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ODAC Newsletter - Mar 16

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.

Finally, a plausible explanation for the Obama-Cameron political orgy — 'love-in' doesn't quite do it — in Washington this week. For Cameron the benefit of this floorshow was obvious — like Blair with Bush, revelling in the reflected glory of US power — but Obama's motive remained a mystery. What could possibly justify gifting all that folderol and face time with the world's most powerful man? Yesterday we got the answer: international cover for a politically motivated release from strategic petroleum reserves, that's what.

Rising gasoline prices are the biggest threat to Obama's re-election, and he is under intense pressure from Republican candidates seeking to pin the blame on him. They're wrong of course — drilling the US into a pin-cushion would do nothing to calm the international oil price — as Obama himself has argued forcefully. But it's election year and he still desperately needs to engineer a cut in fuel prices. It might look less like a cynical U-turn forced on him by his opponents if he can drum up some friendly diplomatic cover.

No deal has been done, as both camps were keen to stress, and a four dollar tumble in the oil price on the news of their talks quickly evaporated. But it all looks designed to increase pressure on the International Energy Agency — the US is its biggest funder — to co-ordinate a stock release. The IEA insists it only does so to deal with a genuine physical shortage, not to massage prices, but many suspect US political priorities played a part in the release last year during the Libyan revolution.

Obama must be desperate though, because there is no evidence that such stock releases have a significant or lasting impact on fuel prices. The price of Brent crude when the stock release was announced last year was $112, and when it finished, $115.

But how could it possibly make a serious difference when all countries are pumping flat out and global spare capacity is wafer thin? The world's remaining spare capacity is now concentrated in Saudi Arabia, and both the Saudi oil minister Ali Naimi and the IEA have recently confirmed there is even less of it available than previously thought.

Saudi is pumping at around 10 million barrels per day — higher than for thirty years — and claims nameplate capacity of 12.5 mb/d. However, Ali Naimi recently admitted that 700 kb/d could not be brought on stream in less than 90 days, three times longer than the standard definition of spare capacity. The IEA this week cut its estimate of Saudi capacity to 11.88 mb/d, because of the depletion of existing fields, and of global spare capacity to 3 mb/d. That's back to levels seen in 2008 when the oil price peaked at $147 per barrel and — with the help of Lehman Brothers - tipped the world into the deepest recession since WWII. Remember back in October 2009 when we told you about the www shaped recession? It looks like that's where we're going.

In such a tight oil market, the effects of a release from strategic petroleum reserves would be transient at best. With the Iranian crisis looking like it may turn military, it would also be foolish: best to save the SPR 'big bazooka' for a real emergency.

In the UK energy policy is also getting some political heat as the coalition government struggles to decide its priorities. Chancellor George Osborne has already shown himself to be sceptical of DECC's environmental policies; the coalition parties are split on nuclear; and there is a strong Tory lobby against wind power (they should read Forbes, which has shown how so-called 'expensive' offshore wind can in fact reduce energy bills.

While DECC maintains its broadly technology-neutral stance, it seems that behind the scenes the gas lobby is in the ascendency. According to a new report by Friends of the Earth based on current construction and approvals 9GW of new gas capacity is likely to be on grid by 2016, and another 10GW is in early planning stages — this despite the fact that high gas prices are calculated to have been the biggest contributor to household energy price rises between 2004 and 2010, and there is as yet no abatement of emissions in place. Given that the government figures estimate only an additional 5GW by 2020, clearly something has got to give here — based on current trends that would be the government's carbon targets, and the ability of households to afford their energy bills.

View our Reports and Resources page

Oil

IEA Predicts Bumpy Ride for Oil Amid Non-OPEC Supply Cuts

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Obama, UK's Cameron discussed tapping oil reserves: sources

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US presses Saudi Arabia to boost oil output

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An Inconvenient Statement, Retracted

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Oil Rebounds From One-Week Low on U.S. Demand Outlook

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Oil and the world economy: The new grease?

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MPs unimpressed by oil firms' Arctic emergency planning

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Gas

Sierra Club Spurns $30 Million Gift After Fracking Turns Toxic

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Gas power construction is 'twice government predictions'

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Nuclear

Older nuclear plants pose safety challenge: IAEA

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UK must use plutonium stockpile to meet carbon targets, top scientist warns

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UK "over a barrel" on new nuclear, campaigners warn

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Nuclear power: The dream that failed

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Wales puts marine and nuclear at heart of green energy master plan

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Renewables

Onshore wind farms add less than £5 a year to household bills

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George Osborne's budget may be another massive bill for the UK

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Now is the time for global deployment of smart communities — IEA Deputy Executive Director

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UK wants 2030 renewable energy target scrapped

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Mining and Minerals

Government to challenge China on rare earths curbs at WTO

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Biofuels

From landfill to Lamborghini: the future of biofuels

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Brazil Ethanol Drive Falters on Domestic Supply Shortage

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Doubts over E.ON biomass plant

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