The world’s biggest oil companies this year have cut back investment far less than had been expected even though oil prices have fallen by more than half because of the global recession, a new study shows.
Ernst and Young says that the main state-controlled national oil companies (NOCs) had kept investment largely steady compared with last year. Meanwhile, improving terms for equipment and services could mean big international oil companies, which cut investments, get more for their 2009 budgets even though they are smaller than 2008.
In total in 2009 the largest NOCs plan to invest more than $275bn, while big international oil companies have cut their expenditures to $100bn, from the $122bn they invested last year. The national oil companies’ investments were boosted by the $28bn from Brazil this year, to develop its huge offshore reserves, and the the $42bn that China’s CNPC will spend as it continues to rapidly build up its capacity and access to future reserves.
Robert H. Frank, an economist at Cornell University, has written a defence of carbon offsets, pointing out that it’s actually a good way to reduce emissions:
A New Yorker may worry, for example, that the diesel fuel burned to ship California-grown tomatoes to him in winter will accelerate global warming. But suppose he would be happy to pay $10 more than the cost of shipping those tomatoes rather than eat locally grown root vegetables nine months a year. That would buy more than enough carbon offsets to neutralize the greenhouse gases emitted by shipping the tomatoes. So it would be much better, for him and the planet, if he bought offsets and ate winter tomatoes.
Frank points out that the approach of setting emission limits and then auctioning off allowances for the prescribed level of emissions worked effectively to lower sulphur dioxide levels in the 1970s under the US Clean Air Act. “As people learn more about such an approach, they seem less likely to oppose it,” he writes. Read more
Not so far.
The contribution of the last oil price spike, which peaked last July at $147, towards the depth of recessions seen around the world today is not exactly a widely-held view, but as we’ve written previously, it’s gaining momentum with several economists now saying there does appear to be some evidence for it. Opec likes to say it has helped the world’s economy through lower oil prices during the recession.
The rapid rise of oil prices in recent weeks – and particularly in recent days – poses the inevitable question of what it will mean for the world economy – and a couple of SeekingAlpha have already worrying about it.
Today’s prices (so far at least) don’t seem to be a cause for concern. Merrill Lynch/Banc of America’s Francisco Blanch suggested last week that up to $80 would be tolerable for OECD countries, and that above that, Opec was likely to increase production, as it now has spare capacity. Read more
Crude oil and gold prices soared on Monday as the weakness of the US dollar, which hit a five-month low against the euro, and signs that the worst of the economic crisis, particularly in Asia, is behind, prompted investors to buy commodities.
On the energy market, Nymex July West Texas Intermediate rose to a seven-month high of $68.29 a barrel, up $1.87 on the day and more than double this year’s low of $32.7 a barrel set in mid-February. ICE July Brent rose $2.01 to $67.54 a barrel. Read more
The Washington Post has an interesting piece on Barack Obama’s interest in energy issues prior to the election. Jason Grumet, executive director of the National Commission on Energy Policy, described a meeting back in the winter of 2005:
Grumet met often with members of Congress; he would tell them that doing something about oil consumption meant taking on the auto industry, raising fuel efficiency and then not seeing much benefit for a decade or so. At that point, he said, “I’d get the yawn, the glance at the clock, and was told, ‘Thanks very much, I’ll tell my staff person to get in touch with you.’ ”
But Obama was different, he said. “If it was going to take years to bear fruit, his response was, ‘We’d better do something now.’ I was like, ‘Wow.’ “
On July 8 last year, while on the campaign trail, Obama reportedly met with ‘top executives from three utilities and two oil companies, the chief energy economist of an investment bank, a climate scientist, a California energy and environment expert, an oil consultant-historian, and several campaign staffers’. He reportedly knew there was a moral case for reducing the country’s dependency on fossil fuels, but wanted to find a political and economic case too. He left the room telling his aides ‘this stuff needs to pop more’. Read more
- US energy braced for hurricane pressure
Rising reinsurance rates have been left many with no cover (FT)
- European greenhouse-gas emissions fall for third year
EU positioned to meet its reduction targets under the Kyoto protocol (Bloomberg)
- Santos welcomes discussions over coal bed
Australian group welcomes ‘collaborative’ talks with rivals (FT)
- Total says new discoveries can beat north sea field decline
Move to challenge top-ranked BP on its home turf (Bloomberg) Read more