ODAC News
Monday 24 Sept
The Oil Depletion Analysis Centre
Food – Australian Wheat Crop 2007
1/ Australia cuts wheat forecast by a third
(Financial Times, Wed 19 Sep)
Natural Gas -
2/ China 2020 natural gas
consumption seen at 9 pct of energy total – CNOOC
(CNN Money, Thu 20 Sep)
Food Security
3a/ Counting the cost of
wheat price hike
(BBC News, Fri 21 Sep)
3b/ Costs may lead EU to beef
up ‘food security’ (Financial Times, Tue 18 Sep)
ASPO-6 Summary
4/ Two barrels of oil are
used for each one found. $100 oil anyone?
(Globe and Mail [
Economy – Subprime Crisis/Credit Crunch
5a/ Banking crisis: Don't blame
the central banks
(Sunday Telegraph, Sun 23 Sep)
5b/ Economic Outlook: Housing
waits to assess damage to confidence (Financial
Times, Sun 23 Sep)
5c/ Growth only as safe as
houses (Financial Times,
Sun 23 Sep)
5d/ US expert warns of fresh
shocks (Financial Times, Wed 19 Sep)
Nuclear Power
6/ Who Will Foot the
Nuclear Power Bill?
(Reuters, Mon 10 Sep)
Natural Gas – the Nabucco Pipeline
7/ Azerbaijan Plays Down
OMV Hopes for Potential Nabucco Gas
(Energy Intelligence [International Oil Daily], Mon 24 Sep)
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1/
http://www.ft.com/cms/s/0/d5e5f8a2-65a1-11dc-bf89-0000779fd2ac.html
Comment: From the article: <<
Australian farmers warned that the revised forecast was optimistic. John
Ridley, chairman of the New South Wales Farmers' Association grains committee,
said the wheat crop would not reach the official forecast. "We won't get
anywhere near a bull's roar of that [15.5m tonnes]," Mr Ridley said.
"The maximum we will get is 5m and, if it doesn't rain soon, it will be
less than that.">>
Article:
The revision from 22.5m tonnes in June to 15.5m tonnes
pushed up wheat prices as the Australian crop was seen as critical to the
balance of the market following damage to European and Canadian crops caused by
bad weather.
... Sorin Vaslobal, a grains trader at Paris-based
cereals merchant Plantureux, said
The loss of so much Australian wheat meant prices
would need to rise to ration demand - in particular a switch to corn and
soyameal for livestock feeding - and to encourage more planting in the northern
hemisphere, traders said.
The Australian Bureau of Agricultural and Research
Economics (Abare) warned that its grain forecasts were vulnerable to further
downgrades if there was no rain in the next three weeks.
It said it did not expect wheat production to slip
below last year's 9.8m tonnes, one of the lowest on record. Australian wheat is
harvested between October and December and the next three weeks are critical.
... Australian farmers warned that the revised
forecast was optimistic. John Ridley, chairman of the New South Wales Farmers'
Association grains committee, said the wheat crop would not reach the official
forecast.
"We won't get anywhere near a bull's roar of that
[15.5m tonnes]," Mr Ridley said. "The maximum we will get is 5m and,
if it doesn't rain soon, it will be less than that."
He added that the revised forecast was based on data
of a month ago. "But there have been no rains since."
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2/ China 2020 natural gas consumption seen at 9 pct of energy total – CNOOC
(CNN Money, Thu 20 Sep)
http://money.cnn.com/news/newsfeeds/articles/newstex/AFX-0013-19699491.htm
Comment:
Article: Natural gas consumption is
expected to account for 9 pct of China's total energy consumption in 2020, up
from 3 pct currently, Zhang Weiping, senior economist with the China National
Offshore Oil Corp (NYSE:CEO) (CNOOC) said.
Zhang told reporters at the Asia LNG Summit in
He said the reliability of liquefied natural gas (LNG)
supply is the key problem for the industry.
Currently, only LNG terminals in
Zhang said potential disruptions in Iranian supply add
an element of uncertainty to two deals signed by Sinopec (NYSE:SNP) and China
National Petroleum Corp (CNPC).
China and Iran signed a memorandum of understanding
(MOU) in October 2004 involving Sinopec participation in developing Iran's
Yadavaran oil field in exchange for 10 mln tons of Iranian LNG annually for 25
years. A final contract has not been signed.
Meanwhile, CNPC is in talks with
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3a/ Counting the cost of wheat price hike (BBC News,
Fri 21 Sep)
http://news.bbc.co.uk/1/hi/7004409.stm
Comment: The BBC asked 5 journalists
to discuss the knock on effects of high wheat prices in 5 regions of the world
– Central Asia,
Article: World wheat prices have risen
to a 10-year high following a dramatic fall in harvests sparked by a severe drought
in Australia and crop diseases across parts of Europe and the Americas.
Meanwhile, demand for wheat-based produce is reaching
record levels and the land once used to grow wheat is being threatened by the
demand for biofuel crops.
Five of our correspondents have been considering the
possible implications of soaring wheat prices for producers, consumers and
regional politics…
3b/ Costs may lead EU to beef up ‘food security’
(Financial Times, Tue 18 Sep)
Comment: FT login required. The European
Commission is expecting big increases in the cost of pork and poultry. Ms Fischer
Boel,
Article: Europeans should brace
themselves for further food price rises, with increases in the cost of meat set
to follow hikes in such staples as bread and milk,
Mariann Fischer Boel said that high cereal prices had
increased animal feed costs and that farmers would soon have to pass those on
to consumers.
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4/ Two barrels of oil are used for each one found. $100 oil anyone?
(Globe and Mail [
http://www.theglobeandmail.com/servlet/story/LAC.20070921.IBREGULY21/TPStory/Business
Comment: Delighted to see that it
looks like Oil and Gas UK
(formerly UKOOA) has lost the argument that the UK is still a net exporter of
oil and will remain one until next year: “The U.K. is now a net importer of oil
and gas”, although it is still a net oil exporter the occasional month. That
should end permanently early next year. Some of the details in the article are
not quite correct (I do not know anyone that is ‘thrilled’ by the onset of Peak
Oil, most are pretty gutted about it), but can be overlooked since the general
tone is spot on.
Article: For the peak-oil crowd, that
merry band of doomsters who believe global oil production is about to go into
irreversible decline and plunge us into a new Stone Age, the timing couldn't
have been better. As the Association for the Study of Peak Oil and Gas was
holding its conference in
The conference speakers were no doubt thrilled. If oil
prices had been falling, their message would have been laughed out of court. As
it were, Ronald Oxburgh, the British lord and geologist who is the former head
of Shell
For years, decades even, the peakists have been
considered the lunatic fringe by the mainstream oil and gas industry, with its
visions of endless gushers. The industry had a simple but compelling argument:
If you don't believe us, listen to the economists.
The economists said - and still say - there is no
shortage of oil; there is just a shortage of oil at low prices. If the price,
say, doubles, the reserves will rise accordingly (though not necessarily on a
1-to-1 ratio). Higher prices means expensive reserves, like
They were right. But maybe the time has come to stop
putting so much faith in the economists. As
In one sense, the peak oil argument isn't even worth
arguing about. Of course oil production will - eventually - decline, plummet
perhaps, for the simple reason the planet has run short of the rotting dinosaur
carcasses needed to make oil. The better argument is that it scarcely matters
whether oil production peaks this year or next if a huge gap develops between
demand (rising alarmingly) and production (barely rising or rising not at all).
In either case, the price goes up, as it has been, leading to potential
economic upheaval or worse.
To Mr. Buckee's point, some of the world's biggest oil
fields are limping into the geriatric ward. Take the North Sea, the reserve
that turned the
Since the 1960s, two barrels of oil have been consumed
for every barrel found. Meanwhile, alternative energy is going pretty much
nowhere. At a conference in
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5a/ Banking crisis: Don't blame the central banks
(Sunday Telegraph, Sun 23 Sep)
Comment: Niall Ferguson, Laurence A Tisch
Professor of History at Harvard University, adds a bit of humour to the current
financial meltdown by comparison with ‘Mary Poppins’, the film in which the
banker called Mr Banks loses his job because of a run on the bank he works for.
Article: Back in November last year I
found myself addressing a bunch of bankers in the
At the time, my audience was distinctly underwhelmed
by my argument. I was dismissed as an "alarmist". One of the most
experienced investors attending the conference went so far as to suggest to the
organisers that they "dispense altogether with an outside speaker next
year, and instead offer a screening of Mary Poppins". Presumably his
thought was that he and his chums could blot out any thought of future
financial crisis with a lusty chorus of "supercalifragilistic".
Yet the mention of Mary Poppins stirred a childhood
memory in me. Fans of Julie Andrews may also recall that the plot of the
evergreen musical revolves around a financial event that, when the film was
made in the 1960s, seemed positively quaint, but which has unexpectedly
returned to spook us this month: a bank run, something not seen in London since
1866.
... For it has not only been Northern Rock, the
British mortgage lender, that has been menaced by a loss of customer
confidence.
For the moment, however, it is not the managers of the
mortgage banks who are facing "wrack and ruin in their prime", but
rather the central bankers.
... There are indeed some tough questions to be asked
as this crisis continues to unfold. Where was the FSA when Northern Rock was
piling up those fatal short-term liabilities? How does the Chancellor of the
Exchequer justify offering bank depositors a government guarantee of 100 per
cent when existing deposit insurance is far less generous and other investors –
notably those who put their money in now defunct private pensions – received no
such relief? And how smart does his predecessor, the Prime Minister, now look
for having stripped the Bank of its supervisory powers 10 years ago?
It's not over. Coming soon: more pressure on
No doubt these next links in the chain reaction will elicit
yet more calls from the politicians and the press for the heads of the central
bankers. But it was not the central bankers who put the "fragile" back
into "supercalifragilistic".
5b/ Economic Outlook: Housing waits to assess damage to confidence
(Financial Times, Sun 23 Sep)
http://www.ft.com/cms/s/0/082c8832-686b-11dc-b475-0000779fd2ac.html
Article: Alan Greenspan’s warning that
Growth in
5c/ Growth only as safe as houses
(Financial Times, Sun 23 Sep)
http://www.ft.com/cms/s/0/a3e429d6-69d0-11dc-a571-0000779fd2ac.html
Comment: A reminder, as if one was
needed, that ‘house price corrections’ are due in the
Article: There are several routes that
get us from a credit squeeze to a recession. Last week I wrote about a falling
dollar as a transmission mechanism. The property market is another one, at
least for some European countries.
Over the past decade, we observed large housing booms
in the
... None of these sound plausible to me as explanations
for the extreme house price increases we have observed. To achieve that effect,
you need credit – a lot of it.
In
There is fortunately no need for new regulations to
crack down on such irresponsible lending practices. The market has done it for
us. The credit bubble is over, thanks partly to a buyers’ strike for
asset-backed commercial paper. Back in the 1990s,
It takes time for house prices to fall, but when the
process starts, it can quickly build its own momentum. The Case-Shiller house
price index for the
... A good global indicator of inflationary
expectations is the price of gold, which has just reached a 27-year high and
where market sentiment remains bullish. The odds of a 1970s-style hard landing
have shortened considerably.
The Italian economist Tommaso Monacelli has produced
some interesting statistics* showing the correlation between house prices and
private consumption in various countries. They are highest in the
This raises the question of whether, and to what
extent, the superior economic performance of these countries was due to the
credit boom. My own hunch is that we will soon have to change our narrative of
economic growth, and accord a much greater weight to the importance of money
and credit.
5d/ US expert warns of fresh shocks
(Financial Times, Wed 19 Sep)
http://www.ft.com/cms/s/0/31d8aba4-66b6-11dc-a218-0000779fd2ac.html
Article: Fresh economic shocks on the
scale of the current credit squeeze will occur if
Robert Shiller, a Yale university economist, told a
“The decline in house prices stands to create future dislocations,
like the credit crisis we have just seen,” he told the Senate’s joint economic
committee.
The warning underlines an increasingly widespread view
that the turmoil in financial markets and tightening lending conditions are
early consequences of a slump in the
... The Center for Responsible Lending has predicted
that foreclosures on subprime loans will lead to a cumulative loss of $164bn
(€118bn, £82bn) in home equity. Investment banks have suggested the costs to
financial institutions could be more than $300bn.
The joint economic committee heard from experts who
said a 15 per cent fall in house prices would wipe out $3,000bn of household
wealth.
Alex Pollock, a fellow at the American Enterprise Institute,
said: “Residential real estate is a huge asset class, with an aggregate value
of about $21,000bn, and is of course the single largest component of the wealth
of most households.
“A year ago it was common to say that while house
prices would periodically fall on a regional basis, they could not on a
national basis ... Well, now house prices are falling on a national basis,” he said.
Mr Shiller said it was “difficult to predict the
depth, duration and all of the consequences” of the worsening housing slump...
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6/ Who Will Foot the Nuclear Power Bill?
(Reuters, Mon 10 Sep)
http://uk.reuters.com/article/oilRpt/idUKL0792245720070910
Article: Nuclear power may be close to
a revival after two decades in the shadow of the
But ask the industry who is going to foot the
potentially massive bill and it becomes coy and mutters about governments,
public/private partnerships and equity financing.
"There is a lot of talk about the nuclear
renaissance, but in reality only
According to the WNA -- the nuclear power industry's
umbrella organisation -- there are 439 reactors operating globally, generating
371,000 megawatts of electricity or about 16 percent of total demand.
A further 34 are under construction, with 81 planned
and 223 proposed -- 88 of which are in
The WNA estimates nuclear power could double over the
next 30 years but, given the forecast surge in population and demand, it will
still only account for about the same percentage.
... Electricity generation accounts for some 20
percent of global carbon emissions.
Given that even under the WNA's most optimistic
outlooks nuclear will only account for 18 percent of electricity demand, the
amount of carbon foregone comes in at just four percent.
And that, says the environmental lobby, is simply not
worth the risk entailed in the mooted new nuclear age.
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7/
No link, from daily newsletter.
Comment: The Nabucco
Gas pipeline saga continues, but possibly for not much longer due to lack
of gas supplies. The building of the Nabucco pipeline is supposed to start
during 2008, but the backers are still looking for supplies (30 bcm/year).
Originally the suggestion was to import all the expected surplus capacity from
Central Asia –
Article:
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