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 riots on Britain’s streets and in world markets. The IEA monthly oil report referred to the oil market as a ‘big dipper ride‘ as Brent oil dropped below $100 for the first time since early February, before regaining some of the losses later in the week.
Pundits compared the turmoil with 2008, but in some ways it looks far worse. Three years ago the collapse of the oil price to below $40 provided some temporary relief, but that’s unlikely to happen this time. True, both the IEA and OPEC have revised down their global demand forecasts, but both organizations still predict demand growth, in a market which is already tight and has not yet fully replaced Libya’s shut in production. While the west teeters on the brink of a double dip, surging demand in the developing world will mean higher, not lower, oil prices, according to analysts at Barclays Capital: “The growth in demand is rather rapidly likely to press against the limits of global supply, with most of the work needed to be done by prices in order to balance the market.”
Although the Arab spring has been pushed out of the news in recent weeks, it is another crucial factor in the oil price balance. The violence in Libya and Syria is a daily reminder to the rulers of Saudi Arabia and Kuwait of what could happen in their countries at any time. The cost of maintaining their thrones is rising with increased military and social spending, and this raises the oil price at which state budgets break even. Barclays Capital says this supports a floor price of $100 per barrel.
The UK government found itself caught off guard this week as riots and violence spread across the country. The causes of the trouble will be much discussed and fought over in the coming weeks, but it was a clear illustration of just how quickly things can turn lawless and very nasty. It is an unsettling backdrop for the apparently impending recession – or George Osborne’s “long hard recovery” if you prefer — which will be the worse for the government’s failure to tackle our oil dependency, and with stubbornly high oil prices beyond our control.
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Oil
Oil is riding a ‘big dipper’, says energy watchdog IEA
Oil is riding a “big dipper,” with prices plunging again on uncertainty about debt levels in the West, signs of a slowdown in emerging markets and political paralysis, the IEA said on Wednesday.
“Crude oil prices have plunged for the third time in three months,” the West’s energy watchdog said, noting a drop of $12-15 dollars a barrel in about 10 days, as it cut its demand forecast for this year…
Oil swings strike parallels with 2008 crisis
When in September 2008 the global economy was facing a depression to rival that of the 1930s, Jeffrey Currie, head of commodities research at Goldman Sachs, sent investors a note saying that financial concerns were “overriding” the facts in the oil market…
OPEC cuts oil demand amid economic gloom
OPEC, source of more than a third of the world’s oil, cut its forecast for global oil demand growth this year as a worsening economic outlook curbs consumption in developed economies.
The revision from the Organisation of the Petroleum Exporting Countries in a report on Tuesday follows reductions by other forecasters, such as investment bank Barclays Capital, as slowing growth hits consumers and businesses…
Saudis pump most oil in 30 years to replace lost supply
Saudi Arabia pumped the most oil in three decades last month, reaching 9.8 million barrels a day and boosting OPEC production, the International Energy Agency said. Increased output in Angola helped replace lower supply in Libya.
Daily supply from the Organization of Petroleum Exporting Countries’ 12 members rose to 30.05 million barrels a day in July from 29.94 million in June, the Paris-based IEA said Wednesday in its monthly oil market report…
Kuwait hopes oil price rebounds in few weeks: minister
Kuwait hopes oil prices will rebound in the next two or three weeks and “settle” at a level favourable to producers and consumers, Oil Minister Mohammad Al Busairy said.
“It’s very difficult to discuss the price in this situation. We hope the price will recover within two or three weeks from now, but we don’t know,” Al Busairy said in a phone interview on Monday from Kuwait City. “There’s no guarantee about the situation in the States and Europe, and debt in Italy or Spain.”…
Falling Oil Prices to Squeeze Canada’s Oil-Sands Growth
The recent steep drop in crude-oil prices isn’t good news for Canada’s oil-sands industry, which boasts large reserves but requires high up-front costs for development.
With oil futures prices dropping more than 30% since April from above $110 a barrel to below $80 a barrel Tuesday, profits will be squeezed at several projects and some under construction may be halted if they no longer make economic sense…
Crude Heads for Third Weekly Drop on Concern Volatility Threatens Recovery
Oil fell in New York, heading for a third weekly decline, on concern that volatility in financial markets will worsen an economic slowdown.
Futures slid as much as 1.7 percent today, ending a two-day climb. Crude has traded from $75.71 a barrel, a 10-month low, to as high as $85.97 in intraday trading this week. Reports today may show manufacturing stalled in the euro region and Greece’s economy shrank. Prices surged yesterday after applications for U.S. unemployment benefits unexpectedly slid to the lowest in four months…
Gas
Gas Fracking Poses Serious Environmental Risks, U.S. Panel Finds
Natural-gas companies risk causing serious environmental damage from hydraulic fracturing unless they commit to the best engineering practices, a task force named by Energy Secretary Steven Chu concluded.
Regulations to protect public health will work best when drillers embrace techniques that avoid “undesirable consequences,” according to a draft report today by a subcommittee of the Secretary of Energy Advisory Board. The increased use of fracturing, or fracking, which forces water and chemicals into rock, raises the potential for a “serious problem,” the panel found…
Natural gas: Cleaner, not cooler
Ever more growth in the use of natural gas is welcome for many reasons. But it is not a cure for global warming
THE juxtaposition of “gas” and “boom” conjures misfortune: mining disasters, Zeppelins in flame and the like. But the gas boom that the world is currently experiencing is a conflagration to be celebrated. The development of previously unexploitable shale gas as a resource in America and other countries, and the growth in the liquefied-natural-gas (LNG) market, between them promise a future in which more gas is traded more freely, to the benefit of the world at large…
China Closes In on European Gas
GDF Suez SA is close to a deal in which China Investment Corp. would take a stake in the energy company’s exploration-and-production business, marking yet another investment by Beijing in Western energy assets and boosting the French company’s exposure to the energy-hungry Asian market.
Under the proposed deal, the Chinese sovereign-wealth fund would take a 30% stake in the exploration-and-production business for as much as €3 billion ($4.28 billion), a person familiar with the matter said…
Dutch court suspends major gas storage project
The top court in the Netherlands on Monday ordered the suspension of the Bergermeer gas storage project, the largest in Europe, citing objections by environmentalists and local residents who fear earth tremors.
The storage project, along with the soon-to-be-completed liquefied natural gas terminal in Rotterdam, is an important part of the Netherlands’ plan to become a European hub for natural gas once it stops exporting gas in 2025…
Poland hopes to tap big reserves of shale gas
In the small village of Lebien in northern Poland, the mayor, Elzbieta Religa, is a convert to a new vision of energy independence.
Ms Religa’s house lies a few kilometres from a test well drilling for shale gas. The rig looms high above bright green fields dotted with flowers…
Nuclear
Nuclear Shift to Weigh on E.ON and RWE
Utilities E.ON AG and RWE AG this week are expected to report significant year-on-year declines in earnings for the first-half of 2011, reflecting additional burdens related to the German government’s July decision to exit nuclear energy.
But investors are already looking ahead and will be keen to hear how Germany’s largest energy companies will respond to an even more difficult business climate…
Tepco suffers $7.4bn quarterly loss
Tokyo Electric Power, operator of Fukushima Daiichi nuclear station, reported a Y571.7bn ($7.4bn) net loss for its first quarter as it began tallying the cost of compensating tens of thousands of people affected by the destruction of the atomic plant in March.
Some 50,000 families have been unable to return to their homes due to concerns about radiation contamination from meltdowns at three of the station’s reactors, which were wrecked by Japan’s March 11 tsunami. Experts say many are unlikely ever to be allowed to go back and Tepco is expected to face steep compensation bills for years…
Renewables
Germany enjoys surge in offshore wind investment
One of the world’s largest private equity firms and one of its largest infrastructure banks have announced plans to plough billions of Euros into Germany’s fast-expanding offshore wind sector, after the government last week announced offshore wind farms will play a central role in its plans to phase out the use of nuclear power plants.
US private equity group Blackstone announced on Friday it would invest a total of €2.5bn in the planned Meerwind and Noerdlicher Grund wind farms as it seeks to bolster its presence in the European renewable energy market…
US cleantech investment plunges 44 per cent
The second quarter of 2010 was a record-breaking period for investment in clean technology companies, which makes this year’s numbers seem all the worse.
According to just-published research from Ernst & Young, investment in clean technologies companies dropped by a whopping 44 per cent in the second quarter of 2011, although there is still plenty of activity in the market…
Offshore wind farms are good for wildlife, say researchers
It is the evidence proponents of offshore wind farms have been waiting for: a Dutch study has found that offshore wind turbines have “hardly any negative effects” on wildlife, and may even benefit animals living beneath the waves.
The researchers reached their conclusions after studying a wind farm near Windpark Egmond aan Zee, the first large-scale offshore wind farm built off the Dutch North Sea coast…
How UK newspaper coverage is skewed against renewables
A few weeks ago I blogged about the impact the hackgate scandal might have on coverage of climate change. My thesis was that while News Corporation was a crucial pedlar of junk science in the US and Australia, its UK newspapers tended to be more enlightened on global warming than many of its competitors — such as the Daily Mail.
Since then, I’ve been sent some interesting and previously unpublished analysis of British newspaper coverage of renewable energy. Carried out by the Public Interest Research Centre (Pirc), the research confirms the Mail’s unusually anti-green stance, though it also highlights the remarkable degree of negativity that renewable energy receives in the UK press more broadly — including in the Sun…
Biofuels
Report: Algae as fuel presents problems
Algae-based fuel is a possible future energy source with high energy output from minimal land use but could come with environmental burdens, scientists say.
Algae would produce considerably more transportation energy than canola and switch grass for every acre planted and can be grown on poor-quality marginal land that cannot be easily used to grow food crops such as corn, University of Virginia researchers said in a release Wednesday…
UK
Rural transport cuts put essential services out of reach
Rural-dwellers who are unemployed, young or old, or disabled are increasingly stuck in their homes and unable to access essential services because of savage cuts to public transport in the countryside, MPs have warned.
The “extensive” cuts that have happened already to rural bus services mean that people cannot find jobs, travel to school or college, or even access health services, according to the House of Commons transport committee. The situation is likely to get worse…
Utility bill rise is biggest consumer concern
Utility bills are the biggest worry for British consumers, with a third of people now feeling they have no spare cash after paying for basic needs.
Britons have never felt more starved of money for luxuries, savings or paying off debts, according to the British Retail Consortium…
Facility to convert energy from landfill waste may not go ahead
A pioneering new facility to generate energy from waste — one of the biggest of its kind in the UK, according to its makers — may not go ahead, owing to uncertainty over government renewable energy subsidies.
Air Products announced on Wednesday it had received planning permission from Stockton-on-Tees borough council for its first advanced gasification facility in the UK that would convert household and commercial waste to gas, producing enough energy for 50,000 homes and diverting 300,000 tonnes of waste a year from landfill…
Climate
Report: Canadian emissions to rise on back of tar sands boom
Canada is unlikely to meet its commitment to cut greenhouse gas emissions by 17 per cent by 2020, thanks to the continued expansion of its controversial tar and oil sands industry.
That is the conclusion of a peer-reviewed report from the government-backed Environment Canada agency released late last month, which warns that anticipated emission reductions from electricity generation and other areas of the economy will be more than offset by a huge increase in emissions from tar sands developments…
Economy
Grim outlook from Bank of England: rates static till 2013
Interest rates will be unchanged for up to two years as the recovery struggles to gather momentum against economic headwinds that are getting “stronger by the day”, according to the Bank of England.
In a relentlessly bleak outlook for Britain’s prospects, the Bank downgraded its growth forecasts for the next three years, cut its longer-term inflation projections, and warned that the risks remain “on the downside”…
Cheaper oil may be last best stimulus
Falling crude prices are the silver lining to the market’s black clouds. While governments lack economic ammo, one estimate says each cent off gas adds $1 billion to U.S. pockets alone. OPEC is unlikely to intervene any time soon, meaning lower fuel costs could be the only economic booster for now.
Oil prices can be a potent stabilizer in volatile times — dampening consumer spending power in a boom and buoying incomes when times are tough. The contribution could be especially valuable now. Not only do the authorities in most nations lack an ability to provide further stimulus, many will be actively sapping demand through fiscal retrenchment…