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.
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Oil
IEA Predicts Bumpy Ride for Oil Amid Non-OPEC Supply Cuts
The International Energy Agency cut forecasts for oil supplies from outside OPEC this year because of lower exports from Sudan and Syria, cautioning that reduced spare output capacity raises the risk of a price surge.
Producers not in the Organization of Petroleum Exporting Countries will provide 53.5 million barrels a day this year, or 200,000 a day less than the IEA forecast last month. The agency kept estimates for global oil demand in 2012 unchanged, predicting fuel use will remain “stunted” by the economic slowdown and higher prices. Disappointing non-OPEC output will make the market more reliant on a “slim buffer” of spare production capacity from a few OPEC nations, the IEA said…
Obama, UK’s Cameron discussed tapping oil reserves: sources
President Barack Obama and British Prime Minister David Cameron discussed the possibility of releasing emergency oil reserves during a meeting on Wednesday, two sources familiar with the talks said, the first sign that Obama is starting to test global support for an effort to knock back near-record fuel prices. Obama raised the issue during a broad bilateral meeting at the White House, according to a UK official with knowledge of the discussion…
US presses Saudi Arabia to boost oil output
The United States is pressing Saudi Arabia to boost oil output to fill a likely supply gap arising from sanctions on Iran, Gulf sources told Reuters, adding that such an increase is unlikely before July.
“There were talks held between Saudi and the US and the US asked if Saudi could be accommodating once the sanctions take effect in July. And the Saudi response was that it was ready to meet demand in the market if required, but would not like to take part in the politics,” one Gulf official said…
An Inconvenient Statement, Retracted
Energy Secretary Steven Chu on Tuesday walked away from his oft-quoted pre-Cabinet statement that the United States should deliberately raise gasoline prices to discourage consumption.
In a 2008 interview with The Wall Street Journal before he was appointed President Obama’s energy secretary, Dr. Chu, then the director of the Lawrence Berkeley National Laboratory, said, “Somehow we have to figure out how to boost the price of gasoline to the levels of Europe.”…
Oil Rebounds From One-Week Low on U.S. Demand Outlook
Oil advanced for the first time in three days in New York, trimming a weekly decline as investors bet that fuel demand will increase with an economic recovery in the U.S., the world’s biggest crude consumer.
Futures climbed as much as 0.5 percent, rebounding from the lowest settlement in more than a week, before data that may show U.S. consumer confidence rose to a one-year high and industrial production increased. Jobless claims fell last week to a four- year low, the Labor Department reported yesterday. Oil also gained after the U.S. and U.K. said they haven’t reached an agreement to release emergency stockpiles to counter rising prices following Western sanctions against Iran…
Oil and the world economy: The new grease?
WITH the euro crisis in abeyance, high oil prices have become the latest source of worry for the world economy. “Oil is the new Greece” is a typical headline on a recent report by HSBC analysts. The fear is understandable. Oil markets are edgy; tensions with Iran are high. The price of Brent crude shot up by more than $5 a barrel on March 1st, to $128, after an Iranian press report that explosions had destroyed a vital Saudi Arabian oil pipeline. It fell back after the Saudis denied the claim, but at $125, crude is still 16% costlier than at the start of the year.
Assessing the dangers posed by dearer oil means answering four questions: What is driving up the oil price? How high could it go? What is the likely economic impact of rises so far? And what damage could plausible future increases do?..
MPs unimpressed by oil firms’ Arctic emergency planning
British oil companies spearheading a race for resources in the pristine waters of the Arctic were on Wednesday accused of not learning the safety lessons of the Gulf of Mexico oil spill as industry executives gave evidence to MPs.
Members of the Commons environmental audit committee also expressed shock at an admission from Shell and Cairn Energy that they had not assessed the potential financial impact of any worst case oil spill…
Gas
Sierra Club Spurns $30 Million Gift After Fracking Turns Toxic
Environmental and health groups are calling for tougher U.S. regulation of hydraulic fracturing for natural gas, turning on a one-time donor to their causes: Chesapeake Energy Corp. (CHK)
The Sierra Club, the largest U.S. environmental group, is rethinking early support of natural-gas development after activists and scientists linked the drilling to tainted water and increased air emissions, Executive Director Michael Brune said yesterday in an interview. The group turned down $30 million from Chesapeake after he took over in 2010, he said…
Gas power construction is ‘twice government predictions’
The “dash for gas” is in full flow in the UK, according to new research, which has found that the amount of gas-fired power generation under construction, or in planning, is twice government expectations.
While the government has estimated that about 5GW of new gas-fired power generation will be needed to supply the UK in the coming decades, power stations with more than 3GW of capacity are now under construction and nearly 10GW of plants have received planning permission, according to Friends of the Earth analysis. In addition, nearly 10GW of capacity is in the earlier stages of planning.
Nuclear
Older nuclear plants pose safety challenge: IAEA
Eighty per cent of the world’s nuclear power plants are more than 20 years old, raising safety concerns, a draft UN report says a year after Japan’s Fukushima disaster.
Many operators have begun programmes, or expressed their intention, to run reactors beyond their planned design lifetimes, said the International Atomic Energy Agency (IAEA) document which has not yet been made public…
UK must use plutonium stockpile to meet carbon targets, top scientist warns
Global supplies of uranium will begin to run out in 2023 when UK will rely on domestic nuclear supply, predicts Sir David King.
It will be impossible for the UK to meet its long-term carbon reduction target without reusing the nation’s stockpile of plutonium, the former government chief scientist has warned…
UK “over a barrel” on new nuclear, campaigners warn
The UK’s proposed investment in nuclear power means handing over control of energy policy to France at the same time as shouldering all of the risks associated with new reactors, four of the UK’s most eminent environmentalists have warned.
In an open letter to Prime Minister David Cameron, Jonathan Porritt, Tom Burke, Charles Secrett and Tony Juniper argue plans for eight new nuclear reactors, most of which are set to be built by French companies EDF and Areva, will prove “a massive rip-off for the British taxpayer”.
The government is keen to replace the UK’s aging nuclear power plants and last month signed a series of deals with France worth more than £500m to support plans for new reactors…
Nuclear power: The dream that failed
THE enormous power tucked away in the atomic nucleus, the chemist Frederick Soddy rhapsodised in 1908, could “transform a desert continent, thaw the frozen poles, and make the whole world one smiling Garden of Eden.” Militarily, that power has threatened the opposite, with its ability to make deserts out of gardens on an unparalleled scale. Idealists hoped that, in civil garb, it might redress the balance, providing a cheap, plentiful, reliable and safe source of electricity for centuries to come. But it has not. Nor does it soon seem likely to…
Wales puts marine and nuclear at heart of green energy master plan
The Welsh government will today publish a new energy strategy outlining how the country aims to establish itself as a leading low carbon technology hub, creating tens of thousands of new jobs in the process.
The report, titled Energy Wales: A Low Carbon Transition, sets out a series of commitments designed to accelerate investment in low carbon energy generation and maximise the economic and job creation benefits that will arise from a shift towards renewable energy and nuclear power…
Renewables
Onshore wind farms add less than £5 a year to household bills
The government’s main renewable energy subsidy scheme adds just £15.15 a year to the average household bills, according to new research based on official Ofgem figures. The research aims to dispel the myth that green energy is driving recent increases in energy bills.
The energy watchdog has released its annual report on the Renewables Obligation (RO) scheme, confirming that there was an increase in renewable energy generation across the UK in 2010-11. Some 23.2TWh of electricity was provided by renewable energy sites that are accredited under the RO, an increase of about 15 per cent on the previous year…
George Osborne’s budget may be another massive bill for the UK
The chancellor’s environmental stance at his party conference and autumn statement could have cost us billions — the opposite of what he intended. It’s unlikely the budget will do any different.
“Once is happenstance. Twice is coincidence. The third time it’s enemy action.”…
Now is the time for global deployment of smart communities — IEA Deputy Executive Director
Ambassador Richard Jones highlights successful demonstration projects at meeting in Fukushima City
Smart communities — cities, towns, neighbourhoods and villages that reduce their energy demand and generate their own power from renewable sources — should play an increasingly important role across the world, the International Energy Agency’s Deputy Executive Director has said…
UK wants 2030 renewable energy target scrapped
Fledgling green industries could be hit as document reveals move to rebrand nuclear power as a renewable form of energy.
The UK government wants nuclear power to be given parity with renewables in Europe, in a move that would significantly boost atomic energy in Britain but downgrade investment in renewable generation, according to a leaked document seen by the Guardian…
Mining and Minerals
Government to challenge China on rare earths curbs at WTO
The United States, Japan and European Union plan to bring a new trade case against China over its export restrictions on rare earth minerals used in a variety of high-tech and clean energy products, senior administration officials said on Monday.
They were responding to a published report by the Associated Press which said President Barack Obama would announce on Tuesday that the United States would ask China for talks on the issue at the World Trade Organization, the first step in filing a trade case, and be joined by the EU and Japan…
Biofuels
From landfill to Lamborghini: the future of biofuels
What’s not to like about converting garbage into a low-carbon energy, displacing oil and its climate-warming emissions?
Not much according to the biofuels industry, which reckons household and office rubbish will be the most promising source for biofuels in 2012. That increases the intriguing possibility of mining landfill sites, as is already happening in a few places, though of course grabbing the junk before it gets buried is clearly the first option…
Brazil Ethanol Drive Falters on Domestic Supply Shortage
Brazil is struggling to make enough ethanol to satisfy domestic demand just as the U.S. scraps restrictions on imports for the first time since 1980.
The U.S., the world’s largest market for the biofuel, on Jan. 1 cut a 45 cent-a-gallon tax credit and a 54 cent-a-gallon tariff that protected local companies from foreign competition. Brazil, the world’s No. 2 producer, is unlikely to be able to take advantage after output dropped 19 percent this season…
Doubts over E.ON biomass plant
Energy utility E.ON said it was reviewing whether to proceed with building a new biomass plant, for which it received government approval today, in light of proposed cut to subsidies.
The company was given the go-ahead to build a 150MW dedicated biomass power station at Royal Portbury Dock in the Port of Bristol, which could generate enough electricity to power up to 160,000 homes…
