ODAC News
Sunday 29 July
The Oil Depletion Analysis Centre
The next newsletter will probably be Wed 8th
August.
Peak Oil in the
1/ Politicians fret over wrong crisis as Peak Oil looms - FEEDBACK
(British National Party, July 2007)
Oil Prices
2a/ PETROLEUM
($US/bbl) (Bloomberg, Wed 18 Jul)
2b/ Investec's Guinness sees oil price doubling
(Reuters, Thu 19 Jul)
2c/ Surging
oil prices darken inflation outlook (The
Independent on Sunday, Sun 29 Jul)
Economy
3/ U.S. Foreclosure
Filings Jump to Record in First Half (Bloomberg, Thu 12 Jul)
6a/ Asia
markets tumble as debt panic spreads (The Times, Fri 27 Jul)
6b/ For
all practical purposes the markets are closed right now
(The Oil Drum, Mon 30 Jul)
Coal in the
4/ Coal's Doubters Block
New Wave Of Power Plants
(Wall Street Journal, Wed 25 Jul)
Big Oil
5a/ Scramble
for oil catches up with Exxon
(MarketWatch, Thu 26 Jul)
5b/ Shell
Bucks Trend With Q2 Earnings Growth (Energy Intelligence [International Oil
Daily], Fri 27 Jul)
5c/ BP
production drops again (AllAfrica,
Tue 24 Jul)
7a/ UK Energy Security (The Oil Drum:
7b/ Energy
Trends (
Energy Crises in Sub-Saharan
8/ Toiling in the Dark: Africa’s Power Crisis
(NY Times, Sun 29 Jul)
9/ DUBAI: Energy shortages
could scupper plans - FEEDBACK (Financial Times, Tue 24 Jul)
Russian Oil Production
10/ Russian
oil output to plateau until 2020 – EconMin
(Reuters, Tue 24 Jul)
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1/ Politicians fret over wrong crisis as Peak Oil looms - FEEDBACK
(British National Party, July 2007)
Comment: Last Wednesday’s
newsletter caused a stir because the first article was about a BNP (British
National Party) article on Peak Oil. A few individuals thought of this as
promoting the BNP. The BNP is an extreme right wing political party, which as mentioned
before scares the living daylights out of ordinary folk. ODAC’s
aim is to let ODAC News readers know what the BNP is saying/promoting on the
grounds that it is better to be well-informed. In future when the newsletter
contains BNP articles, it will be made clear who they are. See The Politics of Peak Oil and Fascism.
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2a/ PETROLEUM ($US/bbl) (Bloomberg, Wed
18 Jul)
http://www.bloomberg.com/markets/commodities/energyprices.html
PRICE CHANGE %
CHANGE TIME
Nymex Crude
Future 77.02
2.07
2.76
07/27
Dated Brent
Spot
77.00 1.23
1.62
07/27
WTI Cushing
Spot
77.02 2.07
2.76
07/27
2b/ Investec's Guinness sees oil price
doubling (Reuters, Thu 19 Jul)
Comment: This really ought to be front
page news, but I do not remember seeing this reported in anywhere (Reuters is a
News Agency). As mentioned last week, it is ok for the IEA to forecast oil demand
will outstrip supply over the next 5 years, and ok for the media to report
this, but not ok to analyse what the consequences will be, yet.
Article: Citywire
AA-rated Tim Guinness believes the oil price will hit $150 a barrel by 2010 and
shock people into reducing their dependence on the resource.
Guinness, manager of the Investec
Global Energy fund, made his comments after last week's report from the
International Energy Agency warned the world would face a "supply
crunch" in 2012 due to poor output from non-Opec
countries clashing with strong demand within the cartel's oil producers.
The report led to a spike in oil prices to their
highest level in nearly a year at $72.65 a barrel, around $2 below its highest
ever level.
Guinness agrees with the IEA forecast and expects the
oil price to rise steadily over the next five years as supplies dwindle.
AA-rated Ian Henderson, manager of the JPM Natural
Resources fund, said the oil price could double in five years.
He also warned there could be an oil shortage before
this date due to lack of investment in the industry.
"The issue is about money and access. Not enough
money is being invested in the industry and so the access to the oil reserves
is not as good as it should be," said
Guinness thinks that once oil hits the $150 mark it
will be enough to force people to change their attitude to the commodity.
He said: "To control the oil price demand growth
must be negative, which will happen when oil hits $150 and it will stay there
until demand for oil falls."
Once the effects of this have been felt, Guinness
expects the oil price to fall back to $100, which he believes should be the
level at which it stays for the long term.
He said: "If I was Opec
I would manage oil at this price. Energy accounts for 15 percent of world GDP
spending and oil at $100 is tolerable."
Guinness believes once oil stays consistently at the
$100 level the economy will turn its focus to alternative energy supplies.
He said: "$100 is a level at which alternative
energy sources work economically and on a large scale."
2c/ Surging oil prices darken inflation outlook
(The Independent on Sunday, Sun 29 Jul)
http://news.independent.co.uk/business/news/article2814659.ece
Article: Oil prices climbed to within a
cent of a record close in
The surge is of particular concern as the threat of
interest rate increases continues to alarm creaking global stock markets while
adding to fears about a credit crunch.
In
Oil prices were lifted by a US Commerce Department
report that showed American economic growth was a quicker-than-expected 3.4 per
cent in the three months to the end of June. That pushed expectations about
demand levels higher and saw traders buying up oil contracts.
In
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3/
http://www.bloomberg.com/apps/news?pid=20601087&sid=adIQXu4IeMsA&refer=home
Comment: A couple of weeks old, but
still relevant. More details on the
Article: Mortgage foreclosures in the
Almost 926,000 foreclosure notices were filed, 56
percent more than a year earlier and the most since
The jump in 30-year mortgage rates by more than a half
a percentage point since May is putting a crimp on borrowers with the best
credit just as a crackdown in subprime lending standards limits the pool of
qualified buyers. Foreclosures also are increasing as the supply of unsold
homes hit a record 4.43 million in May, according to the National Association
of Realtors.
Foreclosure rates in ``most states remained
substantially above last year's levels,'' RealtyTrac
Chief Executive Officer James Saccacio said in a
statement.
In June, defaults surged 87 percent to 164,644 from a
year ago, said RealtyTrac, a seller of foreclosure
data, in the statement today. Last month's total was 7 percent lower than in
May.
...
An estimated 58 percent of properties in the
foreclosure process are linked to borrowers with subprime loans, and RealtyTrac expects
...
Six of the top 10
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4/ Coal's Doubters Block New Wave Of Power Plants
(Wall Street Journal, Wed 25 Jul)
http://online.wsj.com/article/SB118532834584277100.html?mod=googlenews_wsj
Comment: The similarities between US
and
Article: From coast to coast, plans
for a new generation of coal-fired power plants are falling by the wayside as
states conclude that conventional coal plants are too dirty to build and the
cost of cleaner plants is too high.
If significant numbers of new coal plants don't get
built in the
As recently as May,
But as plans for this fleet of new coal-powered plants
move forward, an increasing number are being canceled
or development slowed. Coal plants have come under fire because coal is a big
source of carbon dioxide, the main gas blamed for global warming, in a time
when climate change has become a hot-button political issue.
... In the wake of the fading coal proposals, and
others that are expected to follow, Citigroup downgraded the stocks of
coal-mining companies last week, noting that "prophesies of a new wave of
coal-fired generation have vaporized."
... Roadblocks for coal put greater attention on other
sources. The
That puts the focus on natural gas. "Gas is the
bridge fuel" that will step in if coal stumbles, says Marc Spitzer, a
member of the Federal Energy Regulatory Commission, regulator of the nation's
wholesale gas and electricity markets.
Currently, clean-burning gas provides roughly a fifth
of the nation's power needs. But the nation's gas production has been flat, and
other industries are increasingly using it as a fuel or raw material. Mr.
Spitzer says that the nation needs more facilities to accept liquefied natural
gas, which is gas cooled into a liquid that can be imported from overseas.
... Rising construction costs are another reason that
the future looks murky for big coal burners. Duke Energy Inc. created a stir
eight months ago when it announced that the expected cost of a new twin-unit
power plant in North Carolina had ballooned to about $3 billion, up 50% from
about 18 months earlier. That run up in cost and other factors compelled the
North Carolina Utilities Commission to nix one of the two proposed units.
The coal industry is looking for ways to make its
product more palatable. Earlier this week, Peabody Energy and ConocoPhillips
said they are exploring the possibility of constructing a coal-gasification
plant at a mine in
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5a/ Scramble for oil catches up with Exxon
(MarketWatch, Thu 26 Jul)
Comment: MarketWatch
reports that ExxonMobil’s production declined by 1%.
The gist of the article is that we should expect production declines from Big
Oil, but at least oil prices remain high.
“While other companies have increasingly boosted oil
and gas reserves through acquisitions, Exxon stuck to the drill bit … ”
How did the Mobil get in ExxonMobil? Acquisition.
Article: Commentary: Race for
resources tightens as crude prices march ever higher
Exxon Mobil Corp is the world's biggest oil company.
It didn't get there without lots of hard, smart field work.
While other companies have increasingly boosted oil
and gas reserves through acquisitions, Exxon stuck to the drill bit, scouring
the globe for new fields and making big, long-term investments to find, develop
and produce petroleum.
This has kept Exxon at the head of its class in the
reserve replacement derby so closely watched in the industry. Simply put,
reserve replacement measures a company's ability to find oil as fast as it
pumps it. Anything less means the company is going backward.
Today Exxon announced it went backward. Its
second-quarter earnings report showed a production decline of 1% from a year
ago.
While that hardly seems a significant drop, investors
used to Exxon's stellar track record were alarmed enough to push Exxon's share
price nearly 5% lower -- its biggest one-day drop in five months.
This is not the first time Exxon's output has dropped.
And it certainly won't be the last as global demand for energy continues to
push the hunt for oil ever farther into hostile environments, politically
unstable or downright dangerous corners of the world.
Add to this the rise of national oil companies, many
of which are moving beyond their own borders to compete for access to new
exploration tracts.
The search has taken
All this means Big Oil's romping ground is shrinking.
The "easy" oil is long gone, the rest is getting harder to find, and
competition for it is tougher than ever.
If there's any silver lining in all this for
investors, it's that tight supplies and surging demand are keeping plenty of
upward pressure on prices. Crude futures topped $77 a barrel Thursday in
But higher crude prices cannot offset losses from a
creeping production decline for long. Which is why Wall Street goes so glum on
the sector when its leader stumbles -- even just a little bit.
5b/ Shell Bucks Trend With Q2 Earnings Growth
(Energy Intelligence [International Oil Daily], Fri 27 Jul)
No link, from Energy Alert newsletter
Comment: “a 2% decline in production”
Article: Anglo-Dutch supermajor Royal Dutch Shell bested its main rivals
Thursday with a 20% increase in second-quarter headline profits. The boom in
earnings was led by record refining margins and one-time gains worth $660
million which more than offset a 2% decline in production.
5c/ BP production drops again
(AllAfrica, Tue 24 Jul)
http://business.iafrica.com/worldnews/267254.htm
Comment: BP’s
oil production has gone down again, but it has a few big fields coming onstream
over the next couple of years.
Article: British oil giant BP reported
a drop in net profit for the three months to June on Tuesday, as energy
production dropped for an eighth quarter running despite strong world demand
for oil and gas.
... BP said on Tuesday that during the second quarter,
oil production fell by 5.3 percent to 3.804 million barrels per day, as the
group faced disruptions at US refineries.
The group said it expects production to reach an
average for the year of 3.8 to 3.9 million barrels, in line with its
guidance...
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6a/
Comment: The ‘panic’, and the fall in
the stock markets, was minimal, but do hint of a new era – an increasing
squeeze on easy credit (higher interest rates and in the
Article: Asian markets suffered their
heaviest falls in four months today as anxieties about the credit crunch that
had gripped Europe and the
The Nikkei 225 index lost 418.28 points, or 2.36 per
cent of its value, to close at 17,283.81 on the Tokyo Stock Exchange.
The index fell as much as 3 per cent late in the
session before recovering some of its losses later.
... Markets in
"You've got an economic impact from lower housing
prices and housing demand," Simon Doyle, a strategist at Schroder Investment Management Australia, told Bloomberg.
... Yesterday panicked investors fled stock markets
amid anxieties that the flood of cheap credit that has fuelled a global boom in
corporate deals is drying up.
Mounting fears that a credit crunch will end the easy
lending that has fuelled a wave of takeovers, and pushed shares to record
highs, sent shockwaves through markets on both sides of the Atlantic.
... The severity of the losses, as fearful investors
stampeded for the exits, triggered “circuit-breakers” at the New York Stock
Exchange designed to put the brakes on sudden plunges in stocks. The broader
S&P 500 index of US blue chips also dived by more than 2 per cent.
The latest in a series of triple-digit swings in the Dow’s value, as well as London’s
heavy losses, was deepened as worries over the economic impact from the US
housing market downturn were exacerbated by news that sales of new homes in
America tumbled by 6.6 per cent last month in the largest drop since a 12.7 per
cent plunge reported in January. A new jump in oil prices, to almost $77 a
barrel, added to the edgy mood.
... Ryan Larson, a senior equity trader at Voyageur
Asset Management, said: “The real concerns are about credit and oil pushing higher.
Wall Street continues to walk a wall of worry.”
The anxieties were initially sparked by the shakeout
in
6b/ For all practical purposes the markets are closed right now
(The Oil Drum, Mon 30 Jul)
http://www.theoildrum.com/node/2824#more
Comment: ‘Jerome a Paris’ (Jerome in
Article: While you've certainly heard
of the big drop in the Dow Jones in the past two days, and probably heard that
the housing market keeps on getting worse, the most ominous news are actually
coming from a distinct part of the financial markets - leveraged debt.
That particular market, as suggests the quote I used
in the title of the diary, is undergoing a dramatic change in mood as bankers,
which had been bending over backwards to lend ever more money at ever more favorable conditions have suddenly decided that this was
not a good idea and are brutally turning off the taps. Deals such as the huge
$12 billion financing for the purchase of Chrysler by Cerberus have been canceled - or, to be more precise, the syndication of these
deals has been killed, which means that the client will still get the money,
but the banks that structured the deal initially and underwrote the loans (i.e.
they committed to lending the money) won't be able to share that risk with
others on the market and are stuck with it. For those deals already
underwritten, the victims are the banks that did the deal; for deals not yet
underwritten, the client won't see any money.
That market matters, as it is the one that has been
feeding the private equity boom, i.e. the increasingly aggressive purchases of
companies by funds which were able to bid high prices precisely because they
could find cheap and easy finance. That boom had fueled
the increase in stock market prices (with the price of targeted companies after
jumping on such deals, and many others going up on speculation that they could
be purchased) and in the price of many other assets - simply because buyers had
lots of money.
It's the same kind of market that lent money to subprime
lenders for them to on-lend to clients borrowing to buy overpriced houses (in
the hope of flipping them quickly). As long as money was plentiful, prices kept
on going up and the bet on them going up was vindicated, further fueling the boom.
Easy lending came through lower interest rates, and
lower financing costs. Thus, for a while, higher acquisition prices (whether of
homes or of other companies) did not translate into higher financing burdens,
making such acquisitions not unreasonable proposals. But as interest rates
increased (because of Fed-driven increases, out of inflation fears), these
costs jumped up - at least for those borrowers on adjustable rates...
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7a/
http://europe.theoildrum.com/node/2790#more
Comment: ODAC has tried to make the
case over the last year that natural gas supplies for the
Article: In 2006, 92% of the primary
energy consumed in the
Not so long ago the
Dependency upon imported energy undermines
A beneficial attribute of the BP annual statistical
review of world energy (used throughout this report) is that it shows primary
energy consumption for the 5 principal energy sources normalised to millions of
tonnes of oil equivalent. This eases comparison of energy consumption from oil,
natural gas, coal, nuclear and hydroelectric power as shown for the
In 1965 (when BP records begin) 98% of
In this period, the energy mix has changed
significantly. In 1965, no natural gas was used. But with the discovery and development
of offshore natural gas in the North Sea, the proportion of natural gas in the
In 1965, the
This equates to 3.6 tonnes oil equivalent per person
per annum in 1965 and 3.8 tonnes oil equivalent per person per annum in 2005.
Each person in the
I will now look at the oil, natural gas and coal
production and consumption records for the
7b/ Energy Trends
(
http://www.dti.gov.uk/energy/statistics/publications/trends/index.html
Comment: The DTI is now called the
Dept for Business,
Article: The main points for the first quarter
of 2007:
• Total energy production was 13˝ per cent lower than in
the first quarter of 2006.
• Oil production fell by 4˝ per cent compared to the
first quarter of 2006. Production from older established fields continued to
decline but this decline was partially offset by three new fields, including
the very large Buzzard field.
• Gas production was 17 per cent lower compared with the
first quarter of 2006. Gas imports and exports increased by 50˝ per cent and 44
per cent respectively. The
• Total primary energy consumption for energy uses
increased by 1 per cent. This was 1 per cent lower when adjusted to take
account of weather differences between the first quarter of 2006 and the first
quarter of 2007.
• Final energy consumption decreased by 9 per cent, with
falls in the domestic sector of 14˝ per cent, the industry sector of 9 per cent
and the services sector of 6˝ per cent. There was a rise of 1˝ per cent in the
transport sector.
• Coal production was 28 per cent lower than a year
earlier. Coal imports were 2.3 per cent lower than a year earlier. Generators’
demand for coal was down 21˝ per cent.
• Coal supplied 23˝ per cent less electricity than in
the same period a year earlier, while gas supplied 43 per cent more.
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8/ Toiling in the Dark:
http://www.nytimes.com/2007/07/29/world/africa/29power.html?_r=2&oref=slogin&oref=slogin
Comment: Eye-opening article on just
how bad electricity supplies are in Sub-Saharan Africa, including
Article: … Power blackouts — “load
shedding,” in utility jargon — are hardly novel in sub-Saharan
The causes are manifold: strong economic growth in
some places, economic collapse in others, war, poor planning, population booms,
high oil prices and drought have combined to leave both industry and residents
short of power when many need it most…
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9/
http://search.ft.com/nonFtArticle?id=070724000724
Comment: This article from the FT
about an energy crunch in the Middle East (
Article: The article in the FT (DUBAI:
Energy shortages could scupper plans) in your last newsletter sums up what I
have been shouting about for several years - Dubai cannot power all the
projects it has started let alone proposing, while a number of completed
projects are running on hired generators as local utility DEWA (Dubai
Electricity & Water Authority) has no spare capacity. In June the local
paper had a report of how the Director of DEWA visited 1st Palm Island (there
are 3 under construction,
each progressively larger than other, + World,
Dubailand
etc. etc.) to assess its power demands - Island has been under construction for
a number of years and people are moving into apartments and villas. Summer
power cuts at 50C in the shade well prove great fun for rich retirees in a tax
free haven !
Watched BBC World 2 days ago where they had a good
report of power shortages in
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10/ Russian oil output to plateau until 2020 – EconMin
(Reuters, Tue 24 Jul)
http://www.reuters.com/article/companyNewsAndPR/idUSL2477974720070724
Comment: “Russian oil output to
plateau until 2020” - Putin has already hinted as much a couple of times
earlier this year. However, the article does say a rise from 9.85 Mb/d now to
about 10.6 Mb/d in future. Not much of a rise though. Did CERA, the group that
says Peak Oil is garbage, not suggest
Article: Russian oil production will
remain largely unchanged until 2020, the Economy Ministry said on Tuesday,
broadly confirming the country's existing energy strategy and the outlook by
the International Energy Agency.
The ministry said in its long-term economic outlook
that it expected Russian production to level off at 530 million tonnes a year
(10.6 million barrels per day) between 2015 and 2020.
Last month, the International Energy Agency (IEA),
which advises 26 industrialised countries, said it expected Russian oil output
to rise to 10.60 million bpd in 2010 but then fall to 10.50 million bpd by
2012.
The IEA also warned that
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