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ODAC Newsletter - Feb 10

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.

'Peak Oil Scare Fades as Shale, Deepwater Wells Gush Crude' was the title of one of the lead articles in Bloomberg's newly launched 'Sustainability' section this week. The report echoes a growing number of press reports announcing the end of the "myth" of peak oil. So what gives?

That conventional oil has peaked and will be in decline over the next decades is no longer controversial — so in that sense peak oil has been and gone, and the economic consequences are evident. On the other hand, the peak-oil-is-dead argument goes that the market has worked just as it should. As oil supplies became tight prices rose making previously uneconomic resources viable — this together with technical advances in extracting those more difficult to produce resources mean that global reserves are now bigger than ever. The poster child of this turnaround is North America where tar sands, shale oil, and deepwater off-shore oil appear to have reversed a decades-long production decline, while shale gas has created a gas glut - though this may be a mirage produced by bad data, according to one recent analysis.

But the important question for the future is, does this mean our problems are behind us and life can get back to normal? Peak oil is about rates of production, so can oil be brought to market in a timely fashion at a price which the economy can bear but which also covers the costs?

On this front there is still a great deal of insecurity — depletion rates demand that new production equivalent to about a third Saudi output must be brought online each year, just to stand still — and of course demand is expected to increase. Replacing this is a big ask — especially with unconventional oil which is both slower and more expensive to produce — and as yet untested as global liquids production has remained essentially static since 2004. Recent analysis from consultants Douglas Westwood suggests demand growth in the developing world — especially China — cannot be met without causing violent oil price spikes, which in turn cause recessions in the developed economies. The recessions are necessary, argue DW, to shift consumption from the old economies of the west to the rising stars of the east. This is another example of the market 'working', but also clear evidence that there is not enough oil to go round.

There is also growing dependence on OPEC, as evidenced in BP's recent Energy Outlook. One commentator, perhaps surprisingly sounding a wary note this week was Saadallah Al Fathi - former head of the Energy Studies Department in Opec Secretariat in Vienna. Al Fathi warned that "Optimism is important for human progress but that does not mean we should ignore what the numbers are telling us" ... he then went on to question both unconventional reserve numbers and more tellingly, those of OPEC.

In other news this week, new Energy Secretary Ed Davey announced the government's plans for revising the FiT scheme. Current rates will be kept until the end of March before being cut by 50%. Rates could be cut further if installation prices continue to fall. The plans got a mixed reaction from industry. Meanwhile, despite being busy with QE3 (a 3rd round of quantitative easing) Mervyn King is to review claims that the fossil fuel industry is an investment risk in the face of carbon reduction targets.

Oil

Debate rages on when oil will peak

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Peak Oil Scare Fades as Shale, Deepwater Wells Gush Crude

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Oil, Food, Water: Is Everything Past Its Peak?

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The Real Cost of 'Peak Oil'

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Oil Falls From Three-Week High as Economic Concern Counters U.S. Outlook

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China to Increase Domestic Diesel, Gasoline Prices First Time in 10 Months

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BP raises dividend and defends plans to drill deeper

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Statoil Net Rises as Reserves Replaced for First Year in Six

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EIA boosts 2012, 2013 oil demand growth forecast

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Gas

BG cuts back on fracking for shale gas as prices slide

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Everything you know about shale gas is wrong

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Electricity

There's inefficient, and then there's really inefficient

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Belgian battery can power 1,400 homes

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Nuclear

Federal Regulators Approve Two Nuclear Reactors in Georgia

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Biofuels

EU energy chief against higher biofuel target for now

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UK

Barker tells solar industry to "get real" over feed-in tariff cuts

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U.K. to Open Biggest Offshore Wind Farm in $52 Billion Expansion

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Bank of England Says to Evaluate Fossil-Fuel Investment Risk

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KPMG refuses to release controversial green energy report

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UK emissions rose 3.1% as economy recovered in 2010

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Bank of England injects another £50bn into UK economy

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Transport

Airline industry split widens over EU carbon 'tax' row

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China bans airlines from paying EU carbon charges

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