Peak Oil News

Is oil's wild ride over? If you follow the energy markets in the slightest, there's a good chance this thought has crossed your mind lately. Last year turned out to be a roller coaster for energy, including record highs and mind-numbing, multi-year lows. For those of you who took advantage of the situation, you got the best of both worlds. I'll get into that a bit later. Admittedly, it hasn't been easy watching oil prices plummet over $100 per barrel during the last half of 2008. It was difficult not to cringe. In order to defend prices (and no doubt while watching their revenue slip through their fingers), OPEC started swinging. If you told me a few years ago that OPEC would cut output by four million barrels per day, I wouldn't even guess how high prices would have jumped. Last month, after their second round of cuts (2.2 million barrels per day, the single largest in their history), oil prices merely shrugged and fell as low as $32 per barrel. Normally, I wouldn't get too hung up on OPEC numbers. Cheating on their quotas is nothing new. I have a feeling OPEC is going to stick to their cuts this time. Believe me, you aren't the only one who thinks oil is cheap under $50 per barrel. Last week, both China and the U.S. announced plans to build up their crude stockpile. The U.S. Department of Energy said it will buy nearly 12 million barrels of crude. As of last week, U.S. crude stocks were approximately 29 million barrels more than a year ago. Peaks, Plateaus and Falling Impo..

The story of solar at UNC-Chapel Hill is a story of student leadership. Civic engagement is an integral part of the rich history of this flagship public university of North Carolina. Once these top students from around the state, along with a sizable 18% from around the country and beyond, get out of class — they continue their education through extra-curricular and public service activities in the 600+ campus organizations. Over the years, students have been protesting wars and pushing racial integration, organizing to free collegiate apparel from sweatshop labor conditions, and leading countless other campaigns that keep this campus at the forefront of progressive change. Environmental engagement is no exception. In 1989, students at UNC-Chapel Hill started a new national organization and hosted an environmental conference that birthed the modern college environmental movement. They brought together over 1,500 students from more than 200 campuses to push environmental responsibility through the Student Environmental Action Coalition (SEAC) . As the 1990s rolled by, SEAC was joined by many other national student environmental organizations that learned from SEAC's experience and aimed to tackle growing challenges such as global warming. UNC-Chapel Hill students remain a crucial catalyst for environmental progress by implementing solid projects like the solar story I share below. Students involved in the UNC-CH chapter of SEAC and collaborating with other campus groups..

2009 did not bring Europe a resolution to the Russia-Ukraine gas price dispute. Russia refused Ukraine's offer of advance payment, calling recent pricing a "humanitarian gesture." Both countries have in turn claimed that gas will be delivered through Ukraine to EU countries as promised, but Russia is leveling charges that Ukraine is siphoning gas for itself as negotiations continue. BusinessWeek.com's Steve LeVine points out that Russia is using some fuzzy math on its part, or at least conveniently marking to market: "...When Gazprom is retorting that it in fact could charge Ukraine $418 per 1,000 cubic meters if it so wishes, that’s Russia’s estimate of the price of natural gas last May." And shortfalls in natgas supply edging into double-digit percentages have been reported from Poland, Hungary, and other former Soviet bloc countries. As it's impossible to separate this resource dispute from Russia and Ukraine's long historical relationship (going waaay back past the Soviet Union into Czarist and even tribal times), we should also look at the newer market-oriented language that Russian officials are using. Russian state news agency RIA Novosti led with this statement today: Gazprom will reduce its delivery of gas to Ukraine by 65.3 million cubic meters - the volume that has been stolen, the Russian energy giant's CEO said on Monday. "Stolen" is a strong word. It's reminiscent of the language Saddam Hussein used when he accused Kuwait of slant-drilling for Iraqi..

The new year brings no shortage of energy concerns, even though oil prices are much lower than last January. Instead of enumerating those that I think merit particular attention, for today I'd like to focus on an over-arching energy policy choice facing the US. The recent flurry of calls for a quick increase in the tax on gasoline highlights the need for us finally to decide whether energy security or climate change constitutes the higher priority for urgent action. Altered circumstances have undermined the natural linkages between these two problems, and the financial crisis and recession make it not just impractical, but undesirable to attempt to tackle both with equal vigor. During the holidays I received emails from friends and other readers pointing out various op-eds calling for a big increase in US gas taxes. The arguments in favor of such a measure include reducing US oil imports from unfriendly nations and making fuel-efficient cars and other advanced energy technology more attractive for consumers and investors. The current low gas prices would allow such a tax to be imposed with much less pain than only a few months ago. Yet as Tom Friedman's New York Times column on the subject recognized, this entails an explicit choice between taxing gasoline and taxing the greenhouse gas emissions linked to climate change. Friedman has been a consistent supporter of higher gas taxes, and he still comes down on that side of the argument. For many reasons, I disagree, but it's ev..

Worldwide concern is growing over high oil prices, the security of supply of fossil fuels and its impact on many sectors of our society. Such concerns voiced at the oildrum over the past years are becoming part of the mainstream energy discussion. On 21 & 22 January 2009 a major business conference will be held in the Netherlands in which I am involved as an advisor in my role as President of ASPO Netherlands. I invite you to come and listen to top executives and leaders from many industrial sectors who will explore the effects of high oil prices in their field of expertise or industry. Day 1 is dealing with political and macro economic aspects of changing oil supplies. Day 2 is teaching more about specific economic sectors, like Transport & Infrastructure, Food & Agriculture, Energy Systems and Chemicals & Materials. There will be many speakers including Maria van der Hoeven (Dutch Minister of Economic Affairs), Matthew Simmons (invited), Peter de Wit (President Shell Netherlands), Kjell Aleklett (ASPO International), Jeremy Tomkinson (CEO The National Non-Food Crops Centre), Jörg Schindler (ASPO Germany) and Ger Bemer (CEO Royal Nedalco). For Conference Agenda and Registration, go to the the Permanent Oil Crisis website. Under the fold, find the highlights from the program. Come to Amsterdam! Plenary sessions on Wednesday, 21 January on political and macro economic aspects of changing oil supplies. Presentations will include "Sustainable Energy for the Automotive Sector",..

Recently, Rune Likvern wrote a post talking about the possibility of a natural gas shortage in the United Kingdom, possibly as soon as February or March 2009. Rune isn't the only one worried about the supply of gas in Europe and the UK. A little over a year ago, Euan Mearns wrote two posts about the European natural gas supply, the first called European Natural Gas and a follow-up addendum called Daddy, will the lights be on at Christmas? In this post, we combine the two posts and re-run them. Besides being relevant to the gas shortage issue, the posts also provide some additional background related to current Russian/Ukrainian dispute. OECD European gas production looks set to peak in 2008. After that, falling production combined with rising demand will see OECD European gas imports wanting to rise from current 197 BCM per annum to 442 BCM per annum by 2020. Where will this gas come from and how will rising European imports affect N America and the rest of the world? Figure 1 OECD Europe gas production and conceptual forecast. Click all charts to enlarge Executive summary As of 2006, OECD Europe produced 55% of its own natural gas with the majority of gas imports coming from Russia and Algeria. OECD Europe has three main gas producers - Norway, The UK and The Netherlands. Norwegian gas production is undergoing a major expansion, but this is forecast to halt at 130 BCM per annum next year for political resource conservation reasons. UK and Dutch gas production are in decline..

As we enter yet another episode of worried or sanctimonious articles about the gas conflict between Russia and Ukraine, it's worth remembering a few simple facts: 1) The conflict started in 1992, not in 2006; 2) Russia cannot win a gas war against Ukraine and knows it; 3) the real underlying stakes are not about Russia or Ukraine. 1) The conflict started in 1992, not in 2006 A given in most of the coverage of this episode is that these things have been happening over the past few years only. Everybody remembers the 2006 episode 3 years ago, which brought the issue to global awareness, and most coverage seems to think that this is when it all started. It's not. Russia and Ukraine started squabbling about gas as soon as the Soviet Union broke up, ie from 1992. There were cuts to gas deliveries to Western Europe in 1992 and 1993, which led the major importers - the GDFs, Ruhrgas and SNAMs - to set up offices in Kiev to try to understand what was going on and to bring pressure on the then new country of Ukraine to not interrupt gas deliveries. I spent half a year in GDF's Kiev office in 1994, where I painstakingly collated local sources to prepare a report on the Ukrainian gas industry, and picked up most of the content for my PhD dissertation on the independence of Ukraine and its relationship with Russia, both of which were defined largely by gas. I've never been able to ascertain that Ukraine actually ever paid anything for gas to Russia then or since. The reality is that the..

Coal was almost as volatile as oil and natural gas in 2008, with its global trade price down more than 50% since the summer. While North American natural gas and global oil prices are poised for rebound since they have fallen below the higher marginal cost of production, coal production costs remain below current prices by most accounts. Therefore, coal prices have substantial room to fall if economic conditions continue to deteriorate. Below are some thoughts on coal supply and demand as we all prepare for the year ahead. The recession has brought stagnation to demand growth throughout the world, even in China as I shared a few weeks back . It looks as though global demand growth may stop in its tracks after a higher than 4% speed in 2006 and 2007. If Chinese and Indian exports continue below year-ago levels and renewables continue to grow, we may even see lower coal consumption worldwide in 2009. This scenario would be a beneficial outcome for the climate that can give hope to international negotiations achieving lower emissions in the 2010s and beyond. Coal supply seems to have higher growth potential than oil and natural gas due to the low costs of production and its widespread and vast reserves. The absence of a coal “OPEC” helps ensure a secure supply of the fuel in the years ahead. This is especially the case in the US — the site of more than a quarter of global reserves. A key driver in coal's price is climate policy since coal consumption emits the..

Editor's Note I only have two things to say on this first day of trading: Happy New Year and buy stocks. Last year was certainly one to forget. Now, a change of presidential administration, an emerging trough in stock prices, and the growing investor confidence that comes with a new year. . . means it's time to get back on the horse and start buying energy stocks. A second economic stimulus is coming down the pike. It will likely be ready to sign when Mr. Obama takes office. And it will lob about $850 billion at projects to create jobs and spur spending. Most notably, the coming stimulus will focus on updating our severely outdated electricity grid. An article I wrote last week for Green Chip Review hones in on investment opportunities arising from a smart grid transition. With these stocks about to take off, I thought this piece would be of interest to Energy & Capital readers as well. Enjoy.   I've been talking about the smart grid for well over a year now. Two Novembers ago, I wrote about three companies doing business in the realm of energy efficiency, which now goes by the pet name 'smart grid.' As it happens, I may have had my prognosticating dial set a year too early. Those three companies got swallowed up by the financial tsunami that was 2008, losing more than half their value, which is even worse than the Dow and the S&P. Here's the chart: Now, 2009 is being hailed as the year of the smart grid. It may be too early to tell, but with a change in administration,..

After yesterday's post on the wide range projection for oil next year, I wanted to share some thoughts on natural gas in 2009. I'll start with the supply side, which has been more volatile than oil. Then I'll go over some potential trends in demand. The weekly EIA natural gas storage report came out today. And while last week's inventory drop was 40% above average due to some cold weather, levels remain above the five-year average and allow the price of natural gas to remain below $6 per MMBtu at year's end for the first time since 2002. Inventories are 2.3% below last year's level, but US natural gas companies have ample production capacity that they can ramp up from shale formations if the prices rise above $7 (which is seen as a floor to make most new shale production profitable). Recent reserves growth paint a healthy supply picture for the North American natural gas market through 2009 at least. Internationally, there may be some tightness in natural gas markets — especially if Russia and other producers decide to flex their energy muscles (as it appears ready to do regarding Ukraine tomorrow). The year 2009 may mark the emergence of natural gas production coordination by Russia, Qatar, and Iran in a natural gas major exporters cartel a la OPEC. On the demand side, it is difficult to say in the volatile economic environment. The EIA predicts flat US demand that would probably prevent prices from approaching the $10+ per MMBtu that natural gas hit last summer. But ..

This is my final column for 2008; so, it's time for the requisite journalistic navel-gazing. Join me as I dig into a big slice of humble pie with the calls I got right for dessert. In my first column for the year, published on March 27, I said: Despite last week's Fed cut and the subsequent huge rally, I am far from certain that the carnage is over. As I see it, the true valuations of the underlying assets under all this mess are yet to be revealed, and many banks, particularly regional banks with a large book of mortgage-related business, may yet fall. I am not convinced that the Fed has enough ammunition to prevent it, and I wouldn't call a bottom in the financials just yet. Even I underestimated how true that statement would prove to be. The financials had only begun to slide. It would be July before the real selloff began, erasing more than half the value of the entire sector by the end of the year. Even so, there were pundits aplenty calling the bottom in March, trusting that the Fed had the tools to stop the bloodshed. In that column I lambasted the $30 billion of taxpayer money that was extended to JPMorgan Chase to let them take over the assets of the failed Bear Stearns and compared it to the bailout of Chrysler back in 1979. Little did I suspect that would look paltry compared to the massive socialization of the banking, insurance and real estate sectors that was yet to come, and that continues to this day with the automaker bailout. Bernanke and Paulson have now p..

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OAO Gazprom, Russia's natural gas export monopoly, seems to have scored a major victory in its perennial natgas price standoff with neighboring Ukraine. Like the Baltic countries of Lithuania, Latvia, and Estonia, Ukraine was formerly attached to Moscow politically in the Soviet Union. And it remains on Russia's umbilical cord when it comes to power supplies. Russian President Dmitri Medvedev had threatened "sanctions and demands" if the Ukrainian government didn't pay off more than $2 billion in back payments and fines. Ukraine caved early this week, agreeing to pay the whole amount owed in arrears. Kiev is even laying down an advance payment for 2009 supplies. Yet the New York Times reports that Gazprom is saying they haven't gotten the money yet, so the matter may not be resolved by January 1.  At the beginning of 2006, Gazprom cut off supplies to Ukraine during a pricing dispute. Ukraine, Belarus, and a number of other former Soviet republics have been beneficiaries of a sort of legacy pricing in the post-Soviet period, which Russia via Gazprom wants to draw to a close so it can reap the benefits of high open-market bids. The Cold War USSR has given way to a new sort of Russian nationalism, which regards Ukraine and other former Soviet wards as the "near abroad," and certainly part of Moscow's sphere of energy influence. It's not just a remnant of Communist-era Russian politics we're seeing here... Since the European gas pipeline network lies west of Ukraine, pressu..

Before we get deep into the coming year, I would like to share some views on potential global energy shifts in 2009. Today, I'll start with our biggest energy source — oil. Looking back at 2008, oil has been perhaps the wildest ride. Most analysts had no clue oil could rise to its July record ~$147 per barrel and then were equally caught off guard by the recent lows below $40. It is projected that 2008 will be the first year with a global demand decrease since the early 1980s. So, what shifts can we try to anticipate in the year ahead? Bloomberg reported today that the median projection from a roundup of oil analysts is a rebound in oil's price to ~$60 per barrel (50% higher than today). I find this guesstimate to be reasonable, but think the range of possibility spans from as low as $30 and as high as $80. If the recession continues to deepen beyond the first quarter then OPEC would be forced to continue to lower its production but may not be able to do so enough to get prices out of the $30s. But if OPEC is disciplined in the cuts it committed to by January 1st (December numbers show they cut even further than their December commitment and may have the resolve to follow-through next month), then price may begin to rise toward the cost of marginal non-OPEC production of $70-$80.  For the latter scenario, the economy will probably need to show signs of life in the second half of ‘09. Outside of OPEC, the supply side may be a bullish or bearish pressure on prices..

No matter how enjoyable the holidays are, Monday always comes too fast. Fortunately for those of you who favor a shorter work week, New Year's Day is right around the corner. But before I go off on too much of a tangent and lose focus, I want to address a question a few of my readers have had on their minds. Their concern was whether natural gas prices have finally bottomed out or not. While oil stubbornly remains under $40 per barrel, natural gas prices have rebounded over $6/Mcf during trading today. So have natural gas prices finally climbed out of the basement? It wasn't too long ago that natural gas cost over $14/Mcf. That price has plunged nearly $8/Mcf since those July records. In order to determine how bullish you should be regarding natural gas in 2009 , it's important to take a look at a few things first. Dreading the Gas OPEC Is this the year that the dreaded "Gas OPEC" will form? I'll admit the future of gas OPEC doesn't seem too appealing for European countries. Europe receives about 40% of its natural gas from Russia. Add Iran and Qatar to the mix, and we're dealing with over half of the world's known natural gas reserves. As far as the possible effect on the U.S., I wouldn't worry just yet. The fact that natural gas markets are regional (unlike oil, natural gas is transported using a pipeline infrastructure) means we can breathe easy. The idea of the world's leading natural gas producers forming a cartel similar to OPEC may be daunting. I know a few analysts t..

A year ago, I looked back on 2007 and ahead to 2008, a year that has defied the predictions of most observers. Although I can't claim to have foreseen the possibility that oil would break $140 and $40--from opposite directions--in the same year, I worried about energy market volatility and cautioned that risk cuts both ways. That seems equally appropriate advice today, when markets are focused on the downside, and " confirmation bias " is such a powerful force. But while we shouldn't expect a repeat of the wild ride of the year now ending, the experience has provided some expensive lessons about energy markets. The following is a non-exhaustive list of those that struck me: Demand matters as much as supply in determining prices. The difference between oil at $145 per barrel and $40 is only a couple of percent of global demand, or more precisely a swing between steady growth of 1-2% per year and a shrinkage of similar magnitude. Speculation can amplify prices and market volatility, but it can't override a dramatic shift in the underlying fundamentals of supply or demand. Leverage increases not only the magnitude of speculative gains and losses, but apparently also the speed of the shift from one state to the other. When prices have been rising steadily, commodity price hedging can look like a sustainable revenue source--almost a perpetual motion machine--until the trend breaks. Then we see that the main benefit of hedging is to smooth out cash flows and enable firms to take on..

I'm back from another amazing trip down to North Carolina to be with family! I ate enough to bicycle back to New York City, but of course we took the rental car and train with our Christmas presents and luggage There have been some major energy developments that I'd like to begin discussing today… For instance, China is reported to have much slower coal consumption growth in 2008 than years past. China is expected to have 4.5% demand growth for coal this past year, compared to 7.5+% growth the last couple of years. This helps my estimate of global coal consumption fall toward 3% rather than the 4.5+% growth of late — which would have devastated the climate without significant deceleration. Next year's global coal demand should be very interesting. If demand is flat, it could mix with projected lower oil demand to make 2009 the first year of carbon emissions reduction in a long time. The other major news I noticed was the continued decline of Mexico oil production. PeMex reported last week that total liquid production for November was even lower than September's extremely low number . In September, Mexico had the excuse that they shut off some wells because the Gulf Hurricanes put a plug on US refinery demand. But these numbers for November show the high risk that Mexico oil production will inevitably continue to slide toward zero net exports within a few short years. Cantarell's output continues to decline at an astounding rate of ~33%, sending its production for..

canada.com By Dan Gardner In Greek mythology, the enchanting songs of the Sirens lured unwary sailors to shipwreck and death. Today's Sirens are the roadside signs singing sweetly, "Cheap gas! Drink deeply and be at ease, weary traveller!" After suffering record-high oil and gas prices earlier this year, it's understandable that we see cheap gas as anything but a danger. We're in a recession. But before we drink deeply and relax, let's look through the telescope at what lies ahead. In November, the International Energy Agency -- an intergovernmental organization that advises 28 member countries -- released its latest forecast. Between 2006 and 2030, the IEA predicts, worldwide energy consumption will grow 45 per cent. "Current trends in energy supply and consumption are patently unsustainable," said Nobuo Tanaka, executive director of the IEA. "Rising imports of oil and gas into OECD regions and developing Asia, together with the growing concentration of production in a small number of countries, would increase our susceptibility to supply disruptions and sharp price hikes. At the same time, greenhouse-gas emissions would be driven up inexorably, putting the world on track for an eventual global temperature increase of up to 6 C." Think 1973. That year, an oil embargo imposed by the Organization of Petroleum Exporting Countries hammered the developed world. Oil shocks will become more common and more severe. The triggers could be anything. A terrorist attack in the Strait of..

huffingtonpost.com By Jim Schumacher and Debbie Bookchin Last week at a Christmas party in the hills of Umbria, we were part of a captive audience listening to an American businessman holding forth on an ever-popular expat subject - the dismal exchange rate of dollars to euros. He informed his listeners that they needn't worry: In just a couple of years, he said, America will have pulled out of the recession and the economy will be growing strong; Europe, on the other hand will still be facing the ripple effects of the global meltdown - and will be suffering. "You'll see," he said blithely, "the dollar and the euro will be at par." Although the conversation took place in Italy, it could have as easily occurred in a Wall Street boardroom. Despite the ongoing economic meltdown, the dominant, "business as usual" wisdom is that the ascendancy of the American model of global capitalism can only continue. It's just a matter of time before the good ship USS Free Enterprise rights itself and we have smooth sailing ahead. But exactly what resources will the U.S. call upon to fuel the economic recovery that our American businessman and millions of others like him continue to believe in? Our longtime economic paradigm - growth fueled by cheap oil - has no future. Even when it did, it was a flawed concept because the constant growth required under the "grow or die" capitalist paradigm demands that we relentlessly exploit natural resources - how else to increase profit margins and pay in..

Falls Church News-Press By Tom Whipple If you don't understand what is going on with the price of gasoline and demand for the world's oil supply, then join the club. Analysts, pundits, government officials, oil ministers, oil executives, and oil traders are all over the board in trying to explain what is happening and more importantly what is going to happen. Some are saying that $30 oil will be with us until the economy recovers while others are talking of a spike to $200 in 2009. We are currently finishing out an extraordinary year. For several years now, oil prices have been moving steadily higher. They passed $100 a barrel around New Year's and moved on to peak at around $147 in July. By late spring much of the world was in turmoil. Politicians were out in force, bashing speculators, environmentalists, OPEC, additions to the Strategic Petroleum Reserve and you name it. Airlines and car sales were collapsing. The President flew off to Saudi Arabia where he personally appealed to the King to send us more oil. The King held a big oil conference and promised to do what he could. Then, in mid-July, the great oil panic came to a screeching halt. While several explanations have been offered for this turnabout, I believe the start of the Beijing Olympics the most proximate cause. If 2008 has been hard on America it has been traumatic for China. In the first half of the year the Chinese endured a great earthquake, major snowstorms, and a nationwide panic over readiness to put on ..

Because your ultraconductors still haven't shown up . How would you like your crow served?

Everybody seems to have the same question for me lately: What's the deal with gasoline prices? How could it go from $2 a gallon to over $4 and then back to $1.66 in a single year? Was it speculators? The evil machinations of OPEC? Badly-timed fills and draws of the Strategic Petroleum Reserve (SPR)? A financial calamity engineered by the masterminds of a shadowy wealth conspiracy? It's never an easy question to answer, but I can easily say "none of the above." The price of oil and gasoline is set daily and globally by a complex interaction of many factors, including the relative valuations of currency, speculation in oil futures, the fact that oil is "priced at the margins," delayed supply and demand feedback to the market, economic growth rates, money flows of hedge funds and big institutional investors, geological factors, geopolitics, and many more. Oil shot to $147 this year because of a particular highly-leveraged alchemy of those factors, and it fell as the leverage unwound. It's down now because the world is heading into a major recession and traders are, as usual, overdoing their bearish reaction. OPEC's responses this year have been mostly late to the game, so they were regularly ignored by the market. Last week's production cuts by the cartel, and the subsequent sell-off in oil, was a fine example of this. Filling the SPR is too negligible to move the markets either. In May, the debate over filling the SPR raged on with hardly anyone seeming to realize that its 68,..

A month ago an old friend--in fact a former boss and mentor--hinted that the recent collapse of oil prices might lead to revisions of the oil & gas reserves that companies carry on their books. I recalled his suggestion a week ago, when the Wall Street Journal published an article on the subject of potential reserve revisions, indicating that "big chunks" of reserves might have be to declared "uneconomic", harming company valuations and potentially their ability to raise capital. This came into even sharper focus last Friday, when the January 2009 crude oil futures contract on the New York Mercantile Exchange (NYMEX) plunged sharply on its last day of trading, ending at $33.87 per barrel--the lowest oil price since February 10, 2004 . I can only imagine how intently the reserves accounting groups of oil and gas companies must be scrutinizing the performance of the February contract, wondering how badly it might swoon by December 31, when the price for determining year-end "proved reserves" is established. The comparable price from which the 2007 year-end reserves were calculated was $95.98 per barrel, the highest ever. The subsequent slide puts reserves booked as long ago as 2004 at risk. My friend knows more about oil & gas reserves and their reporting, from personal experience, than I ever will. It's an arcane subject. Despite the general designation of "reserves accounting", this task is normally carried out not by accountants, but by engineers under the supervision of a v..

Banks are engaged in a massive deleveraging exercise right now. One part of that has been much described and commented upon: the elimination of bad assets, either by taking the losses or by dumping them on the tax payer. The other part of the process is much more devious, as it means choking off new activity, even when sound, to avoid any new build up of assets. Debts that mature and are paid help shrink the balance sheet; giving new loans goes against that process and is thus avoided as much as possible by banks right now. New lending activity is therefore much more scrutinized from a risk perspective, sees its conditions made much less favorable than they used to be, and is especially frowned upon for long term commitments, as long term liquidity is scarce and expensive. In my case, working in a bank that suffers from a huge gap between its predominantly long term assets, and its short term liabilities, was basically bankrupt earlier this autumn, had to be bailed out via nationalisation and has not yet announced its forthcoming strategy (ie I still don't know yet if my ativity will be a "core business" or not), funding has been especially restricted. The wind sector requires long term funding in order to spread out the initial investment over a long enough period (so that the levelized cost per MWh is low enough) and it was a massive user of debt finance to get investments done. This means that it is an industry particularly vulnerable to the credit crunch. And indeed, exp..

Last week, I mentioned that OPEC was drawing a line in the sand. The organization was determined to stabilize oil prices. As you know, that line turned out to be a 2.2 million b/d cut in production. That's over four million barrels per day in production cuts since September. OPEC's decision had no effect on prices. Things got worse, too. Two days after the announcement, oil prices dropped as low as $32.40 per barrel. For those of you keeping track, that's a 78% decline since July. I guess the production cut wasn't as surprising as OPEC thought. Then again, we're also assuming that OPEC members are able to even stick to their quotas. The idea that OPEC producers won't cheat their quotas may just be wishful thinking. Because last week's production cut was so underwhelming, OPEC was forced to react. Last Friday, the oil cartel promised to continue cutting production until prices move higher. Today, February contracts are trading lower, under $42 per barrel. Unfortunately, until we see a real supply shortage or a turnaround in global consumption, OPEC will just have to keep redrawing that line in the sand. We'll just have to wait a few more weeks to see how much OPEC will cut when they meet in January. Since July, OPEC imports to the U.S. have dropped over a million barrels per day. U.S. imports overall have declined by almost twice that amount, down to approximately 11.5 million barrels per day in September. Domestic Crude Production Let me ask you, "When was the last time U.S...

There's so much noise — Slashdot , at The EEStory , gm-volt.com , and EEStor Ultracapacitors — that it's hard to understand the major issues being bruited in the new U.S. Patent (7466536B1) filed recently by EEStor. Perhaps the most interesting part of this comes in this The EEStory discussion thread about the patent. This post in particular interests me (all lower-case typing is a direct quote): i found it interesting that the patent describes taking the alumina and PET materials down to -150 degrees C! i'm no expert, but i doubt seriously that's a common practice. that's very cold. maybe that's the magic fairy dust everyone has missed -- the use of extremely cold temperatures to modify the property of the materials in order to make this seeming violation of physics work. i've been following eestor for years now and i don't think they've done it, but i do find the mention of ultra cold temperatures used in manufacturing very, very, very interesting. is the low temperature something that would have been done in weir's previous career in hard drives? as others have said, r. weir is either one of the boldest liars out there or he's an extremely shrewd inventor. We still, of course, don't even have a demonstration unit released, and there's plenty of good reason to be skeptical. But if they're liars, they're certainly keeping their mouths awfully closed, an awfully long time. It's entirely possible that there were design problems they assumed they could skate past th..

The Guardian George Monbiot puts the question to Fatih Birol, chief economist of the International Energy Agency - and is both astonished and alarmed by the answer By George Monbiot Can you think of a major threat for which the British government does not prepare? It employs an army of civil servants, spooks and consultants to assess the chances of terrorist attacks, financial collapse, floods, epidemics, even asteroid strikes, and to work out what it should do if they happen. But there is one hazard about which it appears intensely relaxed: it has never conducted its own assessment of the state of global oil supplies and the possibility that one day they might peak and then go into decline. If you ask, the government always produces the same response: "Global oil resources are adequate for the foreseeable future." It knows this, it says, because of the assessments made by the International Energy Agency (IEA) in its World Energy Outlook reports. In the 2007 report, the IEA does appear to support the government's view. "World oil resources," it states, "are judged to be sufficient to meet the projected growth in demand to 2030," though it says nothing about what happens at that point, or whether they will continue to be sufficient after 2030. But this, as far as Whitehall is concerned, is the end of the matter. Like most of the rich world's governments, the UK treats the IEA's projections as gospel. Earlier this year, I submitted a freedom of information request to the ..

Straight.com By Gwynne Dyer Worried about "peak oil"? The International Energy Agency's annual report, "The World Energy Outlook 2008", admits for the first time that "although global oil production in total is not expected to peak before 2030, production of conventional oil...is projected to level off towards the end of the projection period." When the Guardian's environmental columnist, George Monbiot, pressed the IEA's chief economist, Fatih Birol, on that opaque phrase, the actual date turned out to be 2020. The IEA's previous reports, which assured everyone that there was plenty of oil until 2030, were based on what Birol called "a global assumption about the world's oilfields": that the rate of decline in the output of existing oilfields was 3.7 percent a year. But this year some of the staff actually turned up for work occasionally and did a "very, very detailed" survey on the actual rate of decline. It turns out that production in the older fields is really falling at 6.7 percent a year. There are still some new oilfields coming into production, but this number means that the production of conventional oil--oil that you pump out of the ground or the seabed in the good old-fashioned way--will peak in 2020, 11 years from now. Birol assumes, or rather pretends, that new production of "unconventional oil" will allow total production to match demand for another decade until 2030, but this is sheer fantasy. "Unconventional oil" is oil that is extracted, at great expense an..

The preliminary EIA estimates for US electricity use in October point to even deeper carbon dioxide emission reduction than I reported last week . The data are presented in their Electric Power Flash . Although the data will be refined in the weeks ahead, these estimates have big implications on our fossil fuel consumption and thus our greenhouse gas emissions. The EIA estimate October electricity generation was down ~4%. This led to another massive drop in consumption of natural gas ~13.8%, coal ~4.4%, and petroleum liquids ~48%. Hydropower generation increased ~10.9%, nuclear increased ~1.8%, and other (wind, biomass and solar) were up ~2.6%. Year-to-date totals were even more climate-friendly than post-September estimates. Total electricity generation is now down ~1.1% while low-carbon nuclear and hydro generation were flat and up ~5.6%, respectively. Coal combustion for electricity has fallen a significant ~.5%, natural gas a whopping ~7.5%, and oil an even bigger ~42.5%. If November and December electricity data follow these trends closely, it is possible that they make 2008 emissions more than 3% below their 2007 level. I will keep track of the data as it comes in and report it to you on this blog. It will be interesting to see the more refined estimates for October when they come out in another few weeks (especially with wind generation totals parsed out). If these numbers hold and the electricity demand reduction trend continued in November and this month, 1990 emiss..

Below is SET's first guest post - from our European partners over at Leonardo Energy , a Global web-based Community for Sustainable Energy Professionals. The author, Hans de Keulenaer, is the programme manager of “Electricity & Energy” at the European Copper Institute. Please enjoy our first of many guest posts at SET: EU energy policy and the financial crisis The financial crisis will not deter Europe on its course towards a low carbon economy, but it may slow it down. The complexity of EU energy policy Europe does not have an Energy Policy Act. Instead, it has numerous interconnected white papers, policy declarations, directives, programmes and projects which aim to regulate a complex sector. Just on climate change, the EU is party to the UNFCCC (as are its member states). But it also manages the world’s largest Emission Trading Scheme , the European Climate Change Programme and related policies such as the Directive on Integrated Pollution Prevention and Control , to name just a few. Sometimes, these various policies interact in unexpected ways, such as in the 2005-2008 controversy on pass-through pricing under the Emission Trading Scheme , during which electricity producers charged their customers for the value of carbon allowances they had been allocated free of charge. This is an effective taxation of many billions of euros by an environmental policy with a yet unclear environmental impact. On energy, the EU also has a multiplicity of directives, each of ..

One of the energy-related email lists to which I'm subscribed recently alerted me to an interesting piece of pending legislation in the US Congress, the "Open Fuel Standard Act of 2008", S.3303 . The bill would require automakers to increase the proportion of their cars that are able to run on non-petroleum fuels to 50% by 2012 and 80% by 2015. Its title might be intended to conjure up analogies to high tech software standards, and its supporters may cite national security considerations, but its main purpose is to plug a gaping hole left by previous Congressional energy legislation. And while it mentions other fuels such as methanol and biodiesel, it is first and foremost about ensuring the future market share of ethanol. The main focus of the "OFS Act" is Flexible Fuel Vehicles, cars that are factory-equipped to consume fuel containing high proportions of alcohol, which might otherwise damage their fuel systems and other components. Most of the 240 million cars in the US are only certified for alcohol blends of up to 10%. The few million FFVs already on the road were produced under a provision of the Corporate Average Fuel Economy regulations that allowed carmakers to offset them against low-mpg conventional cars, such as large SUVs. Considering that most FFVs burn gasoline most of the time, instead of the alternative fuels they were credited with enabling, this actually reduced the real-world fuel economy of the US new car fleet and increased US petroleum imports, a fact t..

Pee-Wee Herman used to sing, "Connect the dots... laa la laa la laa," as he leapt into the magic screen. No, I haven't been hanging out with Pee-Wee in movie theaters. But his advice on connecting the dots is applicable in the context of financial and political realms... and the trends and investment ideas that emerge.  Since the election in November, a series of dots have been emerging that indicate it's time to take a serious look at recently-established carbon ETFs and ETNs . Connecting the Carbon Dots In naming his climate change and energy team last week, Mr. Obama nominated Lisa Jackson to head the Environmental Protection Agency. In her previous position, Jackson led the New Jersey Department of Environmental Protection, where she is credited with helping put New Jersey in a leadership role on the issue of climate change and with encouraging the state to adopt a moratorium on building new coal plants. She also championed the reduction of emissions. And, in 2007, New Jersey became the third state, behind California and Hawaii, to pass a law that mandates steep emissions cuts over the next four decades. New Jersey, under Jackson's direction, also helped establish the Regional Greenhouse Gas Initiative (RGGI), the first mandatory, market-based CO2 emissions reduction program in the United States. A "market-based" program means it is possible to profit from reducing emissions. And I suspect, under her leadership, the EPA will push through a similar measure that cover..

You may have heard about financier Bernard Madoff and his house of cards that just came tumbling down. In addition to being the most brazen and costly Ponzi pyramid schemes in recent memory, Madoff also showed us how far unadulterated trust can be taken. The Madoff scandal unfolding also brings to mind other houses-of-cards in the investing world. For one, how about the price of oil and how many alternative fuels depend on costly crude? German renewable energy industry leaders met this year with national officials to discuss methods to bolster that country's worried renewables sector. Pricing subsidies are coming down from the government's end, and orders are being delayed by solar power and wind project planners, since much of the money and financing needed to go green have evaporated. Enter OPEC, which on Wednesday announced a 9% output cut that exceeded most estimates. That followed the Fed's rate cut surprise on Tuesday, and set us up for a potential twin rally in oil and stocks. Unlike the Fed, though, OPEC has more wiggle room moving forward: "OPEC is sending a message that they are trying to cut pretty seriously," Mike Wittner, head of oil research at Societe Generale SA in London, told Bloomberg. "If they need more cuts, there will be more cuts." The main question now is one of confidence in a broader equity market shaken by subprime and schemers like Madoff. Will buyers get back into stocks, especially clean energy ones, if oil prices float back upwards, or will tre..

The US Energy Information Agency (EIA) released a preview of yet another exciting energy document yesterday, their Annual Energy Outlook (AEO) to 2030. This year's AEO 2009 showed dramatic shifts from last year that can help us achieve carbon emissions reduction toward stabilizing our global climate. But it also shows we have more work to do. The preview projects higher oil prices, slower growth in electricity demand, and lower carbon dioxide emissions. Oil prices are predicted to rise to new records once the economic recovery picks up, reaching above $125 per barrel (inflation-adjusted 2007 dollars) as an annual average rather than a temporary spike like this summer. As I wrote yesterday , they predict US oil consumption will stay flat through 2030. And they also project US oil production will rise to a level close to the 1970 peak thanks to the higher prices incentivizing further exploration and development. Peak oil theorists would laugh at this production assessment and remind EIA staff that US oil production has been falling on average ~2% per year. But next year's high prospects for 5% growth in production due to three large new fields ramping up (Thunder Horse, Tahiti, and Atlantis) gives the EIA hope the trend of decrease could reverse. They also include a large increase in biofuels production, which is more believable to me than the production increases. It's hard for me to imagine US oil production in 2030 at a higher level than today, but we will see how new disco..

Guardian Newspapers By Sulaimon Salau Even though optimists in the energy sector have flayed the insinuations that the nation's oil reserve would dry up in the next 50 years, reports from the Department of Petroleum Resources (DPR) recently suggest that the woe may still take effect on the country if the current trend in the industry continues. Specifically, the Director of DPR, Mr. Aliyu Sabonbirni, presenting the third quarter report of the industry in Lagos recently, said the situation of event in the industry does not prove the probability of an increase in reserve, instead, daily decrease. He however attributed the downward trend to poor performance of the Joint Venture (JV) companies and the lingering Niger Delta crises, which had prevented most companies from full operations in the oil-rich region. Sabonbirni, who was represented by the Head of Gas, DPR, Mr. Billy Agha, said, "current daily oil production is 2.108 million barrels of oil per day (bopd). Current oil reserves depletion rate is 2.23 per cent based on an estimated yearly production of 730.90 million barrels. Remaining reserves' life index is 45.75 years. "Investigation conducted on reserves situation from 2002 - 2007 revealed a downward trend in the oil reserves in most of the JV companies, which accounted for 70 per cent of our nation's reserves." However, he said PSC companies and a few indigenous operators showed aggressive exploration activities that led to some reserves growth over the reviewed period..

Even OPEC's announced cut of 2.2 million barrels per day (Mbd) couldn't send oil prices higher today. Recessionary demand continued to out-muscle supply cuts as prices remained below $45 per barrel (more than $100 below the July peak). Two new reports confirming US demand woes ruled another day of oil price determination. The first report, the EIA oil inventory weekly , showed short-term demand weakness. Lower petroleum demand allowed crude supplies to increase again this week to more than 7% higher than last year's level. Distillates (diesel and heating oil) demand was down 12.8% and gasoline a smaller 1.2%. The tightest supplies continue to be in propane, which fell a bit due to 9.4% higher demand than last year. Jet fuel demand was down ~12% as fewer people are flying this December. The overall picture of ~5% lower demand remains. The second report, an early release of the EIA Annual Energy Outlook , showed long-term demand weakness. In a big shift from last year's report, it projected US demand for oil will remain flat through 2030 — unlike the almost constant demand growth we have experienced ever since oil's North American discovery in ~1860. While it does project some increase in liquid fuel demand over the next 22 years, the EIA believes that incremental demand will be met by increasing biofuels supply [Stay tuned for more dramatic details about the Annual Energy Outlook in the days ahead]. Additionally, OPEC's announced cut, while a record amount at 2.2 Mbd, i..

This is the second part of a two part series about U.K. natural gas. In the first part of this series, I presented a historical look at natural gas supplies in Europe, with a focus on the United Kingdom’s (U.K.) sources of natural gas supplies. In this second part, I present the results of simulations of the U.K. natural gas supply and demand situation for the remainder of this heating season. The results of these simulations are quite alarming: it appears that there is a significant chance that the U. K. will run short of natural gas in storage before the end of winter. If the U. K should run short of natural gas in storage, the U. K. will need to get along with only its on-going sources of natural gas. These are gas pumped from the U. K. continental shelf, pipeline imports, and imported liquefied natural gas (LNG). Recently, these sources have totaled about 300 million cubic meters a day (Mcm/d). Cutting back to this level of consumption may be difficult, since the shortfall is likely to exceed interruptible supplies, especially during cold weather when demand may exceed 450 Mcm/d according to National Grid. There is still considerable uncertainty in precise amounts because demand may vary due to economic conditions and the weather, and supply may vary because of changes in production amounts or imports. The primary reason for the likely shortfall in natural gas is the continued decline in production from the UK continental shelf. Production has declined in each of the l..

As OPEC's members and friends meet in Algeria to agree on deeper cuts in oil output, the effectiveness of their actions will depend greatly on the nature of the demand slump to which they are responding. If it proves to be merely a dip in the long-term growth trend, similar to the one associated with the Asian Financial Crisis of the late 1990s, then their current decline in revenue will likely be short-lived. If, on the other hand, the response in consuming countries is similar to that following the energy crisis of the 1970s and early 1980s, then OPEC and indeed all oil producers face protracted problems. In that case, they might have to hope that the chief economist of the International Energy Agency is correct in his new assessment that the credit crisis will hasten an expected peak in global oil production, perhaps sending oil prices beyond their summer 2008 highs within a few years. Although the narrative concerning the present financial crisis and global recession is bound up in the collapse of the US housing market and the vast global debt bubble that fueled it--a bubble that had to burst sooner or later--it seems remarkably coincidental that it would begin to deflate just as oil prices raced past their previous inflation-adjusted peak of around $90 per barrel. Because that price rise took place over several years and was driven as much by demand as by supply constraints, the resulting oil shock wasn't as sharp or obvious as the one triggered by the Arab Oil Embargo o..

The December 2008 edition of Oilwatch Monthly can be downloaded at this weblink (PDF, 1.6 MB, 24 pp). Figure 1 - World Liquids production from January 2004 to November 2008. The Oilwatch Monthly is a newsletter that is available free of charge with the latest data on oil supply, demand, oil stocks, spare capacity and exports. Readers who want to receive the Oilwatch Monthly in their e-mail box each month can subscribe at this weblink , by filling in their first name, last name, email adress and selecting Oilwatch Monthly in the mailing list box. To finalize your subscription push the 'inschrijven' button below the form. A summary and latest graphics below the fold. [break] Latest Developments: 1) Conventional crude production - Latest available figures from the Energy Information Administration (EIA) show that crude oil production including lease condensates decreased by 907,000 b/d from August to September, resulting in a total production of crude oil including lease condensates of 73.80 million barrels per day. The all time high production record of crude oil stands at 74.86 million b/d reached in July 2008. 2) Total liquids production - In November world production of total liquids increased by 160,000 barrels per day from October, according to the latest figures of the International Energy Agency (IEA), resulting in total world liquids production of 86.53 million b/d. Average global production in 2007 was 85.41 million b/d according to the IEA. In 2008, an average of 86...

The Ottawa Citizen By Dan Gardner In Greek mythology, the enchanting songs of the Sirens lured unwary sailors to shipwreck and death. Today's Sirens are the roadside signs singing sweetly, "Cheap gas! Cheap gas! Drink deeply and be at ease, weary traveller!" After suffering record-high oil and gas prices earlier this year, it's understandable that we see cheap gas as anything but a danger. We're in a recession. Times are tough. It's a relief that the cost of getting around and heating our homes has plummeted. It's also an economic stimulus at a time when we need all the stimulus we can get. But before we drink deeply and relax, let's have a good look through the telescope at what lies ahead. In November, the International Energy Agency - an intergovernmental organization which advises 28 member countries - released its latest forecast. The current global economic downturn changes the numbers, the IEA concluded, but not in a way that will make a difference in the long term. Between 2006 and 2030, the IEA predicts, worldwide energy consumption will grow 45 per cent. "Current trends in energy supply and consumption are patently unsustainable," declared Nobuo Tanaka, executive director of the IEA. "Rising imports of oil and gas into OECD regions and developing Asia, together with the growing concentration of production in a small number of countries, would increase our susceptibility to supply disruptions and sharp price hikes. At the same time, greenhouse-gas emissions would be..