ODAC News

 

Wednesday 30 May

 

The Oil Depletion Analysis Centre

 

 

1/   Our blind faith in oil growth could bring the economy crashing down      (The Guardian, Tue 29 May)

2a/  Britain Maps Out Clean, Secure Energy Future          (Planet Ark [Reuters], Thu 24 May)

2b/  Energy white paper: meeting the energy challenge     (UK Dept of Trade and Industry, May 2007)

2c/  Energy white paper: chapter 4 - oil, gas and coal                    (UK Dept of Trade and Industry, May 2007)

3/   60 percent of oil and gas execs believe trend of declining reserves is irreversible            (Energy Bulletin [PR Newswire/KPMG], Fri 25 May)

4/   Stage set for $US80 oil prices           (Sydney Morning Herald, Fri 25 May)

5a/  Breaking: housing prices collapse [USA]       (Daily Kos, Thu 24 May)

5b/  Sales of Existing Homes Fell in April (NY Times, Sat 26 May)

6a/  Russia tries to burn BP        (The Sunday Times, Sun 27 May)

6b/  BP loses appeal against Russian oil field seizure       (The Times, Mon 28 May)

7a/  Interesting Times in Kuwait   (ODAC contact, Mon 28 May)

7b/  Dubai : City of Super-towers - Dubai to have at least six supertowers by 2015   (Gulf News, Mon 28 May)

7c/  Emirates poised to become largest long-haul carrier   (Gulf News, Mon 28 May)

7d/  RTA on long drive with $12b project [Roads and Transport Authority - Dubai]     (Khaleej Times, Wed 30 May)

8a/  Russia Faces Shortage of Workforce            (FC Novosti, Thu 24 May)

8b/  No Unregistered Oil Wells Left          (FC Novosti, Tue 29 May)

9/   Growing biofuels demand raises food prices    (Financial Times, Sun 27 May)

10/  So, we'd be able to take OPEC to court — what a big help      (Houston Chronicle, Fri 25 May)

11a/ Organic movement faces split over air-freighted food   (The Independent, Tue 29 May)

11b/ Dominic Lawson: A lesson in how to dig yourself into a hole   (The Independent, Tue 29 May)

12/  Ancient forest threatened by airport expansion bid [UK]          (The Independent, Tue 29 May)

13/  Easterners could freeze in the dark [Canada] (Globe and Mail, Mon 28 May)

14/  With measure of caution, Europe joins biofuel gold rush          (International Herald Tribune, Mon 28 May)

 

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1/         Our blind faith in oil growth could bring the economy crashing down   (The Guardian, Tue 29 May)

 

http://www.guardian.co.uk/comment/story/0,,2089849,00.html

 

Comment:    Good to see George Monbiot tackle Peak Oil in earnest. The UK government’s non-sensical transport policy is a good place to start.

 

Article:    Britain's future prosperity has been hardwired to rising use of transport fuels, without a thought for the supply drying up

 

... The energy white paper the government published last week talks of new taxes, new markets, new research, new incentives. Anyone reading the chapter on transport would be forgiven for believing that the government has the problem under control: as a result of its measures, we are likely to see a great reduction in our use of geological time.

 

Buried in another chapter, however, and so far missed by all journalists, there is a remarkable admission: "The majority (66%) of UK oil demand is derived from demand for transport fuels which is expected to increase modestly over the medium term." To increase? If the government is implementing all the exciting measures the transport chapter contains, how on earth could our use of fuel increase?

 

You won't find the answer in the white paper. It mysteriously forgets to mention that the government intends to build another 2,500 miles of trunk roads and to double the capacity of our airports by 2030.

 

... What happens beyond the medium term is anyone's guess. But it should be pretty obvious that more roads and more airports will mean that our rising use of transport fuel becomes hardwired - the future health of the economy will depend on it. So the government must have examined this question. If our economic lives depend on continued growth in the consumption of transport fuels, it must first have determined that such growth is possible. Mustn't it?

 

Last week I phoned four government departments - trade and industry, transport, environment, communities and local government - in the hope of finding this assessment. But it does not exist. No report has ever been commissioned by the British government on the issue of whether or not there is enough oil to sustain its transport programme.

 

Instead, both the white paper and the civil servants I spoke to referred me to a book published by the International Energy Agency, set up by the OECD after the 1974 oil crisis. This in itself is odd. On every other issue that might affect the UK's security or economic growth, the government conducts its own assessments. But in this case it relies exclusively on one external source. This reliance seems even odder when you read the IEA's book and discover that it's as polemical as my columns.

 

Before it presents any evidence, the book dismisses people who have questioned future oil supplies as "doomsayers". It announces that it has "long maintained that none of this [the possibility that oil supplies might be reaching a peak] is a cause for concern". Though it expects the global demand for oil to rise by 70% between now and 2030, and though it anticipates that output from the world's existing oilfields will decline by about 5% a year, it is confident that new supplies will make up the difference.

 

[Monbiot goes on to discuss the IEA, OPEC, a couple of Robert Hirsch's reports and peak oil]

 

We don't need to invoke peak oil to produce an argument for cutting our use of transport fuel. But you might have imagined that the government would have shown just a little curiosity about whether or not its transport programme will bring the economy crashing down.

 

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2a/        Britain Maps Out Clean, Secure Energy Future         (Planet Ark [Reuters], Thu 24 May)

 

http://www.planetark.com/dailynewsstory.cfm/newsid/42117/story.htm

 

Comment:    The UK govt wants to go for nuclear again, along with countless other countries.

 

Article:    Britain on Wednesday set out plans to secure energy supplies and fight global warming, calling for new nuclear power plants, more renewable energy and greater efficiency.

 

 

Its nuclear call was met with cheers from utility companies but jeers from environmentalists, while the necessary lengthy consultations raised fears the country faced an energy crunch.

Britain's oil and gas from the North Sea are dwindling and it is keenly aware that Russia, which supplies around 25 percent of the European Union's gas, disrupted supplies last year. It also wants to meet its carbon emission cut targets.

 

"If nuclear is excluded, there is every chance that its place would be taken by gas and coal generation, which of course emits carbon," Trade and Industry Secretary Alistair Darling told parliament, announcing the Energy White Paper.

 

"I am quite clear in my mind that it is important that we have a mix of energy supply ... that we don't become overly dependent on imported gas," he added.

 

... The clock is ticking. All but one of the existing nuclear power plants are scheduled to close by 2023 and even the most optimistic pro-nuclear lobbyists reckon it will take a minimum of 10 years to build a new plant from scratch.

 

Darling said a decision on new nuclear must be taken this year. He said no public money would go into new nuclear plants.

 

There is no clear evidence that private sector finance will be on offer for an industry that needs huge initial investment, even if it can later generate power at relatively low cost...

 

 

2b/        Energy white paper: meeting the energy challenge (UK Dept of Trade and Industry, May 2007)

 

http://www.dti.gov.uk/energy/whitepaper/page39534.html

 

Comment:    ‘Peak Oil’ and ‘depletion’ do not appear anywhere in the document. As discussed in item 2c, the oil, gas and coal chapter suggest a world of plenty.

 

 

2c/        Energy white paper: chapter 4 - oil, gas and coal                 (UK Dept of Trade and Industry, May 2007)

 

chapter 4 - oil, gas and coal  (PDF, 470KB)

 

Comments:   

 

Section 4.03 - This is the first time I have seen the DTI admit that the UK is now a net importer of oil. They seem to have finally abandoned the line that Buzzard will keep the UK a net exporter until 2010.  The comment about coal imports is odd. According to section 4.28, Box 4.3, the UK imported almost 74% of its coal requirements in 2006.

 

<<While the UK has benefited from indigenous reserves of oil and gas for many years, as the North Sea matures, we will become increasingly dependent on imported energy. By 2010, gas imports could be meeting up to a third or more of the UK’s total annual gas demand, potentially rising to around 80% by 2020 on the basis of existing policies. The UK is also already a net importer of oil, and by 2020 imports could be meeting up to around 75% of the UK’s coal demand.>>

 

Section 4.02 would suggest that the UK govt is delusional about the state of global supplies of crude oil and natural gas:

 

<<… however, fossil fuels will continue to be the predominant source of energy for decades to come. In fact, global fossil fuel resources are still plentiful, and markets are well-developed to deal with increased trade.>>

 

Section 4.04 suggests that the UK govt, along with many others, still believes that energy can be supplied on the cheap, or to use their language, “at competitive prices”:

 

<<We therefore need to be confident that the market for fossil fuels, supported by appropriate Government policies, continues to ensure reliable supplies of these fuels at competitive prices to people and businesses.>>

 

Section 4.05 - “However, we have a clear strategy to manage these risks” ??

 

<<Whilst imports are not in themselves a threat to security of supply, our reliance on fossil fuels and higher levels of import dependence will bring new associated risks, as the UK will face greater exposure to developments in the global energy system (these risks are highlighted in chapter 1). However, we have a clear strategy to manage these risks.>>

 

Section 4.15, Figure 4.2 - ACTUAL AND POSSIBLE FUTURE UKCS OIL AND GAS PRODUCTION. Propaganda. After 2007, when the Buzzard-effect has worn off, UK oil production will probably continue to fall at roughly the pre-2007 rate. See also Production from already discovered fields (DTI, Jan 2004)

 

Section 4.39. For the record, the latest DTI Oil and Oil Products data (Excel) shows that the UK imported net 6.575 M tonnes of oil in 2006, which is about 130,000 b/d.

 

<<As UKCS oil production declines, we will continue to rely on the global oil market to source our oil supplies. Currently, the UK is well integrated into global markets for oil. The majority (66%) of UK oil demand is derived from demand for transport fuels which is expected to increase modestly over the medium term. Although the UK currently produces about the same quantity of oil as it consumes, commercial reasons mean that more than 60% of this production is exported (mostly to the EU or United States). More than three quarters of the crude oil refined in the UK comes from either the UKCS (35%) or from Norway (46%), with the remaining supplies mainly sourced from Russia (8%) and the Middle East (2%).>>

 

Section 4.44, Figure 4.3 shows substantial growth in UK natural gas requirements between now and 2020, “based on Wood Mackenzie estimates for supply sources to the UK to 2020”. For 2020, about 50 bcm of gas / year from Norway seems very optimistic. The 70 bcm or so of LNG is about 50 M metric tonnes, which is even more optimistic.

 

Section 4.45 – “Worldwide LNG supplies and import capacity are expected to double by 2010”. This is true, but demand is expected to more than double. The above-mentioned Wood Mackenzie is one of most pessimistic about future LNG supplies. Watch Wood Mackenzie LNG video.

 

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3/         60 percent of oil and gas execs believe trend of declining reserves is irreversible     (Energy Bulletin [PR Newswire/KPMG], Fri 25 May)

 

http://www.energybulletin.net/30106.html

 

Article:    Oil and Gas Executives say government involvement in supporting the development of renewable energy sources is necessary to alleviate the problem of declining oil reserves, according to the results of a survey conducted by KPMG LLP, the audit, tax and advisory firm.

 

In the KPMG survey, which polled 553 financial executives from oil and gas companies in April 2007, twenty-five percent of the respondents said that at least 75 percent of government funding into energy should be directed at the renewable sources sector and a further 44 percent said that at least 50 percent of funding should be allocated in the same way. These feelings stem from the overwhelming majority, or 82 percent, citing declining oil reserves as a concern.

 

"These executives are deeply concerned about declining oil reserves, a situation they see as irreversible and worsening," said Bill Kimble, National Line of Business Leader, Industrial Markets for KPMG LLP. "They see renewable energy sources as a lifeline but our survey shows that the execs recognize they cannot count on them as a solution in the short-term. Consequently, oil and gas companies are sending a clear signal to the government that intervention is needed."

 

While oil and gas executives are keen to see renewable energy sources becoming a mass produced reality, 60 percent say that will not be possible by 2010. Of those that believe it will, 18 percent say ethanol is the most viable for mass production by then, 13 percent say biodiesel and only 3 percent say cellulosic ethanol.

 

Sixty percent of the executives believe that the trend of declining oil reserves is irreversible...

 

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4/         Stage set for $US80 oil prices    (Sydney Morning Herald, Fri 25 May)

 

http://www.smh.com.au/news/business/stage-set-for-us80-oil-prices/2007/05/25/1179601621566.html

 

Article:    Global oil prices could easily rally to record levels above $US80 a barrel this European summer, analysts forecast on Thursday, due to Middle East tensions, red hot Chinese growth and a reluctant OPEC.

 

But record high prices will not have the same impact on oil demand as in the past few years since consumers have grown accustomed to it.

 

London Brent crude, currently seen as more representative of the global oil market, briefly rose on Thursday to a nine-month high of $US71.42 a barrel.

 

"It looks like prices are going to move even higher because of geopolitical tensions and tightness in the US," said Christopher Bellew, senior vice president of Bache Commodities. "We could easily get to $US80. $US10 is nothing in these markets."

 

Analysts said little has changed since the last Northern hemisphere summer when oil prices surged to a record $US78.65 for Brent and $US78.40 for US crude.

 

Worries over Iran's nuclear programme, militant attacks in Nigeria and China's breathtaking economic growth remain key drivers for the market.

 

One significant change since last summer has been OPEC's decision to curb supplies by 1.7 million barrels per day, or about six percent.

 

"The world needs more oil than OPEC seems willing to supply, making it difficult to avoid another surge in oil prices over the coming summer," the Centre for Global Energy Studies said in its monthly report.

 

... Prices would need to average about $US85 a barrel this year to have the same impact on global demand as in 2005, he [Jeffrey Currie, analyst at Goldman Sachs investment bank] added.

 

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5a/        Breaking: housing prices collapse [USA]       (Daily Kos, Thu 24 May)

 

http://www.dailykos.com/storyonly/2007/5/24/104312/608

 

Comment:    Interesting review of a Wall Street Journal on house prices in the USA.

 

 

5b/        Sales of Existing Homes Fell in April    (NY Times, Sat 26 May)

 

http://www.nytimes.com/2007/05/26/business/26econ-web.html?_r=1&oref=slogin

 

Article:    By all measures, April was a bad month for anyone with a “For Sale” sign in the front yard.

 

Sales of previously owned homes declined last month as the supply of unsold properties on the market ballooned and prices declined compared with those a year earlier.

 

The National Association of Realtors said today that the annual sales rate for existing homes fell 2.6 percent, to 6 million, which was the slowest pace in almost four years. At the same time, inventories grew to an 8.4-month supply — the largest in 15 years — and the median price of an existing home fell 0.8 percent, to $220,900.

 

The report came a day after a government report on new home sales showed that prices dropped last month by the largest amount on record. While that report also showed sales posting their biggest monthly jump in 14 years, many economists dismissed the number as a fluke.

 

The state of the residential real estate market, as shown in recent days by income reports from home builders, sales figures and other industry barometers, remains dim...

 

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6a/        Russia tries to burn BP    (The Sunday Times, Sun 27 May)

 

http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article1844560.ece

 

Comment:    Interesting overview of the history/politics of BP in Russia, prompted by the current ‘dispute’ over the Kovykta gas field. Finishes off with a brief but good overview of the Energy white paper (item 2).

 

Article:    The oil giant could face the same fate as Shell at Sakhalin as Russia tries to take back control of its natural gas

 

IN the summer of 2003 Vladimir Putin made the first state visit to Britain by a Russian leader since Tsar Alexander II came to see Queen Victoria in 1874.

 

Putin’s trip was as much about business as diplomacy. One of the highlights was the signing – in the gilded splendour of Lancaster House, a 19th-century mansion in St James’s, London – of an $8 billion (£4 billion) investment by BP in the Russian oil and gas industry. The deal had been brokered by Lord Browne, then BP’s chief executive, with extensive help from Tony Blair.

 

Four years on, Browne has gone, Blair is about to leave power and TNK-BP, the Anglo-Russian group the pair laboured to create, is under attack from the Kremlin. TNK-BP’s licence to exploit one of Russia’s largest gas fields is expected to be revoked – possibly as soon as this week. The move may, the gloomiest analysts and Russophiles suggest, be the precursor to the Russian state taking a major and perhaps, in effect, controlling stake in the group.

 

... TNK-BP is the only big oil and gas group in Russia that has no state involvement. It was created after long negotiations between BP, the Russian and British governments and a group of three Russian oligarchs.

 

... As The Sunday Times revealed in 2003 (see link on far right), TNK-BP was the end-result of BP’s frustration with an earlier Russian investment that was going wrong.

 

The company (TNK-BP) is now the third-biggest player in Russian oil and gas. It has proven reserves equivalent to 7.8 billion barrels of oil, and in 2005 was producing 1.6m barrels of oil a day. It also has five refineries (four in Russia, and one in Ukraine) and 1,600 petrol stations, which operate under both the TNK and BP brands. Its operations have been lucrative for shareholders.

 

... The current spat with the Russian authorities concerns not the oil operation, but its prospects of becoming a major player in gas. TNK-BP is the controlling shareholder (with a 63% stake) in Rusia Petroleum, which owns the rights to a large gas field called Kovykta, in the Irkutsk region. The field was discovered in 1987, and is estimated to hold 2,000 billion cubic metres of gas and 83m tonnes of gas condensate. It is ideally situated to export gas to China, but it is not expected to be in full production until 2015.

 

... Some observers believe BP’s decision has highlighted the key flaw of the white paper. The government has rightly identified the two great challenges – fighting climate change and securing energy supplies – but it is showing little urgency to tackle a looming energy crisis.

 

... The government’s laudable aim is to secure a diverse mix of energy supply. But given the long development timescales, the white paper is likely to increase Britain’s dependency on gas.

 

 

6b/        BP loses appeal against Russian oil field seizure    (The Times, Mon 28 May)

 

http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article1850382.ece

 

Comment:    Follow up to article 6a.

 

Article:    Request to prevent Russian state seizure of TNK-BP's Kovykta oil field is thrown out of court, but company can appeal

 

BP's Russian joint venture TNK-BP lost the first round in its battle to hold on to its stake in giant Kovykta oil field today when a Russian court threw out its appeal against the seizure.

 

A judge in an arbitration court in Irkutsk, the region in East Siberia where the field is located, said he had ruled to throw out a suit by TNK-BP, which was seeking to stop the authorities from taking away the licence.

 

TNK-BP had claimed that two environmental agencies Rosprirodnadzor and Rosnedr had no legal right to start the process of withdrawing its licence, and that the move was politically motivated.

 

It is widely believed that the Russian government is using the threat of withdrawal over environmental grounds to force TNK-BP and its privately-owned partner Alfa - owned by a group of Russian billionaires - to give up a proportion of their stake in the oil field operator Rusia Petroleum.

 

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7a/        Interesting Times in Kuwait         (ODAC contact, Mon 28 May)

 

Comment:    From an ODAC contact in the Middle East.

 

Feedback:    Noticed you carried a piece about Dubai's airport expansion in last newsletter [UAE airport spend to hit $19bn]. Had seen it and thought about sending it to you but its just a small piece of the "Energy Insanity" that this place is betting its future on. Whereas US "Suburbia" according to Kunstler "Is the largest misdirection of wealth in history" this place must be a close second.

 

See this local blog - Interesting Times in Kuwait

 

Meanwhile today amongst the local media were 2 articles on the "Energy Insanity" that stood out.

 

Dubai : City of Super-towers [item 7b below]

 

Emirates poised to become largest long-haul carrier [item 7c below]

 

 

7b/        Dubai : City of Super-towers - Dubai to have at least six supertowers by 2015           (Gulf News, Mon 28 May)

 

http://www.gulfnews.com/business/Real_Estate_Property/10128282.html

 

Comment:    Contains interesting image of the six supertowers.

 

Article:    The fast-changing Dubai skyline will sport at least six "supertowers" of more than 100 habitable floors, more than any other city in the world, as per information available.

 

The supertowers are Burj Dubai (where work continues after the completion of 126 floors), Burj Al Alam (slated to rise to 108 floors), the 101-storey Marina 101, Princess Tower (107 floors), the 120-storey Pentominium and Al Burj (which is expected to have between 180 and 200 floors).

 

Most of these buildings are in various stages of planning and construction although Burj Dubai - tipped to become the world's tallest tower - is powering ahead, adding a floor a week, and at least three others are in the early stages of construction. Work on Al Burj is not expected to start until Burj Dubai, whose height and floor-level are closely-guarded secrets, is completed.

 

So Dubai will remain in the news for developing supertowers until at least 2015. No city other than Dubai and Chicago hosts more than one supertower...

 

 

7c/        Emirates poised to become largest long-haul carrier          (Gulf News, Mon 28 May)

 

http://www.gulfnews.com/business/Aviation/10128161.html

 

Article:    Emirates airline could become the world's largest long-haul carrier by 2012 (by seats), according a recent study.

 

An analysis by the Boston Consulting Group (BCG) predicts Emirates will pose a formidable challenge to Asian and European carriers after it triples its capacity over the next eight years through new orders and bigger planes, citing low labour costs, 24-hour flying schedule and optimal geographic location as ingredients of its success.

 

Emirates, currently the eighth largest carrier of international traffic, will expand its fleet of 102 aircraft with 47 Airbus A380 superjumbos over the next few years. The airline's net profits rose 25 per cent in 2006, to Dh3.1 billion ($844 million)...

 

 

7d/        RTA on long drive with $12b project [Roads and Transport Authority - Dubai]           (Khaleej Times, Wed 30 May)

 

http://www.khaleejtimes.com/DisplayArticle.asp?xfile=data/theuae/2007/May/theuae_May852.xml&section=theuae

 

Comment:    ODAC contact in the Middle East comments:

 

How much energy (oil & Gas) is this road project going to take to construct and how much more do they expect the rapidly rising population to use in the future. Has anyone ever thought where these massive increases in fuels are going to come from? Occasionally the media here talks about the abundant solar resource but its all hype - in reality solar is a very expensive option compared to energy efficiency and heavily subsidised electricity (GBP 0.01 to 0.03 per kwh) and petrol (currently GBP 0.70 per imperial gallon - and a higher proportion of Hummer's, SUVs here than even USA).

 

Article:    The Roads and Transport Authority (RTA) yesterday unveiled a $12 billion plan to increase the capacity of roads by building 500km of new roads, 95 new interchanges, nine new ring roads as well as increasing the number of Creek crossing lanes to tackle Dubai’s traffic problems.

 

... Outlining the RTA’s plan of action, Al Tayer said the creation of a livable city posed a significant challenge since land use planning didn’t support sustainability and the way communities were planned only helped to increase automobile dependence.  Currently, the share of all trips made by public transport (buses and Abra) does not exceed 7 per cent of the total traffic.

 

... The transport issue on everyone’s mind is traffic congestion. ’population is forecast to increase from 1.3 million in 2005 to around 5.3 million by 2020. The rapid increase in population growth is a major factor contributing to the increase in traffic congestion. Statistics reveal that 16 per cent of the congestion is related to road accidents.

 

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8a/        Russia Faces Shortage of Workforce  (FC Novosti, Thu 24 May)

 

http://www.fcinfo.ru/themes/basic/materials-rfcm-index.asp?folder=3352

 

Comment:    Russia’s plans to build two nuclear power stations / year, then four, might be ambitious.

 

Article:    Experts warn that the construction, telecommunications and finance sectors will be seriously understaffed by 2015. The shortage of workforce in those industries will reach 14%-22%. Even administrative workers will be in greater demand, as the shortage of managers will reach 10%, according to an economic forecasting think tank under the Russian Academy of Sciences.

 

[The article goes on to say that there is currently a glut of workers by 8-9%, and immigration will defer the problem for a year or two, not solve it]

 

 

8b/        No Unregistered Oil Wells Left   (FC Novosti, Tue 29 May)

 

http://www.fcinfo.ru/themes/basic/materials-rfcm-index.asp?folder=3192

 

Article:    The Russian Natural Resources Ministry has fulfilled the task set by the president and inventoried all of the country’s oil wells.

“The work is completed, there are 248,000 working wells and 4,000 exploration wells,” said Minister Yuri Trutnev at the meeting with President Vladimir Putin. “The owners and locations of all wells have been checked.”

 

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9/         Growing biofuels demand raises food prices            (Financial Times, Sun 27 May)

 

http://www.ft.com/cms/s/30c58c22-0c76-11dc-a4dc-000b5df10621.html

 

Comment:    The UK media in general have been slow to pick on the fact that the demand for biofuels, especially ethanol from corn in the USA, is going to push up food prices globally, which may lead to higher inflation. The last thing the UK’s Monetary Policy Committee wants to hear.

 

Article:   Soft commodities are hardening. Corn, wheat, cocoa and coffee prices have all risen strongly in recent months, suggesting consumers will face an extended period of more expensive food.

 

This year, corn and wheat prices have reached their highest levels for a more than a decade, while coffee prices have hit an eight-year high and cocoa has risen to a four-year high.

 

Yet while price gains for cocoa and coffee have been driven by adverse weather affecting production during a period of rising consumption, analysts say grains prices are experiencing a structural shift, owing mainly to the growing demand for biofuels.

 

“Just as energy and metals prices have rallied sharply in real terms, a similar fate awaits grains, which remain significantly below the [inflation adjusted] highs of the 1970s and mid-1990s,” says Michael Hughes of Deutsche Bank.

 

Recent price strength has sparked fears that consumers could face higher bills, while policymakers are concerned that rising food prices will drive inflation higher. In addition, global food demand is rising strongly, thanks to economic growth.

 

Predictions for higher prices come in spite of expectations that global grain production will rise 6.2 per cent to a record 1.666bn tonnes in 2007-08, according to the International Grains Council. However, this will not match global consumption – forecast by the IGC at 1.680bn tonnes, up 3.1 per cent on the previous year.

 

The situation for cocoa and coffee is different from grains. Coffee’s strength has been driven by adverse weather affecting production in Vietnam and Brazil, the two largest producers.

 

Biofuels are gradually taking over as the main growth driver of agriculture demand. Goldman Sachs says that if government policies are adopted in full, global demand for biofuels could increase from 10bn gallons a year to 25bn gallons by 2010.

 

Goldman expects the trend rate of growth in demand for agricultural commodities to rise from 1.9 per cent a year between 1997 and 2006 to 2.6 per cent a year between 1996 and 2015.

 

This is expected to lead to an extended period of high prices. Goldman forecasts that five years from now, corn will trade at $5 a bushel, compared with about $3.50 on Monday, while wheat will rise from $4.50 to $6 a bushel.

 

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10/        So, we'd be able to take OPEC to court — what a big help            (Houston Chronicle, Fri 25 May)

 

http://www.chron.com/disp/story.mpl/headline/biz/4834680.html

 

Article:   Congress thinks we aren't paying enough for gasoline.

 

That's the only conclusion to draw from a bill, approved by the House on Tuesday, that would allow our government to sue OPEC members.

 

The bill, which also has strong support in the Senate, would amend antitrust laws to make it illegal for foreign governments to curb oil and natural gas production or control energy prices.

 

… In February, OPEC countries supplied 44 percent of our crude oil imports, according to the U.S. Energy Department.

 

Threatening OPEC isn't going to lower prices. What's the old maxim about biting the hand that feeds?

 

"We don't have to stand by and watch OPEC dictate the price of our gas," blustered Rep. John Conyers, D-Mich.

 

Actually, we do, although OPEC's influence has waned.

 

We made the choice to give up control of our energy supply when we bought gas-guzzling SUVs. We made it when we embraced driving over other forms of transportation. We made it when we decided to drag our feet on developing alternative fuels. We made it when we didn't demand that Congress require better fuel efficiency from automakers. We made it when we elected leaders whose idea of conservation is reversing the spin of ceiling fans. We make it, too, when we oppose efforts to expand domestic drilling.

 

The "No Oil Producing and Exporting Cartels" bill, or NOPEC in what passes for cleverness on Capitol Hill, shows the depths of our desperation. As the world's largest energy consumer, we lash out at the notion that someone would dare exploit our weakness.

 

Yet we ceded control to OPEC years ago. With more oil now concentrated in the hands of national oil companies — most of them OPEC members — we no longer get to make the rules...

 

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11a/      Organic movement faces split over air-freighted food         (The Independent, Tue 29 May)

 

http://environment.independent.co.uk/lifestyle/article2591469.ece

 

Comment:    The Soil Association is very Peak Oil aware - their annual conference held in Wales earlier this year focused on peak oil. One of the recurring themes was that while its members are doing a fine job growing food / animals organically, beyond the farm gate there was little control over how much crude is/was used, in particular for transportation. But as the article states, it is not so straightforward. What about the Fair Trade movement? This new initiative seems to be a step towards preparing for Peak, except that the emphasis is on reducing the carbon footprint, no mention of peak oil. See also the SA Press Release - Soil Association tackles the environmental impact of organic air freight.

 

Article:   For the conscientious, food shopping poses many ethical dilemmas: are organic bananas better than Fairtrade or English tomatoes preferable to imports?

 

Britain's booming organic movement has been wrestling with one such dilemma for years and the debate has become so heated it can no longer be ignored. From today, the country's organic farmers, suppliers and shoppers are being asked for an answer to an awkward question: is it acceptable to air-freight organic food?

 

On this one question could hinge the prosperity of thousands of African farmers, fruit and vegetable importers, the integrity of the organic movement and, to some extent, the health of the planet itself.

 

If the body which certifies three-quarters or organic food, the Soil Association, rules that the climate change pollution cannot be justified, it may ban all flown-in food.

 

A ban might split the organic movement: one side with strict environmental standards and another with looser standards that factor in the development of the Third World. The argument arises from the rapid rise of the UK organic movement, which has burgeoned into a £1.6bn-a-year business.

 

Farmers have struggled to grow enough food and in 2005 supermarkets imported one-third of their organic range, mostly by air.

 

Nationally "food miles" are at a record high, with air-freighting up 136 per cent between 1992 and 2002.

 

... In its consultation, which ends on 28 September this year, the Soil Association is setting out the case for five options. Maintaining the status quo would help faraway producers but might damage the organisation's credibility. A gradual or total ban would damage exporters but help tackle climate change and encourage more sustainable agriculture. Warning stickers or offsetting flights would be a compromise...

 

 

11b/      Dominic Lawson: A lesson in how to dig yourself into a hole      (The Independent, Tue 29 May)

 

http://comment.independent.co.uk/columnists_a_l/dominic_lawson/article2591486.ece

 

Comment:    Dominic Lawson puts the boot into the Soil Association, and in particular Patrick Holden, the director of the SA. A hunch - Dominic Lawson has never heard of Peak Oil, and thinks we can continue flying large quantities of food around the world forever. Lawson states: “The director of the Soil Association, Patrick Holden, is one of the hardliners: he believes that almost all food exports worldwide should be ended”, but cites no reference. Is Lawson getting confused between airfreight and all food exports including sea freight? I do not know, but it is transport of food by air that the SA is raising the profile of, not export of food in general, the main theme of his article. The article also begs the question – if food by airfreight is so critical, how did we ever manage without it, which we did until relatively recently?

 

Article:   We should not be surprised that the Soil Association is so careless of the wider interests of the world…

 

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12/        Ancient forest threatened by airport expansion bid [UK]   (The Independent, Tue 29 May)

 

http://environment.independent.co.uk/wildlife/article2591470.ece

 

Comment:    The forecasts for growth in air passengers are unbelievable. 25M passengers 2008, 68M 2030. Hopefully someone is asking – where is the fuel for the forecast increase in flights coming from?

 

Article:   … A public inquiry begins tomorrow into urgent proposals by the British Airport Authority to expand the permitted number of passengers by 10 million to 35 million a year and flights by more than 20,000 to 264,000 a year.

 

The present limit of 25 million is expected to be reached by 2008. If the second runway is built, 68 million passengers are forecast for Stansted by 2030…

 

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13/        Easterners could freeze in the dark [Canada]            (Globe and Mail, Mon 28 May)

 

http://www.theglobeandmail.com/servlet/story/RTGAM.20070528.wcoenergy28/BNStory/specialComment/home

 

Comment:    Excellent, reasonably short review of the fact that Canada is obliged to export so much of its oil to the USA, and import from Europe/ the Middle East to meet its own demand. Note the comment: “A new federal-provincial plan must raise resource rents so that producing regions can use the funds for their transition to a post-carbon economy.”

 

Article:   At a meeting of the House of Commons' international trade committee earlier this month, Leon Benoit, the Conservative chairman, ordered me to stop my presentation as an invited witness.

 

... I was cut off after noting that the United States has a National Energy Policy (a NEP) that emphasizes self-sufficiency, energy independence and domestic ownership.

 

And while Canada, as part of our bilateral Security and Prosperity Partnership initiative, supports U.S. efforts to wean itself off Middle Eastern oil, I noted that we do not have a NEP of our own.

 

Indeed, Canada's official goal is greater continental co-operation, at the expense of our own security of supply.

 

For example, in researching how Canada's energy security would be affected by exporting more energy to the United States, I learned that Canada has no plans, or enough pipelines, to get oil to Eastern Canadians in the event of an international supply crisis.

 

Further, I was surprised that the government was not even studying Canadian energy security.

 

The National Energy Board wrote me on April 12: "Unfortunately, the NEB has not undertaken any studies on security of supply." Yet the board's mandate is to "promote safety and security ... in the Canadian public interest."

 

... But that doesn't make sense. Canada may be a net exporter, but it still imports 40 per cent of its oil - 850,000 barrels per day - to meet 90 per cent of Atlantic Canada's and Quebec's needs, and 40 per cent of Ontario's.

 

A rising share of those imports, 45 per cent, comes from OPEC countries, primarily Algeria, Saudi Arabia and Iraq. Meanwhile, imports from safer North Sea suppliers have shrunk to 37 per cent.

 

Many Eastern Canadians heat their homes with oil. Western Canada cannot supply all of Eastern Canadian needs, because NAFTA reserves Canadian oil for Americans' security of supply. Canada now exports 63 per cent of the oil it produces and 56 per cent of its natural gas.

 

... It turns out Canada has a NEP, only it stands for No Energy Plan. And this is not helping Albertans and first nations, who are the oil and gas owners. Their governments receive pitifully low resource rents.

 

Alberta and Norway have similar amounts of oil and gas, yet Alberta's Heritage Fund has $14-billion (U.S.) while Norway's has $290-billion.