by the government yesterday will be a new “dash for gas” that will lock the UK into a new generation of carbon intensive infrastructure and leave the economy exposed to volatile fossil fuel prices.
Speaking at the launch of the government’s new whitepaper on electricity market reform, Energy and Climate Change Secretary Chris Huhne admitted that one of the aims of the reforms was to ensure the construction of a new fleet of gas-fired power stations…
UK energy reform to generate two-tier victors
As soon as the government published its white paper on electricity market reform, executives from the UK’s “big six” utilities began poring over the document’s 236 pages, trying to judge how it would affect their interests.
These energy companies, famed for their lobbying power, made their preferences clear throughout the process of drafting the white paper. Chris Huhne, energy secretary, had to listen to their views because he will depend on the utilities to provide the £110bn ($177bn) of investment in new power stations and electricity networks that the UK needs…
Fuel poverty affects one in five households
More than a fifth of all households in the UK were affected by fuel poverty in 2009, government figures have shown.
Higher fuel bills meant the number of homes affected rose by one million, or 22%, to 5.5 million, the Department of Energy and Climate Change said…
Geopolitics
Will oil bring Muammar Gaddafi down?
Despite suggestions of a change in Nato’s approach towards the Libyan conflict, particularly the possibility of a negotiated settlement, the outcome may eventually hinge on something much more basic: supplies of fuel.
This was perhaps most visible in Nato’s recent strikes on refuelling depots used by loyalist forces near Brega. The most easterly town under Muammar Gaddafi’s control, Brega is reportedly the most heavily defended urban centre after Tripoli. Gaddafi’s motivation here is clear. If he loses Brega the opposition will gain almost total control of Libya’s eastern oil network, with access to a rumoured 2m barrels of stored crude…
Economy
Moody’s to review US triple-A debt rating
Ratings agency Moody’s has said it may cut the US AAA debt rating, citing the “rising possibility” the US could default on its debt obligations.
The agency warned the likelihood the US would fail to raise its statutory debt limit in time to avert default was low but not insignificant…
China’s economic growth eases
While China’s economic growth remains far faster than that of Western nations, it eased slightly for the second quarter in a row.
China’s economy grew at an annual pace of 9.5% between April and June, the National Bureau of Statistics said Wednesday. That marks a slight slowdown from the first quarter, when GDP grew 9.7% year-over-year…
Why are fossil fuel assets Triple-A rated?
Why are the stocks and shares of carbon-intensive firms Triple-A rated when they face significant legislative, reputational and environmental risks in virtually every geography in which they operate?
It is a question that is gaining traction among green investors, and one which looks set to gain fresh momentum following the release of a report today investigating how the valuation of many fossil fuel firms is based on coal, oil and gas assets that climate change policies may ultimately stop them from exploiting…
