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CBI fears return of the three-day week
Industry will have to bear cost of freeze, says Jones; Government blamed for lack of gas storage
Larry Elliott, Guardian
A cold snap this winter will cause an energy crisis that will force industry onto short-term working for the first time since the three-day week of the 1970s, the head of Britain’s leading employers’ organisation warned last night.
Sir Digby Jones, director-general of the CBI, accused the government of failing to ensure enough storage capacity for imported gas despite being told by business for the past three years that the depletion of North Sea supplies had left the country acutely vulnerable to a short freeze.
Amid forecasts from meteorologists that the country could be in for its coldest spell in more than 40 years, Sir Digby said he had again told the industry secretary, Alan Johnson, this week that Britain’s limited stocks of gas reserves would run out after little more than a week of sub-zero temperatures. “If we have a harsh winter – and all the long-range weather forecasts are saying that we will – this economy, the fourth biggest in the world and the most successful in Europe, will see the switch thrown on business,” Sir Digby told the Guardian.
(20 October 2005)
Drug use on rigs driving oil prices up
Carola Hoyos, Financial Times
Workers abusing and producing methamphetamines have left oil producers struggling to fill jobs, causing delays in projects and helping push up the price of oil and petrol in the US and around the world.
The problem was a big challenge in states such as Texas, Colorado, Louisiana and Oklahoma, industry insiders said. Ron Walsmith, director of oil & gas training at the Mid-Continent Oil & Gas Training Center, said entire rig crews of up to 12 people had been fired for making or using the drug. Methamphetamine labs have even been found on rigs, which is dangerous because both are highly explosive.
But the rigs, which cost anywhere from $2m to $20m (€17m, £11m), are conveniently isolated with easy access to sodium hydroxide, which is needed to reduce the acidity of drilling mud and also to make methamphetamine.
Ben Dell, analyst at Sanford Bernstein, said the issue was serious enough to have an impact on international oil prices.
He said: “With a third of all rig crews in the Rocky Mountains having methamphetamine problems, it’s difficult to get a crew that’s not high.”
(17 October 2005)
Also see the article in High Country News: Methamphetamine fuels the West’s oil and gas boom.
Natural gas prices take toll on U.S. agriculture
Lisa Haarlander, Reuters
High natural gas prices are shaping farming decisions across America’s heartland, from what farmers will plant in the spring to how corn and soybeans processing plants operate, grain dealers and brokers said.
With tight margins and fierce competition, the high costs have not yet been passed on to consumers and are instead eating into profit margins, the sources said.
“There’s that constant fear of raising their rates to recoup those costs because they are so competitive,” said Jeff Adkisson, executive vice president of the Grain and Feed Association of Illinois. “The first guy who raises his rates won’t have grain to merchandise.”
Elevators use large amounts of natural gas in the fall to dry freshly harvested grain so it can be stored.
…
Some farmers, looking at higher natural gas prices, are deciding to plant less corn and switch to soybeans or wheat because they require
less nitrogen fertilizer, which is produced using natural gas as a feedstock.
(18 October 2005)
Farmers Fret Over Fertilizer Costs
Emily Fredrix, AP via Yahoo!News
OMAHA, Neb. – Dave Nielsen just spent nearly $14,000 to fertilize his crops, an amount he never could have imagined when he started farming 20 years ago.
But the $410 a ton Nielsen paid is symptomatic of the crunch farmers are feeling this year as the cost of fertilizer soars. While rising natural gas prices are causing concerns about heating costs this winter, farmers are wondering how they’ll pay for fertilizer, which uses the energy source to produce its main ingredients, such as ammonia or nitrates.
“There’s just a lot of uncertainty in agriculture right now because of the energy costs, and fertilizer is probably the best example of what the uncertainty means in their financial picture next year,” said Rob Robertson, vice president of governmental relations at the Nebraska Farm Bureau.
…Fertilizer aside, consumers should expect to pay more for their food because of the overall rise in energy costs and fuel, which affects many aspects of farming, including planting, harvesting and crop drying, [said Bob Young, chief economist of the American Farm Bureau].
… Some in the farm industry are even concerned about the availability of fertilizer as the cost of natural gas increases, said John Kugler, marketing president of fertilizer manufacturer Kugler Co. in McCook, Neb. He said some fertilizer companies are selling their natural gas supplies instead of producing fertilizer.
Still, Kugler believes the price of fertilizer may have peaked.
“I can’t see it going any higher,” he said. “What will happen is, people aren’t going to use it.”
(19 October 2005)
Automakers show signs of schizophrenia
Roland Jones, MSNBC
Industry claims you can still go fast without using much gasoline
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There’s a sense of schizophrenia in automotive marketing these days. In Chevy’s most recent TV ad, smiling GM workers swear that the powerful new Impala “gets an estimated 31 highway miles per gallon,” while in Toyota’s latest commercial there are cars to fit every American’s taste — powerful ones for the power fanatics, and hybrids for the eco-conscious.
Car consumers would be forgiven for feeling a little confused. After all, power has been the best selling point in the U.S. car market for decades. But now, with gas prices above $3 and biting into Americans’ incomes, once-robust sales of gas-guzzling SUVs have stalled, and so auto makers are at pains to stress the fuel efficiency of their latest cars.
“Historically, we’ve always been a reactive industry,” said Maurice Durand, manager of product public relations at Nissan. “If outside forces change consumer demand to more fuel efficient cars, it’s not as if we have all these new cars with greater fuel economy. It’s just that the marketing message has changed to adapt to what the consumer wants.”
(18 October 2005)
Southeast Asia faces diverse energy challenges: Morgan Stanley
AFP via Reuters
SINGAPORE – Southeast Asian economies are facing diverse challenges in coping with high oil prices, among them removing costly fuel subsidies and attracting investments into the energy sector, US investment bank Morgan Stanley says.
Regional economies must also improve energy efficiency and cut a heavy dependence on imported oil, the bank said in a report received Wednesday.
Malaysia appears best placed to benefit from rising oil prices after consistently remaining a net oil exporter, but fuel subsidies are eating up gains, the bank said.
(19 October 2005)
Pacific Rim energy conference (AUDIO)
Rachel Dornhelm, Marketplace (American Public Radio)
Energy officials from 21 Pacific Rim countries gather in Korea today to discuss possible solutions to surging global energy prices. Rachel Dornhelm reports.
(19 October 2005)
Oil cash stockpile fuels fears of 70s-style recession
Carl Mortished, The Times of London via The Daily Journal
A paper trail of petrodollars leading from the wallets of Western motorists to the bank accounts of oil sheiks is raising fears that the
world is on the brink of a 1970s-style slump.
A quarter-century on from the first oil crisis, however, Middle Eastern countries are better-equipped to spend the avalanche of cash,
international bankers said.
Sales of Bentleys and the footfall in Bond Street jewelers are popular indicators of Middle Eastern wealth, but more important signals have
been triggered in the banking community by this year’s extraordinary surge in the price of crude oil.
Unable to spend the flood of cash, oil exporters have been running up huge deposits reminiscent of the hoard accumulated by countries in the
Middle East in the 1970s.
The International Monetary Fund (IMF) predicts that Middle East-ern and Central Asian oil exporters will earn about $600 billion from crude sales this year. Of that, they will spend some $350 billion importing goods and services from the West, leaving a surplus of $250 billion – footloose money looking for a home.
In the short term, home is likely to be dollar deposits and U.S. treasury bills, according to Mohsin Khan, the IMF’s director for the
Middle East and Central Asia. “The deposits are shooting up,” he said. “We have seen an increase of between $80 billion and $100 billion in the
first quarter of this year.”
(14 October 2005)
