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ODAC Newsletter - Aug 21

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

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Kuwait Says OPEC Should Keep Output Steady Next Month

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Opec’s greed will herald the end of the oil age

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Oil Industry Backs Protests of Emissions Bill

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Oil giants destroy rainforests to make palm oil diesel for motorists

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BP to drill deeper in search of oil

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Will Russia-Cuba agreement produce significant US response?

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Iraq

US pullout in doubt after day of slaughter on streets of Baghdad

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Gas

Australia signs $50bn gas deal with China

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LNG Surplus to Reach a Record, Wood Mackenzie Says

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UK

Rivals battle to explain crunch to the Queen

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Energy experts call for carbon capture scheme for gas fired power stations

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Scotland eyes carbon-capture for North Sea

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EU directives will close down most of Britain's aluminium industry

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Climate

As Arctic Ocean warms, megatonnes of methane bubble up

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Economy

Chinese Market Bounces Back and Rises 4.5%

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Tumbling tax forces Government to borrow £8bn

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Commodity Traders’ $1 Million Bonus as Oil Doubles

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Transport

German Autobahn goes electric

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From hybrid through to pure electric

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Watchdogs warn of sharp rise in off-peak and advance train fares

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Pendragon wants car scrappage plan to be extended

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