ODAC News

Sunday 02 Dec

The Oil Depletion Analysis Centre

The next newsletter will be Sunday 9^th Dec.

Biofuels - UK

1/   Planned UK Biofuel Plant Seen Risky as Wheat Soars            (Planet Ark (Reuters], Fri 30 Nov)

Natural Gas Prices - USA

2/   Record gas storage doesn't mean market can relax     (Platts, Tue 20 Nov)

Natural Gas – Ukraine / Russia

3/   Crisis Looms as Ukraine Talks Price Hike      (Energy Intelligence [International Oil Daily], Fri 30 Nov)

Food Prices

4a/ Soyabeans to stoke food price inflation          (Financial Times, Thu 29 Nov)

4b/ U.S. food banks, in a squeeze, tighten belts  (International Herald Tribune, Fri 30 Nov)

Economy - UK

5a/ The Business Show [video]   (The Telegraph, Fri 30 Nov)

5b/ Is the roof falling in on the housing market?    (The Independent, Fri 30 Nov)

Peak Oil in Australia

6/   The party's over and Liberals will soon be history         (Sydney Morning Herald, Thu 29 Nov)

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1/         Planned UK Biofuel Plant Seen Risky as Wheat Soars       (Planet Ark (Reuters], Fri 30 Nov)

http://www.planetark.com/dailynewsstory.cfm/newsid/45642/story.htm

Article:    Plans by BP Plc, British Sugar and DuPont to build a bioethanol plant in northeast England could be risky if wheat prices keep rising, but the market for the biofuel is growing, analysts said on Thursday.

The companies will invest 200 million pounds (US$414.4 million) in the wheat-based plant in Hull, which will produce around 420 million litres of bioethanol annually from late 2009.

"The fundamentals are there for a profitable business for the Hull plant. It's possibly not a bad investment," said biofuels analyst Robert Outram at London-based consultancy Frost and Sullivan.

But Christoph Berg, a biofuels expert at German analyst Licht, said the investors might put their plans on hold if prices of the wheat feedstock continued to soar, making the economics look less attractive.

UK feed wheat prices hit record highs of around 200 pounds a tonne in September 2007 driven by supply shortages...

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2/         Record gas storage doesn't mean market can relax            (Platts, Tue 20 Nov)

http://www.platts.com/Natural%20Gas/Resources/News%20Features/storage07/index.xml?src=energybulletin

Comment:    Platts reminding us (not that the Peak Oil community needs reminding) that although the USA has historically high levels of natural gas in storage, that does not necessarily mean that prices will remain relatively low.

Article:    With the US natural gas market having entered the 2007/2008 heating season with record volumes of gas in storage, utilities should feel comfortable about their ability to meet winter demand without fears of major price spikes.

Or should they?

Despite nationwide inventories atop 3.5 Tcf as of early November, and despite forecasts for a relatively mild winter in many regions, NYMEX gas futures prices for the winter months remain at historical highs above $8/MMBtu, and concerns about a tight supply/demand balance loom large.

That is due in part to ever-shifting market dynamics, according to FTI Consulting senior analyst Andrew Weissman, who noted that demand for gas from the power-generation sector is "far higher" than it was several years ago, meaning storage inventories will be drawn down more quickly -- especially in the event of a sustained cold snap.

In fact, the Energy Information Administration reported the season's first net storage withdrawal for the week ending November 9 -- a modest 9-Bcf draw that reduced the surplus over both the year-ago level and the five-year average.

Analyst George Hopley of Barclays Capital noted that the switch from injections to withdrawals typically happens later in November.

"Storage operations in recent years have shown reluctance to withdraw so early in the season, given the uncertainty about the remainder of the season," he said. "But in this year, with a record storage accumulation, that concern may loom less large."

Looking ahead, market participants and analysts cite several factors that could wind up mitigating the bearish impact of robust storage supplies. Among them: the recent surge in heating oil prices, which means natural gas will be a more attractive option for those customers able to switch from fuel oil to gas.

International market forces also may come into play. Since winter is when US liquefied natural gas imports typically drop off due to higher demand in Europe and Asia, a particularly harsh winter in those markets could take a big bite out of overall US gas supplies -- forcing the market to rely heavily on storage gas to keep homes and businesses heated and power plants churning out electricity.

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3/         Crisis Looms as Ukraine Talks Price Hike      (Energy Intelligence [International Oil Daily], Fri 30 Nov)

No link. From newsletter.

Comment:    The text from the newsletter (below) is an introduction to the full article, available to subscribers on the Energy Intelligence website, so no details here. But we have been here before. The Financial Times reports today that: “Yulia Tymoshenko, the charismatic, iron-willed Ukrainian politician, inched closer to becoming Kiev's next prime minister after a majority coalition was officially formed on Thursday in parliament between her bloc and allies of Viktor Yushchenko, the pro-western president.” (http://www.ft.com/cms/s/0/5601a620-9ed3-11dc-b4e4-0000779fd2ac,s01=1,stream=FTSynd.html).

Article:    A new showdown is looming over gas prices between Russia and Ukraine, which in January 2006 led to a brief, but alarming, cutoff in supplies to Europe.

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4a/        Soyabeans to stoke food price inflation          (Financial Times, Thu 29 Nov)

http://search.ft.com/nonFtArticle?id=071129000173&ct=0

Article:    Policymakers already concerned about the relentless rise in global food inflation are facing more bad news in the shape of soaring soyabean prices.

Soyabean prices have risen to their highest level in 34 years, boosted by strong Chinese demand and fears that current prices are not high enough to swing acreage from corn to soyabeans in the US, the world's largest producer.

In Chicago, soyabean prices this week hit $11.14 a bushel, the highest level since July 1973, helped by rising demand from the biofuel industry as crude oil prices approached $100 a barrel and also by worries about the Brazilian crop - the world's second largest - after dry weather in Mato Graso state, the key producing area. Soyabeans traded yesterday at $10.85½ a bushel.

The price-jump threatens to resonate through the supply chain, boosting meat and poultry prices because soyabean is used largely for animal feed, analysts warned.

The surge in soyabean costs - coupled with price increases in other feedstock, such as wheat and corn - could prompt some farmers to abandon production of pork, beef and lamb amid mounting losses, paving the way for higher meat prices in the future.

Food inflation is already a big concern for policymakers in developed and developing countries. German inflation has just hit 3 per cent for the first time since at least 1995 on higher food and energy costs while Chinese inflation has surged to a decade high.

... World Oil, the Hamburg-based consultants, yesterday said additional large-scale Chinese purchases were "likely in the near to medium-term." China is the largest world importer, acquiring about 40 per cent of the world's traded soyabeans, followed at a large distance by the European Union and Japan...

4b/        U.S. food banks, in a squeeze, tighten belts  (International Herald Tribune, Fri 30 Nov)

http://www.iht.com/articles/2007/11/30/america/30food.php?WT.mc_id=rssamerica

Comment:    Original article at the NY Times.

Article:    Food banks around the country are reporting critical shortages that have forced them to ration supplies, distribute staples usually reserved for disaster relief and in some instances close.

"It's one of the most demanding years I've seen in my 30 years" in the field, said Catherine D'Amato, president and chief executive of the Greater Boston Food Bank, comparing the situation to the recession of the late 1970s.

Experts attributed the shortages to an unusual combination of factors, including rising demand, a sharp drop in U.S. supplies of excess farm products, and tighter inventory controls that are leaving supermarkets and other retailers with less food to donate.

"We don't have nearly what people need, and that's all there is to it," said Greg Bryant, director of the food pantry in Sheffield, Vermont

"We're one step from running out," Bryant said...

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5a/        The Business Show [video]        (The Telegraph, Fri 30 Nov)

http://www.telegraph.co.uk/portal/popup/ttv/business.jhtml

Comment:    The Telegraph’s daily news program – video. The first minute or so is business headlines, then a 4 minute discussion of whether or not the Bank of England is likely to lower interest rates – answer is NOT. Its main concern is inflation, and that is on its way up.

5b/        Is the roof falling in on the housing market?  (The Independent, Fri 30 Nov)

http://money.independent.co.uk/property/mortgages/article3209860.ece

Comment:    The Independent summarizes a few of the things that are wrong with the UK property market at the moment (front page).

Article:    Steepest decline in prices since 1995

Value of average home down £2,000 last month

Number of new mortgages down 31% in a year

Monthly home lending down £5bn

Has the bubble burst? The signs are ominous. For some months the property market has been cooling, the bubble showing distinct signs of strain.

Five increases in interest rates from the Bank of England in just over a year had begun to do their work, even before the recent credit crunch. House price rises began to moderate in the summer, and values in the past couple of months have been falling, albeit modestly and from a very inflated level. The Nationwide and the Halifax have reported drops of one to two per cent since the autumn, the worst performances since the housing recession of the early 1990s. Yesterday the Bank of England said the number of mortgage approvals slumped in October to its lowest level in nearly three years, and mortgage lending slowed sharply. The Bank has, in unprecedented terms, voiced its concerns about the buy-to-let market, a particularly vulnerable part of the market, as well as commercial property, another area where some amateurish speculation has become part of the scene. Fewer people are popping into the estate agents. Houses are staying on the market for longer. Not good.

Perhaps the biggest cause for concern is the scale of house price inflation over the past decade or so – and, hence, its unsustainability. Since 1997, house prices have trebled. So much of our cash has been ploughed into bricks and mortar that British households have accumulated more debt than any other major advanced economy. This year our total borrowings exceeded the national income for the first time: £1.3 trillion (£1,300,000,000,000) to pay back. At about £200,000, average house prices are at nine times average earnings, the highest ever.

... How bad can things get? The worst scenario is that the UK follows trends in the US. There the bubble burst last year, with the toughest market since the Great Depression. Prices have dropped nationally by about 5 per cent a year. Spare a thought, for example, for the residents of Tampa Bay, Florida, who have seen their condos and family homes collapse in value by 11 per cent since this time last year. Over there, home buyers ask why they should buy when prices will be lower in six months or a year.

... An average house price fall of 10 per cent – a feasible number – would cover some pretty large divergences. The biggest falls would probably be in the places where the boom has been most pronounced, and most recent. Thus those £5m townhouses in central London may become hard to shift, as foreign money and City bonuses dry up; and the trendy developments bought off-plan in Liverpool and Manchester may also see more-than-average falls. Buy-to-lets could be hit. Worst of all, though, will be our own "sub-prime" community, wherever they live. They'll find it hard to remortgage, especially on homes worth less than they paid for them. The pain has only just begun.

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6/         The party's over and Liberals will soon be history   (Sydney Morning Herald, Thu 29 Nov)

http://www.smh.com.au/news/opinion/the-partys-over-and-liberals-will-soon-be-history/2007/11/28/1196036982629.html?page=fullpage#contentSwap1

Comment:    This text has been ‘borrowed’ from a post on the Yahoo Energy Resources group by ‘Alan’.

“To those not familiar with Australian politics: the Liberal Party is the classical liberal, individualistic, free-market-oriented, corporate (etc., etc.) party, kinda like our Republicans, while the Labor Party is the (supposedly) leftish people's party, kinda like our Democrats.”

Article:    The issue of the future, coming down on us now like a steam train, is of course the environment, the double hammer blows of climate change and peak oil. Energy, weather and human misery are the factors that will define our lives for decades to come.

... In short, the party is over. We are a civilisation in collapse.

So what will be the new polarity in future elections? It's the ecology, stupid. The Greens will emerge as the new opposition, though this will take probably two election cycles. By the 2010 election, 20 per cent will vote Green, simply because peak oil and climate catastrophe will have proven them right, and thinking people will see the need for austerity now for our children's tomorrow.

... Climate change will bring horrific costs this century unless a global effort is rallied in a way that has never been done before to regulate our gluttonous use of the air and water. Perhaps a billion lives are at risk, let alone 2 to 3 billion refugees, as agriculture and water supplies collapse across southern Asia and elsewhere, and producer countries, like Australia, find they can barely feed themselves.

... We could have been building what Europe built in this past decade - superb hospitals, bullet trains, schools and training centres,

low cost public transport of luxurious quality, magnificent public housing. WE PISSED IT ALL AWAY ON TAX GIVEAWAYS AND CONSUMER GOODS. On bloated homes that we will not be able to cool or heat, or sell, and cars we won't be able to afford to drive... [emphasis added]

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