Daily Archives: April 30, 2009

Petrol prices will need to rise to “around £5/litre [at 2007 prices]” in 2050 if the UK is to meet its carbon targets, suggests the author of an independent report on the UK’s future energy system.

The report, produced by the UK Energy Research Centre, concludes that for the UK to emit 80 per cent less CO2 in 2050, oil use must be virtually eliminated and the electricity sector fully decarbonised. To achieve this will require a high and stable carbon price of around £200/tCO2 at 2007 prices by the middle of the century.

Kate Mackenzie

As many commentators have noted, oil has been staying close to the $50 mark for several weeks now. Inventory concerns, the US dollar and of course the big question of demand are all moving the price, but even swine flu fears haven’t caused it to deviate for long.

These charts from Capital Economics show how much oil price volatility has come down, after spending much of the past seven months at very high levels.

Kate Mackenzie

And once again crude prices are the key culprit:

The largest impact on profits came from falling crude oil prices, which dropped from about $90 in the first quarter of last year to about $40 in the equivalent period of 2009. That cost Exxon $4.4bn of profit, with a further $500m reduction coming from lower natural gas prices.

Exxon seems to have been less successful at ‘driving deflation’ into its supply chain, which BP has done, with its unit costs were 11 per cent lower in the first quarter, while Shell says some of its costs are down 15 to 20 per cent. Exxon’s costs rose by £300m.

However unlike BP, which has frozen its dividend, Exxon raised its dividend by 14 per cent on the previous year.

More on Exxon’s first quarter results on FT.com

Kate Mackenzie

How would the world adapt to the scenario outlined in Nature‘s two studies published today? Both say the world has a total ‘carbon emission budget’ of 1,000bn tonnes of carbon.

As Fiona Harvey reported in today’s FT:

To remain on track with this “carbon budget” Canada would have to leave its oil sands untapped and Saudi Arabia would need to leave most of its oil reserves in the ground to avert disaster.

So, what now?

Fiona Harvey

So now we know how much carbon we have left. Researchers at Oxford University in the UK and the Potsdam Institute in Germany, with contributions from other renowned academic institutions, have calculated the global “carbon budget” - that is, the amount of greenhouse gas that we can spew out before causing catastrophic and irreversible changes to the climate.

They report on their work in the prestigious peer reviewed journal Nature.

Kate Mackenzie

On FT Energy Source:

Will US natural gas recover soon? The bears are out in force

Obama’s first 100 days, through green-tinted glasses Environmentalists’ assessment

Shell, BP and the increasing cost of inventory The effect of different methods

Elsewhere:

Gas: Pipeline politics revisited: The US seems to want to take down the temperature on European gas transit politics, talking down both Nabucco and South Stream (Oil and Glory/Newsweek)

Cars: Running on air A cheaper way to increase fuel efficiency in cars: regenerative braking could make ‘air power’ useful for city driving (Economist)

Efficiency: Four simple actions that reduce greenhouse emissions – and one that doesn’t really (David MacKay/Without Hot Air blog)

Credit: Credit quality slips further in oil and gas sector More negative ratings actions are likely, especially on speculative grade (BB+ and lower) companies, says S&P (BusinessWeek)

Trade: US to blacklist Iran’s petrol suppliers Proposed bill also targets oil majors that do business in Iran (The National)

Nuclear: Nuclear solutions come with a huge price tag Some states have begun altering budgets so that residents begin footing the bill before construction even begins (AP)

Kate Mackenzie

We wrote last week that research from BarCap suggested there may be some cause for optimism at least on the global LNG glut, because prices in Europe are steady and there is available regasification capacity storage there.

But sentiment in the US natural gas market remains grim.

Kate Mackenzie

Environmentalists have piled into the rating of Barack Obama’s first 100 days. Grist.org, the US news site, is largely positive, noting appointments such as Carol Browner (special adviser on climate and energy), Lisa Jackson (head of the Environmental ProtectionAgency) and energy secretary Stephen Chu.

The $62.2bn of direct spending and $20bn in green tax incentives in the green stimulus package are highlights for the green movement, along with pledges in the budget such as reducing emissions by 83 per cent by 2050, and plans for a cap-and-trade system.

It also approvingly notes the EPA’s decision, delayed under the Bush administration, that greenhouse gases should be regulated under the Clean Air Act.

However environmentalists are not happy with Tom Vilsack’s appointment as secretary of agriculture, because of his strong support for corn ethanol which some studies have shown is no better in terms of carbon emissions than gasoline.

There are also concerns the administration has been downplaying expectations for an agreement at the UN Copenhagen meeting on climate change in December. While the US representatives at a Washington forum earlier this week were optimistic, other countries – while impressed with the change in tone – were reserving their judgment until later in the year.

Related links:

Obama’s green achievements (Grist.org, 29/04/09)
Climate talks: what India, Brazil and China want
(FT Energy Source, 29/04/09)
EPA decision: big news, but the real impact is some way off
(FT Energy Source, 17/04/09)

- Climate-change scientists warn of looming disaster
Studies say little chance planned emission cuts can curb global warming (FT)

- Shell follows BP with 58% first-quarter fall
Chief executive says he will cut jobs this year (FT)

- Shell chief ponders whether or not to invest
Jeroen van der Veer discusses his final challenge (FT)

- Deals to bring expansion of UK nuclear energy
RWE and Eon buy sites to build nuclear reactors (FT)

- Australia environmental body conditionally OKs Chevron’s Gorgon project
Approval clears key legal hurdle for expanding LNG facility (Reuters)

- Gas ‘a big winner’ is US cap and trade passes: Caruso
Former government official says coal will suffer and nuclear growth will be small (Platts)

- EIA analysis: US gasoline stocks drop on lower inputs, imports
Weekly stats show refiners throttled back output while imports fell (Platts)

- CNOOC’s revenue falls 42% as slower growth in China hits demand
Offshore oil explorer derives 93% of sales from China (Bloomberg)

- Abu Dhabi’s Mubadala appoints former BP executive
Steve Peacock to head oil and gas division (FT)

- Lex: Royal Dutch Shell
Taking shelter in its balance sheet (FT)

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