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.
Oil prices jumped to over $72/barrel on Wednesday, up from below $65/barrel earlier in the week, after an unexpected drop in US inventories and a rally in the Chinese stock market. Hopes for global economic recovery rest heavily on the Chinese economy, but doubts are emerging over whether the huge government stimulus package is triggering a recovery or another dangerous asset bubble. The current oil price makes it highly unlikely that OPEC will announce any further production cuts when they meet next month.
This may be news to Bill Emmott, former editor of The Economist, who argued in the Times this week that the world’s oil supply problems are simply down to OPEC greed. Emmott’s piece dismisses peak oil as the work of “planetary doomsters” and assures readers that the world is not running out. Trotting out a series of discredited arguments, he maintains there would be plenty of cheap crude if only “the nationalists in OPEC and the extortionists in Russia” would let the Western oil companies exploit their resources instead of forcing them to go for the difficult stuff – like the Canadian oil sands, or ultra-deep water offshore Brazil . Investment here was “slow” even before the financial crisis and has collapsed since. But that will change over the next decade or so “if prices stay high”.
In a target so rich in bigotry and ignorance it is hard to know where to start. Emmott makes no mention of the peak in non-OPEC supply which is widely expected in the next decade by financial analysts and the IEA, and in spite of unfettered access for the international oil companies. He fails to acknowledge the well-founded doubts about OPEC reserves, or to understand that the spike and collapse of the oil price over the last 18 months has been entirely inimical to their interests, and had they been capable of preventing it – by pumping more oil – they surely would have. Yes, OPEC has shut in capacity today, because of the deepest recession since the 1930s, but in the years 2004-2008, when demand in the developing world was booming but global output was mysteriously stuck on plateau, the cartel was pumping flat out, just like everybody else.
His argument that the oil supply will be restored to health “if prices stay high” is astonishing in the light of recent experience. Listen and repeat, Mr Emmott: oil-price-spikes- cause- recessions- cause-oil-price-slumps-destroy-business-case-for-marginal-oil-projects-tightens-oil-market-causes-spike. Were he a reader of ODAC News, Mr Emmott would know that 2 million barrels per day of planned oil production capacity has been cancelled or “deferred indefinitely”, and a further 4 mb/d has been delayed by 18 months or more, so creating the conditions for another spike and collapse whenever the economy recovers in earnest, as argued cogently by Steven Kopits, MD of Douglas-Westwood in June.
Mr Emmott’s arguments are astonishing not simply because he is an alleged economist, but because from 1993 to 2006 he was editor of The Economist. Older readers may recall this was the organ whose cover story on 4th May 1999 was “DROWNING IN OIL”, which argued that the world was swimming in black stuff, and the price would soon drop from $10 to $5 and stay there. Back in the real world this was the very moment the oil market turned, and the price started its decade long march to last year’s all-time high. $147 is almost 30 times higher than the price The Economist predicted. We include the link to the original story for your amusement.
Undeterred by his earlier effort, Mr Emmott concludes that the oil age will end, apparently without crisis, as a result of technological advances. We hope he is right. “Then”, he concludes, apparently without irony, “the usual forecasts will turn out to be wrong — as usual”. He should know.
Whether the recession and peak oil are keeping the Queen awake at night is unclear, but the growing debate about the links between them may have engaged her over breakfast this week, in the form of an open letter whose signatories included Jonathan Porritt and Rob Hopkins. The missive was in reply to her question about why nobody saw the credit crunch coming, and challenges a previous response from the Royal Academy that failed to include peak oil and environmental constraints in its explanation. The letter ends with an invitation to the Academy for a public dialogue on the issues.
The Queen and her subjects had another opportunity to learn about the possible effects of peak oil and resource depletion this week via the BBC’s documentary Future of Food. The programme explores the threats to global food security from water depletion, oil shocks, population growth and climate change. UK viewers can still catch this on iPlayer.
Oil
Oil Trades Near Two-Month High After Drop in U.S. Crude Stocks
Oil traded near the highest since June after U.S. inventories of crude declined the most in 15 months, signaling a rebound in demand.
Crude stockpiles dropped a more-than-expected 8.4 million barrels last week, the most since May 2008, an Energy Department report showed yesterday. Demand for oil products rose…
Kuwait Says OPEC Should Keep Output Steady Next Month
OPEC should agree to maintain oil production targets when it meets next month to decide quotas, Kuwait’s oil minister said.
Oil prices are “not too bad, not too bad at all,” Sheikh Ahmed al-Abdullah al-Sabah told reporters in Kuwait today. OPEC should keep quotas unchanged, he said. Al-Sabah favors an oil price of $70-$80 a barrel…
Opec’s greed will herald the end of the oil age
Proclamations of economic recovery in the past week in Japan, France and Germany, and soon in Britain and America too, may signal the end of the Great Recession of 2007-09, albeit bumpily. As things stand, though, this month may also signal the beginning of the end of something far more historic and significant: the age of oil…
Oil Industry Backs Protests of Emissions Bill
Hard on the heels of the health care protests, another citizen movement seems to have sprung up, this one to oppose Washington’s attempts to tackle climate change. But behind the scenes, an industry with much at stake — Big Oil — is pulling the strings.
Hundreds of people packed a downtown theater here on Tuesday for a lunchtime rally that was as much a celebration of oil’s traditional role in the Texas way of life as it was a political protest against Washington’s energy policies, which many here fear will raise energy prices…
Oil giants destroy rainforests to make palm oil diesel for motorists
Fuel companies are accelerating the destruction of rainforest by secretly adding palm oil to diesel that is sold to millions of British motorists.
Twelve oil companies supplied a total of 123 million litres of palm oil to filling stations in the year to April, according to official figures obtained by The Times…
BP to drill deeper in search of oil
BP plans to take the search for oil to even greater depths below the earth’s surface. The Gulf of Mexico, where BP has already made a huge discovery more than 5 miles below the seabed, is one of the areas where the group is planning new tests for oil technology in the hope of unlocking untapped resources in the lower tertiary geological formation…
Will Russia-Cuba agreement produce significant US response?
Could Russian plans to help Cuba produce oil off its coast make the United States reconsider its Outer Continental Shelf leasing policy? US independent producers and others hope so.
“More than anything, this agreement must not go unnoticed in Washington,” Independent Petroleum Association of America President Barry Russell said on Aug 4. “Both in the long and short-term, our energy priorities must focus on safely expanding American energy production, especially from the nation’s federal onshore and offshore lands that are owned by all Americans.” …
Iraq
US pullout in doubt after day of slaughter on streets of Baghdad
Extremists struck at the Iraqi Government with a wave of bombings and mortar attacks, killing at least 95 people and injuring more than 560 and raising new doubts about the withdrawal of US soldiers from the country.
The bombings were directed against the main centres of power, including the ministries of finance, foreign affairs, health, education and housing, as well as the parliament and cabinet buildings…
Gas
Australia signs $50bn gas deal with China
The world’s two biggest listed oil companies signed an A$50 billion (£25 billion) deal to supply liquefied natural gas (LNG) from Australia to China in the largest-ever trade deal between the two countries.
ExxonMobil, the world’s second most valuable oil company, will use its 25 per cent share of the Gorgon gas field off the coast of West Australia to provide LNG to PetroChina, the most valuable oil company in the world, for the next 20 years…
LNG Surplus to Reach a Record, Wood Mackenzie Says
Liquefied natural gas producers may earn smaller margins as low demand and new export plants lead to a record surplus and lower prices, Wood Mackenzie Consultants Ltd. said.
New projects in Qatar, Yemen and Indonesia may reach capacity next year, said Frank Harris, global head of LNG at the Edinburgh-based firm. Ventures planned for 2015-20, including those helmed by ConocoPhillips, Royal Dutch Shell Plc and Woodside Petroleum Ltd., may be forced to sell the fuel for less as supplies exceed consumption…
UK
Rivals battle to explain crunch to the Queen
The Buckingham Palace postbag has become the improbable battleground for a spat between rival intellectuals about the credit crunch.
Three weeks ago an impressive selection of the great and the good wrote to the Queen explaining why so few experts predicted the crunch. They were responding to Her Majesty’s famous inquiry, “Why did no one see it coming?” – delivered as she toured the London School of Economics last year…
Energy experts call for carbon capture scheme for gas fired power stations
New gas plants should be subject to the same rules that force new coal plants to fit carbon capture and storage (CCS) technology, according to leading energy bosses.
Experts fear that the government’s new policy on CCS for coal power will lead to a boom in the construction of gas plants which do not have to bury their carbon emissions…
Scotland eyes carbon-capture for North Sea
Scotland-based companies and the government at Holyrood hope proximity to the rapidly-depleting oil and gas fields of the North Sea will put the country at the forefront of a potentially lucrative new industry – storing carbon dioxide.
The UK government believes carbon capture and storage (CCS) is essential for curbing greenhouse gas emissions and it plans to back up to four “clean coal” power stations using the technology, which is still being developed…
EU directives will close down most of Britain’s aluminium industry
For years the largest employer on the island of Anglesey has been the large aluminium plant near Holyhead, providing 540 jobs. Because aluminium production is unusually energy-intensive, the plant is also the largest electricity user in Wales. It has only been kept viable by a mutually beneficial deal with the nearby Wylfa nuclear power station, which has long been supplying the massive 250 megawatts of electricity needed to keep its smelting process in operation at a discount price…
Climate
As Arctic Ocean warms, megatonnes of methane bubble up
It’s been predicted for years, and now it’s happening. Deep in the Arctic Ocean, water warmed by climate change is forcing the release of methane from beneath the sea floor.
Over 250 plumes of gas have been discovered bubbling up from the sea floor to the west of the Svalbard archipelago, which lies north of Norway. The bubbles are mostly methane, which is a greenhouse gas much more powerful than carbon dioxide…
Economy
Chinese Market Bounces Back and Rises 4.5%
China’s main stock market index staged its biggest one-day rally in five months on Thursday, with a 4.5 percent rebound that clawed back the previous session’s steep loss.
Shares in most of the rest of Asia gained on relief that a two-week battering of the Chinese market had stopped — at least for a day. The main indexes in Hong Kong, Singapore and Japan all gained at least 1.5 percent or more during the session, and indexes in Britain, Germany and France followed suit with gains of about 1 percent by early afternoon. Wall Street was also poised for a higher open…
Tumbling tax forces Government to borrow £8bn
Public sector net borrowing hit £8 billion last month, the first time the Government has borrowed in July since 1996, official figures show.
The Government was forced to borrow last month, despite July usually being a bumper month for tax receipts. It was the highest level of borrowing in July since records began. The Government made a net repayment last July of more than £5 billion…
Commodity Traders’ $1 Million Bonus as Oil Doubles
Wall Street firms are again recruiting commodities traders with promises of $1 million bonuses as prices of raw materials from oil to copper double.
Less than a year after oil tumbled a record 54 percent and the Reuters/Jefferies CRB Index was suffering its biggest drop ever, Bank of America Corp. plans to boost commodity headcount by 25 percent. London-based Barclays Plc will increase staff about 6 percent. Morgan Stanley is recruiting traders in shipping. The banks declined to comment on compensation…
Transport
German Autobahn goes electric
Germany on Wednesday unveiled a national strategy to make the country a world leader in sustainable mobility and have 1 million electric cars cruise its Autobahn highways by 2020. “In 2030, this could be over 5 million. By 2050, traffic in towns and cities could be predominantly without fossil fuels,” the National Electric Mobility Plan reads…
From hybrid through to pure electric
What’s the difference between an electric car and a hybrid?
The first generation of hybrids, such as the Toyota Prius, are powered by a battery as well as an internal combustion engine. The battery, which is recharged by the vehicle itself, is the sole source of power only at low speeds. Models now in the pipeline will scale back the role of the petrol engine…
Watchdogs warn of sharp rise in off-peak and advance train fares
Rail companies are poised to impose sharp increases in the cost of advance tickets to compensate for a reduction in other fares because of deflation, it was claimed yesterday.
Travel watchdogs said that rail operators may also impose “stealth charges”, such as increases in the cost of car parking, to recoup their costs…
Pendragon wants car scrappage plan to be extended
It was less an about face than a screaming handbrake turn that would leave skid marks on the forecourt: Pendragon, Britain’s biggest motor dealer, having lambasted the Government’s scrappage scheme as too stingy three months ago, wants it to be extended.
When the plan was announced in May, Trevor Finn, Pendragon’s chief executive, gave it short shrift, saying it was “not enough to make a material difference to customer behaviour”…
