Daily Archives: March 4, 2009

Ed Crooks

Assurances from BP on Tuesday that its dividend was safe even with oil in the $45 region into 2010 received a positive reaction the following day, even if investors hoping for a dividend increase are going to be disappointed. The question now is: how many other companies can say the same?

Will low prices force non-Opec producers to shut their production and thereby involuntarily help Opec to stabilise the oil market in the short-term, bringing supply in line with falling demand?

Opec is continuing to appeal to non-member countries to reduce production ahead of its Vienna meeting late next week, but with current prices above $40 a barrel for Brent and West Texas Intermediate the answer appears to be a resounding ‘no’.

Deutsche Bank and Morgan Stanley’s research suggest that oil prices will need to drop below $30 a barrel for a relatively long period before non-Opec producers, even in high-cost provinces such as the oil sands in Canada or the North Sea, start shutting-in their output, joining “involuntarily” the cartel’s “voluntary” cuts.

Ed Crooks

Armed security service agents have raided the Kiev HQ of Naftogaz Ukrainy, Ukraine’s national gas company, in a move apparently linked to the struggle between the president and the prime minister.

Kate Mackenzie

On Energy Source today:

Hello Americas Sour

Energy companies and the polar bear

Electric cars: It’s the battery, stupid

Elsewhere:

Position yourself now for $300 crude

Cheap oil may provide more of a boost than Obama’s stimulus

Planes that exceed emission limits could be seized

Saudi Arabia’s production peaked in 2005

Texas oil and gas drilling permits fall by a third

Lack of standards could stymie smart grid

More shake-ups in the solar industry

EU fails to pledge climate aid for poor countries

Russia’s middle class didn’t benefit from oil growth; Reversal of fortune

10 hottest jobs in US infrastructure

Kate Mackenzie

A rash of reports about electric cars have coincided with the Geneva Motor Show and yesterday’s dire February figures on US auto sales (GM down 53%; Ford 48%; Chrysler 44% and Toyota 40%).

First, some unwelcome news for GM and its feted project to launch a mass market electric car, the Volt.

Some background: The Atlantic ran a great piece on the Volt last year which explains the difficulties of making an electric car for the mass market: “It’s not a program for the faint of heart” one senior engineer on the project admits. The battery alone is likely to cost in the high four figures, writes the reporter, Jonathan Rauch. “At Chevy prices, GM can expect to lose money on every Volt it sells, at least in the early going, and possibly for years.”

Heavily featured in the story is GM’s outspoken vice-chairman and Volt champion, Bob Lutz. But Mr Lutz announced his retirement last month, earlier than expected and with the Volt still in development.

As if that wasn’t enough, researchers at Carnegie Mellon say that one of Volt’s key features – running more than 40 miles on a single charge – is fundamentally uneconomic:

Kate Mackenzie

President Obama yesterday signed a memo aiming to restore elements of the Endangered Species Act that were reversed by George W. Bush, in a move likely to worry oil and gas producers.

He effectively reinstated rules that all government agencies must consult with the Fish and Wildlife Service (FWS) or the National Marine Fisheries Service (NMFS) on any actions that could affect an endangered species.

By Izabella Kaminska

There have been well documented problems in the Nymex WTI contract of late, the chief concern being the contract’s viability as a global benchmark following sharp fluctuations in its price versus other oil grades. This is  mostly due to capacity issues at WTI’s delivery point at Cushing, Oklahoma, as well as distortions created by the presence of large passive index funds and ETFs in the contract.

All of which now leads energy market price-finding agency Platts to declare this semi-defiant move against the Nymex on Tuesday (our emphasis):

Platts Proposes Launch of Major New Crude Oil Assessment for U.S. Market

New Sour Marker Would Reflect U.S. Gulf Coast, and Act as Alternative Reference to Troubled Sweet Marker

James Fontanella-Khan

Energy news from elsewhere:

- Rio boss says Chinalco deal gaining support (Reuters)

- Rio leaves door open for future BHP deal (WA Business News)

- Venezuela to cut oil contracts as prices fall (WSJ)

- India’s ONGC says selling crude at $45 a barrel (Reuters)

- BASF can’t pull out of Lyondell Chemical buyout, judge says (Bloomberg)

- Palin seeks “bullet” gas pipeline for in-state use (Reuters)

James Fontanella-Khan

Energy news from the FT:

- BP chief hints at dividend freeze
Hayward warns of ‘continued volatility’ in oil market

- Shell accepts BG Group offer for Pure Energy
BG’s stake rises to 40.7% in Pure

- EU slaps tariffs on US biodiesel
Tax ranging from E29 to E41 per 100kg

- Siemens agrees Russian nuclear joint venture
Effort to capitalise on resurgent demand for atomic power

- Argentina hold fire on grain controls
Government considering to regulate trading

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