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£1bn windfall from carbon trading

Roger Harrabin, BBC News
Power firms could make a £1bn windfall profit from the EU Carbon Emissions Trading Scheme, BBC News has learned.

The windfall is likely because many firms have benefited from increases in electricity prices brought about by the scheme without needing to make any extra investment in return.

Peter Bedson, from IPA Consulting, confirmed to the BBC that the unwarranted profit could reach £1bn.

Environmental pressure groups have called the news a scandal.

Part of the problem, Mr Bedson said, is that firms have been given, free-of-charge, the carbon emissions permits on which the scheme is based. This, he explained, is like the government giving energy firms free money.

The WWF pressure group has demanded a windfall tax to re-direct the profits into energy conservation.
(1 May 2006)

High oil prices endanger future of airline industry

IAGS via EV World
SYNOPSIS: The current spike in oil prices is taking the airline industry into uncharted territory and raising questions about the economic viability of many players in the industry.

The current spike in oil prices is taking the airline industry into uncharted territory and raising questions about the economic viability of many players in the industry. In order to protect itself, the airline industry must support initiatives to reduce oil consumption in the ground transportation sector, where most oil is consumed. This is the conclusion of a study prepared by the Institute for the Analysis of Global Security (IAGS) and presented before leaders of the airline industry in Beijing earlier this month.

The report, entitled “The Oil Crisis and its Impact on the Air Cargo Industry,” presents a grim outlook for the future of the global oil market stemming from a combination of increasing volatility in major oil producing countries, geological depletion, terrorism, lack of investment and frantic weather patterns. It suggests that oil prices, currently hovering near $75 a barrel could double should a combination of unfortunate events occur.

“No doubt increasing oil prices are likely to dampen global trade. Air cargo traffic is a leading indicator of any economic slowdown. The air cargo industry itself, in which fuel accounts for 20-30% of the operational cost, is poised to be the prime casualty of the new era of expensive oil,” the report says. “Jet fuel prices have almost tripled in the past four years. As a result, the world’s airlines spent over $100 billion on fuel in 2005, a 50% increase over 2004. At reasonable oil prices of $30-$40 a barrel, world air cargo traffic was projected triple over current traffic levels.” But the recent market conditions suggest a more modest growth.
(1 May 2006)
Related: Fuel costs double loss at Easyjet (BBC)

Bolivia stirs fears of energy producer power

LONDON (Reuters) – Bolivia’s startling seizure of its gas fields has intensified fears of “resource nationalism” tightening global energy supplies and inflating prices for years to come.

Emboldened by record oil prices, producer governments from Venezuela to Russia are grabbing more money and control from foreign investors.

“When government action, whether it goes by resource nationalism or any other name, dampens or deters investment — it’s going to fuel the money coming into the market and be price supportive,” said Michael Wittner of investment bank Calyon.

The nationalization of Bolivia’s gas sector has added yet more bullish sentiment to a world oil market already driven beyond $74 on fears of supply outages from OPEC producer Iran.

Producers have struggled to keep pace with explosive energy demand growth in Asia and the United States that has fueled oil’s four-year rally.

Consumer governments have urged producing nations and oil companies to inflate the supply cushion for the world’s 85 million barrels per day market. Spare output capacity now stands at about two million bpd, most of that in Saudi Arabia.

For foreign investors, the challenge is that the world’s remaining energy reserves lie in the Middle East and Russia where doing business in oilfields can be too dangerous or costly — or, in the case of Saudi Arabia, off limits.
(2 May 2006)

Bolivia nationalizes the oil and gas sector

Paulo Prada, NY Times
RIO DE JANEIRO, May 1 — President Evo Morales of Bolivia ordered the military to occupy energy fields around the country on Monday as he placed Bolivia’s oil and gas reserves under state control.

Surrounded by soldiers at an oil field operated by the Brazilian energy giant Petróleo Brasileiro, or Petrobras, Mr. Morales ordered foreign producers to relinquish control of all fields and channel future sales of hydrocarbons through the state-owned energy company.

He gave foreign companies 180 days to renegotiate existing contracts with the government, or leave the country.

“The time has come, the awaited day, a historic day in which Bolivia retakes absolute control of our natural resources,” Mr. Morales declared, according to The Associated Press. “The looting by the foreign companies has ended.”

The decree is the latest step by Latin America governments from Venezuela to Ecuador to assert greater control over the energy sector, moves that have sent shivers through foreign producers.

Motivated by nationalist politics and soaring oil and gas prices, governments have seized an opportunity to gain higher revenues while parlaying their control over future energy supplies into greater political leverage, both at home and abroad.

“Governments in the region see energy as a commodity they can use to push populist agendas,” said Adriano Pires, director of the Brazilian Center for Infrastructure Studies, an energy consultancy in Rio de Janeiro.
(1 May 2006)
Related from Wall Street Journal: Bolivia Seizes Natural-Gas Fields In a Show of Energy Nationalism

Cheap gas fuels fracas in Caracas

Tim Harper, Toronto Star via Common Dreams
CARACAS, Venezuela – Aldamar Roche, decked out in his best finely pressed Texaco togs, merely shook his head and looked down at the pavement as another in a parade of cars rode up to his pump in a Caracas suburb.

“We’re just giving it away,” he said.

Just about.

At three cents a litre, Venezuelans have the cheapest gas prices in the world, a fraction of the 56 cents they would pay for a litre of bottled water or the 70 cents they would pay for a litre of milk.

While Prime Minister Stephen Harper and U.S. President George W. Bush face increased political pressure to do something about skyrocketing gas prices which have topped $3 (U.S.) per gallon in the United States and a dollar per litre in Canada, the problem here is different.

Half the gas stations in this country say they want to shut down because they can’t make any profit selling gas that is about as expensive as the dust that blows onto Roche’s service station.

President Hugo Chavez announced last Friday he is raising the minimum wage for workers, meaning gas station owners and franchisees must pay their workers more.

But he won’t raise the price of gas for fear his poor backers from the barrios of this city will come down from the hills and bring the economy to a screeching halt as they have before.

The Venezuelan leader uses his oil riches as a political tool, sprinkling it around to curry favour in the region to further his goal of a Latin American “21st Century Revolution,” but also threatening to cut off a very needy Bush, the man reviled by Chavez as the imperialist who is threatening to invade his country.
(2 May 2006)

Ghana: High oil prices set to trigger more strikes

Jonathan Adabre, Public Agenda (Ghana)
As workers celebrated their day yesterday, one question that remained unanswered is when the agitation for higher salaries would stop, given the escalating price of crude oil on the world.

The fear is that the National Petroleum Authority (NPA) would increase prices anytime from now, which could naturally affect the cost of everything, including salaries and wages.

International oil market watchers are forecasting that in the next few months oil prices could hit an all time high of $80 per barrel and inch toward $100 mark by the end of the year, a the trend which could spell doom for the economy.

…What impact will this make on Ghana? Will the government continue its policy of allowing the market to determine petrol prices, given the fact that workers are up in arms agitating for higher wages? Certainly, there are more turbulent days ahead.

[The Executive Secretary of the Energy Commission, Dr. Ofosu Ahenkorah] has ruled out the question of reducing taxes. His reasons are that, the country derives huge revenue from businesses and petroleum. Besides, in Ghana petroleum taxes are used to support the entire government budget and for specific activities such as road maintenance, petroleum exploration etc. “Unless we can find another source of income to support these activities, I do not support the reduction in taxes. The public should rather be educated to understand the taxes”, he warned.

But Mr. Vitus Azeem, Director of the Centre for Budget Advocacy (CBA) of the Integrated Social Development Centre (ISODEC) disagrees. According to him, petroleum taxes, like any other indirect taxes are regressive. They afflict pain on the vulnerable, the excluded and the poor, he argues. To Mr. Azeem, the government does not need to look far for alternative source of revenue.
(2 May 2006)
“Public Agenda is sponsored by ISODEC to promote sustainable development through working for good governance and giving a voice to the disadvantaged.”

World Bank urges economic growth with clean energy

Ambika Behal, UPI via World Peace Herald
WASHINGTON — According to a new report validated by the World Bank, the global community needs to address issues hindering economic growth without losing sight of environmental goals. But environmental groups say the report does not indicate the way developed countries should effectively take a lead.

…Titled “Clean energy and development: Toward an Investment Framework,” the report discusses a framework of investment requirements in developing countries that will meet modern energy needs while considering environmental efficiency. The strategy could potentially affect significant energy investment.

The document outlines large-scale solutions for climate change such as new thermal plants and dams, greater funding for renewable energy and greater market liberalization.

According to International Atomic Energy Agency estimates, a total capital investment of $8.1 trillion is needed between 2003 and 2030, in order to meet the rapidly growing energy needs of developing countries. Using these figures, access to energy services will cost an average of $300 billion a year.

… Friends of the Earth also said that the report looks at how developing countries are going to be affected by a need to mobilize greater energy resources, but it does not explain how “rich countries are going to take the lion’s share of the burden — it shows the victims, not who is first and foremost responsible,” Waskow said.
(3 May 2006)