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 earthquake and tsunami which ripped apart the northern half of Honshu in Japan on Friday has caused a massive humanitarian disaster and a nuclear emergency which may still develop into a major catastrophe. The wider knock on effects could be a backlash against nuclear power, and further global economic instability as a result of damage to what is the worlds 3rd largest economy. Meanwhile in Libya the civil war raged on, and in Bahrain protests became bloody as the government turned to military force and outside help to retain power.
The full effect of the crisis at the Fukushima nuclear plant remains unclear at this stage. What is already clear though is that the safety of the industry is being called into question once again, just as it looked to be on the cusp of a renaissance. Germanys Angela Merkel went furthest, calling for a “measured exit” from nuclear and shutting down the countys seven oldest reactors for a 3 month moratorium. China announced on Tuesday that it is suspending its nuclear building programme until a review has been completed, and other countries including the UK also announced reviews. Governments are likely to face a huge loss of public confidence in nuclear which could reopen debate about its cost and safety. Delays could increase demand for gas and coal, but may also strengthen the investment case for renewables. Either way power prices look likely to rise.
Oil prices eased back early in the week on the perceived threat to oil demand of an economic slowdown. There is fear that the impact of tsunami damage on the Japanese economy will have a knock on effect into the wider global economy. On Thursday prices rose again on concern that violence and unrest in the Middle East will affect supply. Prices are likely to continue to see-saw in the coming weeks as events develop.
On Tuesday Bahrain declared a 3 month state of emergency and invited in troops from the Gulf Cooperation Council, including Saudi forces, to quash the demonstrations. The government then sent in the tanks against protestors drawing widespread condemnation. There were reports on Thursday of protests by Shiites in Saudi Arabia calling for the withdrawal of forces.
In Libya Gaddafis army advanced this week using their superior weapons and air power, and closing in on the opposition stronghold of Benghazi. Late on Thursday night the UN Security Council passed a resolution approving air strikes and “all necessary measures”, short of an invasion, to protect Libyan civilians. The resolution has the support of the Arab League. It could however involve the UN in a protracted conflict to oust Gaddafi with unpredictable consequences.
Oil
World energy crunch as nuclear and oil both go wrong
The existential crisis for the world’s nuclear industry could hardly have come at a worse moment. The epicentre of the world’s oil supply is disturbingly close to its own systemic crisis as the Gulf erupts in conflict.
Libya’s civil war has cut global crude supply by 1.1m barrels per day (bpd), eroding Opec’s spare capacity to a wafer-thin margin of 2m bpd, if Goldman Sachs is correct…
Oil Surges as UN Approves Libya No-Fly Zone; Credit Suisse Raises Forecast
Oil surged to its highest price in a week in New York after the United Nations Security Council approved military intervention to protect civilians in Libya, holder of Africas largest crude reserves.
Futures jumped as much as 2.2 percent after the UN voted to establish a no-fly zone over Libya and demanded a cease-fire with rebels. Oil climbed 3.5 percent yesterday, the most in three weeks, after Muammar Qaddafis jets dropped bombs around Benghazi while Bahraini security forces arrested opposition leaders. Credit Suisse Group AG raised its forecast for Brent crude traded in London, citing Middle East unrest…
Alberta tar sands pipeline project delayed
A controversial pipeline project to pump crude from the tar sands of Alberta to the refineries of Texas has been delayed after the Obama administration ordered additional environmental reviews.
The state department, which has final say on the $7bn pipeline, said it would seek further public comment on the project before making a final decision at the end of the year…
Shell plans $100bn investment drive
Peter Voser, chief executive of Royal Dutch Shell, set out ambitious production targets for the Anglo-Dutch oil major on Tuesday, as the company embarks on a fresh wave of growth to meet rising demand from emerging markets.
The company plans to invest $100bn (£62bn) in new projects over the next four years, including Qatar and Canada…
Gas
European Gas Rises After Japan Quake, German Reactor Decision
European gas prices advanced on speculation that Japan will buy more liquefied natural gas to make up for lost nuclear generation while Germany said it will halt its seven oldest reactors.
“There will be some increase in LNG demand from Japan,” Jonathan Stern, director of gas research at the Oxford Institute for Energy Studies, said today at a conference in Doha, Qatar. Japan may import as much as 10 million metric tons a year more of the fuel because of the earthquake, he said…
More views on Japans effect on gas prices
My last post on Japanese LNG demand and its effect on prices generated some debate from readers, so here are a few more views from a report in Petroleum Economist.
As expected, the report states that Japan is not yet purchasing on the spot market, but is using existing long-term contracts. If suppliers are being generous, as Shell has promised to be, they shouldnt be having to pay much more than normal for their supplies…
Coal
US proposes air rules that may hit coal-fired power
U.S. environmental regulators proposed rules on Wednesday that would force aging coal-fired power plants to choose between installing anti-pollution technology or shutting, which could ensure reliance on nuclear power and natural gas.
The Environmental Protection Agency said the proposed rules, once fully implemented, will prevent 91 percent of mercury in coal from being released into the air. Power plants would have four years to meet the standards…
Moray Firth rocks ‘could store 15 years of carbon emissions’
Sandstone rocks under the North Sea could store at least 15 years of all Scotland’s CO2 emissions from power stations and create tens of thousands of new jobs, an industry-sponsored report has claimed.
The study has estimated that the rock formation, known as Captain sandstone, east of the Moray Firth, could eventually hold up to 100 years’ worth of CO2 emissions from power stations in Scotland, using carbon-capture and storage (CCS) technologies which might be worth £10bn by 2025…
Nuclear
IAEA urges Japan to give more information on nuclear crisis
The head of the United Nations’ nuclear watchdog has urged Japan to provide more information on its “extremely serious” crisis as the battle to regain control of a failing power plant enters a second week.
Yukiya Amano, the International Atomic Energy Agency chief, told the prime minister, Naoto Kan, that although it had been briefed, “there is the opinion in the international community that more detailed information is needed”…
Experts Had Long Criticized Potential Weakness in Design of Stricken Reactor
The warnings were stark and issued repeatedly as far back as 1972: If the cooling systems ever failed at a “Mark 1” nuclear reactor, the primary containment vessel surrounding the reactor would probably burst as the fuel rods inside overheated. Dangerous radiation would spew into the environment.
Now, with one Mark 1 containment vessel damaged at the embattled Fukushima Daiichi nuclear plant and other vessels there under severe strain, the weaknesses of the design — developed in the 1960s by General Electric — could be contributing to the unfolding catastrophe…
Japan crisis: Germany to speed up nuclear energy exit
German Chancellor Angela Merkel has announced a “measured exit” from nuclear power in response to the crisis affecting four reactors in Japan.
Defending the temporary closure of Germany’s seven oldest reactors, she said the Japanese disaster meant it could no longer be “business as usual”…
Germany to shut down pre-1980 nuclear plants
Chancellor Angela Merkel announced the closures, which will leave only 10 nuclear stations still generating, under a nuclear policy moratorium imposed as Japan faced a potential catastrophe at its earthquake-crippled Fukushima complex.
“Power plants that went into operation before the end of 1980 will … be shut down for the period of the moratorium,” Merkel told a news conference, adding that the decision would be carried out by government decree as no agreement with the plants’ operators had been reached…
China suspends nuclear building plans
China has suspended approval for new nuclear power stations following the accident at Japan’s Fukushima Daiichi plant.
It will also carry out checks at existing reactors and those under construction…
Huhne inquiry weighs nuclear crisis
An official inquiry into whether Japans nuclear crisis holds lessons for the safety of Britains nuclear power stations will “affect” investment in a new generation of reactors, according to Chris Huhne, the energy secretary…
Barack Obama to press ahead with plans to build new nuclear power stations
“I think we will, no matter what happens, try to take the lessons of Fukushima and apply them to our existing fleet and any future reactors we will be building,” Steven Chu, US energy secretary, told Congress.
The crisis at the power plant in Fukushima in north east Japan comes at a delicate moment for atomic energy in the US.
Nuclear energy has been handed a big role in meeting a pledge from President Barack Obama that the country will generate 80pc of its electricity from clean energy sources by 2035. America hasn’t built a new nuclear reactor since a partial meltdown at the Three Mile Island plant in Pennsylvania in 1979 derailed expansion plans…
Japan nuclear plant: Panic buyers seek out salt, seaweed and red wine as rumour fuels fallout fears
As nuclear panic began to spread around the world, pharmacies and supermarkets thousands of miles from Japan began to run out of anything and everything that was even rumoured to prevent radiation poisoning.
Russia saw a run on red wine and seaweed; in China people were buying massive amounts of salt, and chemists as far away as Bulgaria reported shortages of iodine tablets…
Renewables
Islay to get major tidal power scheme
A major tidal energy project is to be built in the Sound of Islay off the west coast of Scotland.
The Scottish government has approved plans for 10 tidal turbines, which will generate enough electricity to power more than 5,000 homes…
Geopolitics
U.N. council approves no-fly zone over Libya
UN Secretary-General Ban Ki-moon also welcomed the resolution, his press office said in a statement.
But German Ambassador Peter Wittig, explaining his country’s abstention, warned of a possible protracted military conflict affecting the wider region. “We should not enter a military confrontation on the optimistic assumption that quick results with few casualties will be achieved,” he said…
Bahrain Declares a Three-Month State of Emergency as Gulf Soldiers Arrive
Bahrain declared a three-month state of emergency as a second contingent of forces from Gulf states arrived in the kingdom to support its government following persistent protests.
King Hamad bin Isa Al Khalifa asked the head of the military to guarantee security, state television said. Police opened fire on protesters in the village of Sitra, the Bahrain Youth Society for Human Rights said in a statement. Ali Al-Akri, a doctor at the emergency room of the Salmaniya Medical Complex, said at least two people have been killed in clashes today and 250 others were hurt. He didnt have details on the kind of injuries sustained…
Saudi Shi’ites call for Bahrain troop withdrawal
Saudi Shi’ites held more protests in the kingdom’s oil-producing east on Thursday in support of Shi’ites in Bahrain and called for the withdrawal of Saudi forces from there, activists said.
They said hundreds attended four protests in and around the eastern region’s main Shi’ite center, Qatif, and also called for the release of Shi’ite prisoners in the kingdom, where the austere Wahhabi version of Sunni Islam is applied…
Economy
This tragedy will have an impact far beyond Japan
The economic costs of a catastrophe such as that which has struck Japan should always rank second to the human costs. Economic losses can be recouped; human losses cannot, and it seems almost improper to be trying to make a tally of the economic and financial consequences of what has happened as the terrible story continues to unfold. But such is the harsh reality of our ever more global economy, that these calculations are indeed being made — even if the answers may turn out to be wildly wrong…
Portugal hit by debt downgrade from ratings agency
Moody’s has downgraded Portugal’s sovereign debt rating, citing the country’s need to cut debt and its poor growth prospects.
The ratings agency cut Portugal by two notches from A1 to A3 and kept the rating on a negative outlook, suggesting more downgrades may follow…
Panic over Japan triggers market turmoil
World markets suffered a dramatic series of losses yesterday, with fears of a potential nuclear disaster in Japan hitting stock, metal and oil prices.
In London, the FTSE 100 index of leading shares dropped by more than 3 per cent in early trading before recovering during the afternoon to end the day at 5,695.28, down 1.4 per cent…
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