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 news was dominated this week by the race against time to stem the flow of oil from the Transocean Deepwater rig disaster, and the potentially devastating ecological impact of the spill. BP’s mitigation effort has been painfully slow to watch, and once again placed a spotlight on the high risk world of deepwater oil extraction.
Initial political fallout came on Friday with President Obama announcing a moratorium on offshore drilling until a safety review can be carried out. However previously announced plans to expand the areas open to offshore drilling are now likely to face renewed opposition. Governor Arnold Schwarzenegger captured the mood as he quickly moved to withdraw his support for drilling off the California coast stating “Why would we want to take that kind of risk?” Jeff Rubin picked up this theme in his article comparing the current disaster to the Three Mile Island nuclear accident and predicting the end of all deepwater drilling.
A more likely scenario is described by Timothy Egan in the New York Times – his conclusion is that memories are short and drilling will continue. Indeed even greater risks are likely to be taken as companies move to drill in remote areas like the Arctic. In the end, when filling up the car most people don’t ask themselves Arnie’s question, and focus on the price at the pump.
What financial price BP will pay remains to be seen. Analysts warned this week that the disaster could cost the company as much £15bn and put its shares behind those of its competitors for the “lasting” future. If the legacy of the Exxon Valdez spill is anything to go by however, it is likely to be the Gulf Coast economy which will bear the more lasting effects.
As ODAC goes to print, uncertainty still surrounds the outcome of the UK election. The Tories have the majority of seats, the question is whether they can make it a working majority. Should they form the next government, then on paper they have some strong energy policies — most notably putting a floor under the carbon price. The question is whether they have the resolve to make this a meaningful measure rather than bowing to energy company pressure.
Oil
BP is drilling itself into deep water
Once upon a time, BP stood for plain British Petroleum. Under John Browne, its former chief executive, it was Beyond Petroleum. These days, it is more like Blame the Past.
The eruption of oil from a broken well in the Gulf of Mexico, which threatens immense environmental damage, could cost BP $10bn (€7.6bn, £6.6bn) in cash terms and a great deal more in terms of tarnishing its brand under Tony Hayward, Lord Browne’s successor…
Obama halts new offshore drilling but defends plan
President Obama Friday defended the need to expand offshore oil and gas exploration even as his administration ceased new drilling as a massive oil leak in the Gulf of Mexico is being investigated.
“Let me be clear: I continue to believe that domestic oil production is an important part of our overall strategy for energy security,” Obama said Friday in a Rose Garden speech focused on the economy. “But I’ve always said it must be done responsibly for the safety of our workers and our environment. The local economies and livelihoods of the people of the Gulf Coast, as well as the ecology of the region, are at stake.”…
California’s Schwarzenegger turns against oil drilling
California’s Governor Arnold Schwarzenegger has withdrawn his support for a plan to expand oil exploration off the state’s coast.
He said the spill in the Gulf of Mexico had changed his mind about the safety of oil platforms in the Pacific Ocean…
Oil disaster may prove tipping point for world oil production
What are the consequences of another Three Mile Island?
Will the unfolding environmental catastrophe from the ruptured Deepwater Horizon well in the Gulf of Mexico become deep-water oil’s equivalent to the Three Mile Island accident?
In terms of environmental degradation and economic cost, it’s already become much more. The real legacy of Three Mile Island wasn’t what happened back in 1979, though, but rather what happened, or more precisely didn’t happen, over the course of the next 40 years in the United States. Literally overnight, the near-meltdown of the reactor core changed public acceptance of nuclear power plants. No company in the U.S. has built a new one since…
Groundhog Day for Oil
Wish it weren’t so, but I fear my lasting memory of many trips to Prince William Sound will be of hunched-over workers with toothbrushes, trying to scrub black tar from shivering birds and sea-worn rocks in the Alaska spring of 1989.
All the images were staggering: The birds looked lost and stunned, their coats of warmth matted black, their wings greased by hydrocarbons that would eventually kill most of them. The inlets of that most Edenic of sheltered seas had a sickening sheen, with a smell that made you nauseated and stayed with you through sleepless nights. Harder still was the sight of fishermen — tough, independent, weather-callused men — weeping for their loss…
Gulf oil spill yet to affect consumers’ gas choice
Motorists across the nation are continuing to fill up at stations selling BP gas, with no apparent sign of a consumer backlash at the pump like the boycott triggered by the Exxon Valdez spill 21 years ago.
Gassing up in Erlanger, Ky., 40-year-old Lee Pullins of Springfield, Ohio, said the spill is “absolutely horrible” but will not affect where he buys fuel: “I go where it’s the least expensive, even if it’s only two pennies cheaper.”
Some of those working behind station counters have been worrying about consumer reaction, but owners across the country say it has been business as usual since the April 20 explosion on a rig off Louisiana began unleashing 200,000 gallons of crude a day…
BP ‘facing £15bn loss’ over Gulf of Mexico oil spill
The Gulf of Mexico oil spill disaster is likely to cost BP $23bn (£15bn) and its shares can be expected to lag behind those of its competitors by 5% for the “lasting” future, analysts warned today.
More than $9bn will come from reputational damage as a result of the Deepwater Horizon oil spill while the total costs are likely to drive up its net equity to debt ratio to 35%, much higher than its peers, according to Barclays Capital…
Oil falls below $77, down $10 in the past week
Oil fell below $77 a barrel on Friday, marking a $10 dollar fall during the past week in a tumultuous reaction to a growing sovereign debt crisis in Europe and more bearish global growth prospects.
Oil slid 4 percent the previous day after a suspected trading glitch caused stocks in the United States to plunge 9 percent in the last two hours of trading on Thursday, its biggest single intraday drop ever. However, stocks clawed back some of the losses…
Greenland Oil Rush Looms as Exxon Eyes Cairn’s Bet
Cairn Energy Plc is betting $400 million this year on striking oil off Greenland, a campaign that will be closely watched by producers such as Exxon Mobil Corp. and Chevron Corp. that hold rights off the island.
The potential rewards may justify the cost of Arctic drilling: Greenland’s waters could hold 50 billion barrels of crude and gas, the U.S. Geological Survey estimates, enough to meet Europe’s energy demand for almost two years. More companies are on the way. Royal Dutch Shell Plc and Statoil ASA were among bidders in this week’s auction of offshore drilling rights…
Falklands oil firm Rockhopper claims discover
One of the oil and gas companies currently drilling off the coast of the Falkland Islands says it may have struck oil.
Rockhopper Exploration said that initial data collected from one well “indicated an oil discovery”…
$150 oil: Who will be worst hit, and who will benefit?
The effect of rising oil prices is continuing to attract scrutiny. Credit ratings agency Fitch is now considering which sectors would be most vulnerable – and which would benefit — if/when crude oil prices reach $150. Not surprisingly, airlines are among those worst affected, although this is partly due to their limited hedging…
Russian special forces storm oil tanker, arrest Somali pirates
Russian commandos dramatically rescued the crew of an oil tanker today that had been seized by pirates off the coast of Somalia.
Special forces marines stormed the Liberian-registered Moscow University and freed all 23 Russian crew members unharmed. One pirate was reported killed and ten others were arrested after a firefight during the dawn helicopter raid on the vessel, which is carrying 86,000 tonnes of oil worth $52 million (£34 million)…
Renewables
Offshore windfarms to be used for air defence
Offshore windfarms will double as radar defence systems in a pioneering deal involving the Ministry of Defence, which previously opposed the erection of almost 1,000 wind turbines off the UK’s eastern seaboard because of fears over their ability to scramble defensive radar.
Wind energy projects across Britain have been held up for years because of planning disagreements, some concerned with interference from turbines that can baffle air-traffic control and defence systems, creating blind spots or “blackout zones” in coverage…
Google invests in US windfarms
Google has made its first direct investment in utility-scale renewable energy generation, providing $38.8m to two North Dakota wind farm projects.
The search giant said in a blog post on Monday that it had invested in two farms built by NextEra Energy Resources, which together will provide 170MW of wind energy capacity…
UK
UK expects to win reprieve on EU emissions plans
Lobbying by Britain looks set to have secured a key concession in EU plans to cut power station emissions due to be voted through the European Parliament this week.
The extra time will be much-needed breathing space as Britain struggles to avoid an “energy gap” as polluting coal-fired plants are closed down by existing EU rules on pollutants such as sulphur dioxide at the end of 2014…
UK power plants win four-year stay of execution from EU
A number of old coal combustion stations were due to close in 2014, putting the UK in danger of running out of power in the second half of this decade.
Experts had warned that taking this back-up generation off the system before nuclear power plants are built would risk an “energy gap” and potential black-outs…
Soaring Oil Price Pushes Up Cost Of Food
The annual rise in retail prices reached 2% overall in April, with food and non-food inflation rates both showing significant hikes.
Food inflation rose to 2% against 1.2% in March, which was the lowest rate since the retail index began…
UK refineries up for sale at worst of times
For more than eight months, India’s Essar has been in talks with Royal Dutch Shell over the acquisition of the Stanlow oil refinery in Cheshire. This week Shell said that while the discussions are continuing, the site could be closed if no buyer was found…
Climate
U.S. carbon dioxide emissions fell record 7% last year
Energy-related carbon dioxide emissions fell a record 7% last year, due partly to the economic downturn, the U.S. government reported Wednesday.
While emissions have fallen in three of the last four years, 2009’s drop was the largest since theU.S. Energy Information Administration (EIA) began keeping comprehensive data in 1949…
Politics
President Yar’Adua’s death may spark power struggle in oil-rich Nigeria
President Yar’Adua of Nigeria, whose long sickness plunged Africa’s most populous country into a constitutional crisis, has died, the Office of the Presidency announced last night.
A spokesman said Mr Yar’Adua, 58, passed away at 9pm at Aso Rock presidential villa, with his wife Turai by his side. He will be buried today in accordance with Muslim custom…
Economy
China’s Energy Use Gets More Intense
China vowed to use an “iron hand” — and an extra $12 billion — to reach efficiency targets after revealing energy intensity rose 3.2% in the first quarter compared to last year, reversing a steady decline in the amount of energy used to produce each dollar of gross domestic product.
The increase in the amount of power China’s economy is using relative to how much it’s producing is a major setback in the push to cut energy intensity by 20% by the end of 2010 from 2006. Up until last year, China was doing pretty well, lowering the relative use of energy by 14.38%, according to a statement by Premier Wen Jiabao…
Greece crisis: ‘Contagion risk’ for UK & Europe banks
Banks in the UK and Europe risk their credit ratings being damaged because of “contagion” from Greece’s debt crisis, a ratings agency has warned.
Moody’s said banking systems faced “very real, common threats” if doubts were raised about their governments’ abilities to pay debts…
Transport
United Airlines and Continental merge to create world’s biggest operator
The aviation industry’s fight for survival through ever-larger mergers scaled new heights yesterday with the announcement that United Airlines and Continental Airlines, two major US operators, are combining to create the world’s biggest operator.
Echoing the recent agreement between British Airways and Spain’s Iberia to form International Airlines Group, the carriers are joining forces to create a $3bn (£2bn) company that will carry 144 million passengers a year. The newly named United Continental is strongest in the US domestic market, but both airlines operate transatlantic services to the UK, raising the possibility of higher fares for passengers who fly between the US and Britain on United and Continental. BA, Iberia and American Airlines are also close to securing regulatory approval in the US and the European Union for a tie-up that stops short of a full-blown merger, but allows them to collude on fares and schedules for transatlantic services…
Carmakers pump up production
Global car production surged by more than 50 per cent in the first quarter of this year, according to figures compiled for the Financial Times, in spite of forecasts that car sales in mature markets will not reach their 2008 levels before 2014.
Data for 12 of the world’s biggest car markets, accounting for more than three-quarters of world automobile output, showed double-digit increases in the first quarter of 2010 compared with a year earlier. In China, Japan, Canada, Mexico, and the UK, the year-on-year rise was more than 70 per cent…
