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.
This week saw the release of the full report by the National Commission into the Deepwater Horizon Spill and Offshore Drilling. Last week’s pre-release of Chapter 4 saw blame for the disaster attributed to a culture of complacency around safety both in the industry and its regulators. This week’s full report included the commission’s recommendations which amongst which are more funding for regulatory enforcement, an unspecified increase in the liability cap for accidents, and a research programme into potential issues raised by drilling in the Arctic. Co-chair of the commission, Bob Graham, writing in the St Petersburg Times, warned “This is a wakeup call to the American people. Why are we drilling in deeper and inherently more risky offshore locations? The United States is consuming about 22 percent of the world’s daily extraction of petroleum while it sits on top of less than 1.5 percent of the world’s proved reserves.”
The price for Brent crude oil rose this week to $98.8, a 27 month high and just shy of the psychologically important barrier of $100/barrel. Coal prices too are on the rise with global prices hitting a 28 month high in the wake of the severe flooding in Queensland, Australia. The rising energy prices are premised on anticipated growth in demand. Oil demand grew 2.3 million barrels/day in 2010 despite the continuing economic crisis. The rising prices, which compound the pressures on food and other commodity prices, present a real challenge to economies already struggling with huge financial deficits.
In the UK, where government cuts are just starting to kick in, high oil prices are clearly a cause for political anxiety — with lorry drivers preparing a return to the petrol protests of 2000. David Cameron this week urged OPEC oil to boost production as fears grow that inflation could derail economic recovery, and promised to revisit the idea of a fuel duty stabiliser. But as Terry Macalister of The Guardian points out, while cutting fuel duty might be politically attractive, what we really need is effective policies to get off oil.
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Oil
Disregard for safety led to Deepwater Horizon spill
The worst man-made environmental disaster in the history of America began on April 20, 2010. The Deepwater Horizon, a modern drilling rig exploring for oil and gas more than 3 miles below the surface of the Gulf of Mexico, exploded and sank two days later. Eleven men were killed and 16 injured. Almost half a billion barrels of oil spilled into the gulf, causing incalculable damage to sea life and human life. More than $2 billion has already been spent in the effort to contain and mitigate the direct damage of the spill, and economic losses to gulf fishermen and tourism are still being calculated. It could be a decade or more before the long-term effects on the health of coastal residents and sea life can be assessed.
America’s confidence in the private sector oil and gas industry was shaken. America’s confidence in the capability of government to oversee an inherently risky use of public lands took another hit.
What caused this disaster?…
Bob Graham is the co-chair of the Presidential Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling. He was governor of Florida from 1979-1987 and represented the state as a U.S. senator from 1987-2005.
Gulf of Mexico oil spill commission calls for dramatic overhaul of offshore drilling
President Obama’s official inquiry into BP’s Gulf of Mexico oil spill has blamed the disaster on government and industry complacency and laid out 15 key recommendations to prevent a repeat in the future.
The National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling, the first government-sanctioned group to wrap up its probe of the causes of the drilling disaster, called for new federal and industry agencies to oversea offshore drilling, a significant increase in the $75m liability cap for accidents, and stricter safety regulations to bring the US in line with countries such as Norway and the UK…
Back through the ceiling?
Nearly three years to the day after oil prices first pierced $100 a barrel, they are again threatening to break triple digits on a wave of fund-led optimism, but similarities between 2008 and 2011 end there.
Even the most bullish analysts are quick to recite a litany of reasons why oil will not surge to near $150 again this year. Such a sharp spike would deal the world economy a heavy blow it can ill afford…
Brent Heads to $100 as Cold Boosts Demand; WTI Slips on U.S. Jobless Data
Brent crude headed toward $100 a barrel, widening the spread with New York oil futures as crude stockpiles remained above their seasonal average and jobless claims increased in the U.S., the world’s largest consumer.
Brent traded above $98 a barrel for a second day as wintry weather in Europe and the U.S. boosted demand for heating oil. West Texas Intermediate in New York declined after Labor Department figures showed initial jobless claims increased more than economists estimated last week and an Energy Department report yesterday showed increasing inventories of oil products…
UK’s Cameron urges OPEC to boost crude production
British Prime Minister David Cameron urged OPEC on Wednesday to boost production of crude after a recent rise in oil prices to 27-month highs.
The increase in oil prices, combined with petrol duty and sales tax rises, have pushed petrol prices in Britain to record highs and brought complaints from consumer groups…
Gas
Shale Oil Drillers Chesapeake, EOG Strike Rising Costs in Flight From Gas
U.S. natural-gas companies are getting hit with the highest costs in four years as they shift more production to oil to escape low gas prices.
EOG Resources Inc., Chesapeake Energy Corp. and SandRidge Energy Inc. each have announced $1 billion transactions in the past year to ramp up onshore production of higher-profit oil and other petroleum liquids as booming gas production deflated prices…
BarCap: Global LNG to remain balanced
Suppliers of liquified natural gas are watching the weather almost as closely as New Yorkers right now.
According to a new report by Barclays Capital, one of the only things that kept LNG demand and supply in balance in 2010 was the hellish winter in Europe and what the analysts call “exceptionally supportive weather” elsewhere…
Coal
Coal at 28-Month High to Beat Oil, Gas on Australia Floods: Energy Markets
Coal for producing power may beat oil and natural gas this year as disruptions from Australia to South Africa drive prices for the fuel to a 28-month high.
Thermal coal may climb about 14 percent to $150 a metric ton in coming weeks, while increased stockpiles limit gains for oil and natural gas, Joachim Azria, a New York-based analyst at Credit Suisse Group AG, said in a Jan. 10 report. Helen Lau, a Hong Kong-based analyst at UOB Kay Hian Ltd., said on Jan. 4 coal may advance as much as 15 percent. Prices at the Australian port of Newcastle were at $131.80 a ton on Jan. 7, the highest since September 2008, according to IHS McCloskey data…
Commodities daily: Forgotten energy
For many investors, oil and natural gas are the only energy commodities.
But thermal coal, used to fire power stations, is also important even if it is often overlooked…
Coal’s burnout: Have investors moved on to cleaner energy sources?
The headline news for the coal industry in 2010 was what didn’t happen: Construction did not begin on a single new coal-fired power plant in the United States for the second straight year.
This in a nation where a fleet of coal-fired plants generates nearly half the electricity used…
Renewables
Analysis: Solar stocks face another tough year in 2011
Investors hoping that 2011 will mark the return of off-the-charts growth in solar stocks will be sorely disappointed, though the industry’s battered share prices make for good bargains in the meantime.
In 2010 the fast-growing industry logged its biggest sales year ever, yet shares of solar panel makers lagged the broader market significantly…
Pentagon Must ‘Buy American,’ Barring Chinese Solar Panels
The military authorization law signed by President Obama on Friday contains a little-noticed “Buy American” provision for the Defense Department purchases of solar panels — a provision that is likely to dismay Chinese officials as President Hu Jintao prepares to visit the United States next week.
Although there are many big issues to discuss, including concerns about North Korea, trade and economic matters are certain to be high on the agenda. And while both sides are aiming to keep the discussion positive — the United States is the world’s largest importer and China the largest exporter of goods — simmering resentments over trade in green-energy technologies could be a distraction…
Mining and Minerals
China To Control Rare Earth Extraction, Pollution
China will step up its controls over the mining of rare earths and release new industry standards to cut pollution, a minister and media said on Friday, after the world’s biggest supplier cut export quotas for the minerals.
China, which produces about 97 percent of the global supply of the vital metals, slashed its export quota by 35 percent for the first half of 2011 compared with a year earlier, saying it wanted to conserve reserves and protect the environment…
UK
Energy costs ‘damaging UK recovery
The government faced a widening campaign by business groups tonight calling for the mounting tax burden and soaring energy costs to be curbed.
The Major Energy Users Council (MEUC) has set up the Carbon Action Group to tackle the rise in fuel costs and the Federation of Small Businesses said the rises, coupled with VAT and other tax increases, were damaging companies and undermining a much-needed economic recovery…
Now is not the time to keep on trucking
It is tempting to lend one’s support to British truck drivers who will announce today that they are planning to join students and public sector workers protesting against government policies. The haulage industry is a potent force to have on your side: it is capable of bringing the country to a standstill by blockading roads as it did in 2000 and, to a lesser extent, two years ago.
The big wheels of trucking argue that a succession of excise duty hikes combined with soaring oil prices are crippling an industry that plays a vital role in taking food to the shops and exports to the docks…
Refinery agreement unlikely to be the last
PetroChina’s investment in Scotland’s Grangemouth refinery marks the entry into Britain’s refining markets of one of the world’s largest energy industry players…
Oil sector’s career reputation ‘needs to be rebuilt’
Scotland’s offshore sector needs to rebuild its reputation to halt the drift of graduates towards renewables, it has been claimed.
Offshore industry body Oil and Gas UK said attacks from groups such as Greenpeace needed to be combated…
Imports push goods trade deficit to record high
Imports of oil and aircraft pushed Britain’s goods trade deficit to a record high in November, official figures showed today.
The trade in goods deficit – the difference between goods exported and imported – widened to £8.7 billion in November, from £8.6 billion in October, the Office for National Statistics said…
Gas supplies at five-year low for early January
The amount of gas kept in storage in the UK is at its lowest level in five years for so early in the winter, according to National Grid.
Last month, was the coldest December since 1890, and the UK’s gas storage facilities, which are among the smallest in Europe, are already more than half empty as they cope with record demand. Domestic supplies of gas have also been exported to the continent via the Interconnector under-sea pipeline, because prices are higher there than in the UK…
Centrica loses competition law battle over gas storage
Rough is Britain’s largest storage site and can hold around two-thirds of the country’s gas stockpiles. However, Centrica has to act within strict limits when sharing space at the site with its competitors.
It asked in April last year for the Office of Fair Trading to lessen the regulation, arguing that gas now comes from more diverse sources than it did in 2002 — loosening its power…
Axeing of UK sustainability watchdog leaves gap in scrutiny, MPs warn
The government’s decision to axe its sustainability watchdog will make its green agenda far less accountable, according to a report released today by the environmental audit committee (EAC).
The plan to withdraw funding for the Sustainable Development Commission (SDC) from April this year was heavily criticised in today’s EAC report, along with suggestions that some of its responsibilities could be taken on by the Department for the Environment, Food and Rural Affairs (Defra) and the committee itself…
Geopolitics
Oil and peace in Sudan
In the centre of the southern Sudanese town of Juba, there is a huge clock to mark the last few days and hours before Sunday’s secession referendum, as my colleague Xan Rice reported earlier this week. It is a tense time in one of Africa’s biggest countries as millions wait for an outcome that is widely expected to herald the birth of a new country. But lying behind the drama of events on Sunday, there is one highly technical issue which will probably do more than anything else to determine the long-term chances of peace in Sudan: measuring oil.
Three quarters of Sudan’s considerable oil reserves are likely to end up in the new southern Sudan, so how this oil is measured and the revenues shared out will be vital to good relations between the north and the south. One of the issues that has provoked deep mistrust in recent years has been discrepancies in the figures produced by the main oil company and those produced by the government; the latter consistently report figures which are smaller, by between 9% and 26%…
Economy
WEF: The world economy can not ‘face major new shocks’
The global economy is “in no position to face major new shocks”, according to the World Economic Forum (WEF).
Its Global Risks 2011 report warns that economic imbalances, volatile commodity prices and currencies, and governments’ budget shortfalls are “unsustainable”…
Trade war looming, warns Brazil
Brazil has warned that the world is on course for a full-blown “trade war” as it stepped up its rhetoric against exchange rate manipulation…
Chile protests turn deadly as Latin America buckles under rising energy prices
Two people in the southern Chilean city of Punta Arenas were killed Tuesday night when a truck ran into the barricade where they were protesting the government’s plan to increase natural gas prices.
The world’s southernmost city, with a population of 110,000, remained largely paralyzed today by a general strike as local residents and elected officials demand that the national government maintain subsidies on natural gas, which is widely used in the region to power vehicles, heat homes, and provide energy for businesses…
