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ODAC Newsletter - Jan 13

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.

Fears of an EU recession gained ground this week with news that the German economy shrank in Q4. In oil markets this dunked oil prices to a New Year low — though they quickly recovered on Thursday in response to renewed concerns of supply disruption. In Nigeria unions threatened to escalate nationwide strikes to the oil production sector at the weekend if the government fails to reverse recent cuts in fuel subsidies. Tension over Iran's nuclear program also increased on Thursday with news of the assassination of a fourth Iranian nuclear scientist. Meanwhile U.S. Treasury Secretary Timothy Geithner's tour of the Far East to drum up support for further sanctions produced mixed results, with action promised by Japan and Korea, but a rebuff from China.

China's oil imports rose 6% in 2011 (compared to 17.5% in 2010) as economic growth slowed from 10.4% to around 9.2%. Chinese power consumption rose 11.7%, mostly delivered by coal, despite significant growth in renewables, including a tripling of solar PV.

China faces the conundrum of balancing its economic ambitions with concerns around severe air pollution and climate change. The director of the National Energy Administration, Liu Tienan, has called for energy use to be capped at 4.1bn tonnes of coal equivalent per year by 2015, but he is expected to face fierce opposition. It is encouraging that Liu made the suggestion; imagine Chris Huhne or Steven Chu even thinking such a thing.

Despite the fall in China's oil imports the US Energy Information Administration's short-term forecast released this week predicted increased oil demand this year of 1.3 million barrels/day resulting in a record WTI average price of $100/barrel in 2012 ($5/barrel more than 2011). Next year is predicted to be tighter still, though the agency did warn that there was plenty of possible up or down side to the forecast.

With spare capacity tight, the oil market remains precariously balanced between fear of supply disruption and shortage on the one hand, and worsening economic crisis on the other - especially if this should spread to China - resulting in oversupply and drastically falling prices. While a sudden price drop might give some short-term relief to oil importers, it would render many marginal oil production projects uneconomic, and so create the conditions for a renewed tightening in a few years time. It would also present serious political challenges to oil producing nations reliant on high prices to balance their budgets.

One industry which could be affected by this is the shale gas industry in the US. Bloomberg published an article this week suggesting that shale gas is a hugely overpriced bubble, with the market being supported by oil prices.

The UK's nascent shale gas industry was in the news again this week as two members of the British Geological Survey stepped up to calm fears about the hydraulic fracturing process, ahead of a government decision on whether to allow its continuation following earthquakes in Lancashire. Geologists Peter Styles and Mike Stephenson saw the risk of water supply contamination from fracking as unlikely, and danger from seismic activity as minor, while calling for greater regulation and monitoring of the industry than has been the case in the US. Importantly they provided radically lower estimates for the size of the resource than drilling company Cuadrilla. The geologists estimate the resource to be 4.7 trillion cubic feet (instead of 200 trillion cubic feet) of which only 5 to 10% would be recoverable. So, you have to ask, where's the hurry to get it out?

In the meantime much longer term benefit could come from energy spent on studying the findings of two other reports released this week — Heat: Degrees of Comfort from the Royal Academy of Engineering sets out the huge challenge of reducing energy consumption of domestic buildings to meet emissions targets, and The Economics of Low Carbon Futures presents a costed approach to decarbonising a city based on a study of Leeds.

View our Reports and Resources page

Oil

Nigeria fuel protests: Union threatens oil shutdown

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For global gasaholics, ending fuel subsidies is the first step

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Bomb kills Iran nuclear scientist as crisis mounts

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EIA forecasts oil, gas demand increases through 2013

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On top of the Arab Spring, petro-tyrants now face perniciously low oil prices

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Republicans hope for "yes" on Keystone, prepare for "no"

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Oil Sands Foes Are Foes of Canada, Minister Says

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Western oil firms remain as US exits Iraq

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Gas

Shale Bubble Inflates on Near-Record Prices for Untested Fields

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Study needed on shale gas effects on health: group

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Coal

China's renewables surge outweighed by growth in coal consumption

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Nuclear

Obama bans uranium mining around Grand Canyon

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Japan Plans Age Limits, Tougher Tests for Nuclear Plants

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Renewables

German jobs boom in renewable energy questioned

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German solar boom strengthens critics of subsidies

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Biofuels

Biofuels become a victim of own success - but not for long

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Lufthansa ends biofuel trial with U.S. flight

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UK

UK shale gas industry still awaiting clearance for fracking

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Fracking company chief to face critics in south-east

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Plumbers unprepared for move to energy-efficient homes, report warns

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Low carbon Leeds City Region would 'save money and create jobs'

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MPs to quiz oil giants BP, Shell and Cairn Energy on Arctic drilling safety

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UK N.Sea oil, gas investment set for record year

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RenewableUK slams Civitas wind power report as inaccurate and outdated

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DECC quietly delivers £197m boost to feed-in tariff budget

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Economy

Energy costs push German inflation rate up to 2.3%

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