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Oil prices: Green light from the black stuff
Editorial, Guardian
… The 15% jump in the cost of crude oil since the new year will lead to higher inflation and lower growth, particularly if central banks respond by pushing up interest rates. If sustained, this will be the fifth significant rise in oil prices since 1973, and each of the previous four was followed by a recession. This will have political consequences too. If consumers are paying more for their petrol, domestic energy bills and public transport, they have less to spend on everything else. Historically, support for the government drops when there is a squeeze on disposable incomes of the sort currently being endured. And worse may be to come. Chris Huhne, the energy secretary, says there is a real threat of crude prices hitting $160 a barrel; the business secretary, Vince Cable, is warning of a “fully fledged energy and commodity price shock”.
Oil prices are high for three reasons: demand, particularly from China, has been strong; the vast quantities of cheap dollars in the global financial markets have encouraged speculation in commodities; and political unrest in north Africa and the Middle East has led to fears of disrupted supplies. While the UK government is powerless to influence these trends, it has a duty to come up with a medium-term strategy for British needs in a world in which rapid growth in the emerging nations, coupled with dwindling output from traditional low-cost producers, means prices are on a permanent upward trend. This will not wait.
(5 March 2011)
China Reportedly Plans Strict Goals to Save Energy
Keith Bradsher, New York Times
With oil prices at their highest level in more than two years because of unrest in North Africa and the Middle East, the Chinese government plans to announce strict five-year goals for energy conservation in the next two weeks, China energy specialists said Friday.
Bejing’s emphasis on saving energy reflects concerns about national security and the effects of high fuel costs on inflation, China’s export competitiveness and the country’s pollution problems.
Any energy policy moves by Beijing hold global implications, given that China is the world’s biggest consumer of energy and largest emitter of greenhouse gases. And even the new efficiency goals assume that China’s overall energy consumption will grow, to meet the needs of the nation’s 1.3 billion people and its rapidly expanding economy.
As a net importer of oil, China tends to view its energy needs as a matter of national security.
(4 March 2011)
UK facing 1970s-style oil shock which could cost economy £45bn – Huhne
Patrick Wintour, Guardian
Climate and energy secretary says an oil price of $100 a barrel transforms the economics of climate change
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Britain is facing a 1970s-style oil price shock that could cost the UK economy £45bn over two years, the climate and energy secretary, Chris Huhne, is expected to warn in his first intervention on the issue since the start of Middle East political crisis.
In Thursday’s keynote speech on the impact of the oil crisis, Huhne will argue that an $100 (£61) a barrel price for oil transforms the economics of climate change in Britain.
He will disclose the Department of Energy and Climate Change’s (Decc) economists have warned that if the oil price rise turns into a 1970s-style shock the cumulative loss to the UK economy would be worth £45bn over two years. Decc’s economists made the calculation on the basis of oil prices rising from $80 a barrel last year to $160, according to Huhne.
At $102 a barrel, oil is at a two-and-a-half year high and there have been predictions that if the political turmoil spreads across the Gulf, the price will rise considerably more.
(3 March 2011)
Libya, oil production, OPEC responses, Saudi Arabian capabilities and the SPR
Heading Out, The Oil Drum
The impacts of the disruptions in the Middle East are now starting to become evident as supplies no longer flow into the delivery pipelines that carry fuel from countries such as Libya to their European customers. It is now considered likely that the 1.6 mbd that Libya delivers to the world market will not be available for some time. Ireland, for example, which has had other problems with the banks in the recent past, is now faced with the loss of perhaps 23% of its fuel supply, which while only 14 kbd is, for that country, likely to be very significant. For while the Libyan shortage at present may be just due to Gadhafi ordering the ports closed, if he is also ordering the destruction of facilities, as is rumored, then the consequences may be more long term. ENI has reported that the Libyan shortfall is currently 1.2 mbd.
It is in this context that the world turns to OPEC, which has stated that it has enough oil in reserve to stabilize deliveries, and looks to see a compensating production increase from those nations with that potential. And here is the rub, for some OPEC countries are themselves in a little political difficulty which might negatively impact their own production, while those that can, in the short term, increase flow volumes to match the shortfall are likely all called Saudi Arabia.
(28 February 2011)
My2050@lastoilshock
David Strahan, The Last Oil Shock (blog)
Here’s my initial take on DECC’s new energy planning toy, My2050, launched this week. The aim is to cut emissions to 20% of 1990 levels by 2050 and keep the lights on. There are screenshots of my choices below.
Of course, the emissions target is probably too generous and fails to reflect the latest science, and given the limitations of the choices presented, the tool is inevitably crude. But it presents some interesting dilemmas even so.
The first is how hard it is to hit 20% without completely electrifying space heating and transport fuel, which is something I have advocated for some time. This really is the only way to decarbonise home heat and transport; biogas from anaerobic digestion will help, but the resource doesn’t look big enough to supply both sectors, certainly in Britain.
The next is the model’s sensitivity economic growth; you seem to have to opt for pretty much steady state manufacturing to have any chance of hitting the target, implying zero growth for forty years. This may be right, but did DECC really mean to say so?
(4 March 2011)
