Lower oil prices helped bring inflation down to zero in the Euro area in May. Bond markets have in the past couple of weeks begun to anticipate some inflation growth in the US over the next two years, and the ECB and various commentators are voicing confidence that the region will return to inflation by the end of the year, after a brief deflationary period.
What role might oil prices play in inflation rates over the next few months? It’s a question that has been concerning many market watchers in recent weeks, particularly those who worry that the very low official interest rates and quantitative easing measures being taken in the world’s biggest economies could lead to high inflation in the future; or that oil prices are not reflecting a fundamental increase in demand but rather the effect of restocking. Reuters yesterday wrote about ‘alarm’ over the inflationary effect of the oil surge, as inflation expectations returned to the bond market in the past two weeks after a prolonged absence, following the sharp rise in crude prices in the past month.
When Mahmoud Ahmadi-Nejad came to power in 2005 oil executives quietly hoped the return of a hardliner would have a silver lining. They hoped his election would bring some order to Iran’s energy industry, allowing negotiations to progress after years of false starts during which energy technocrats and officials were constantly moved around, and few had the power or will to make substantial decisions.
Their hopes did not come to pass. Instead, the hardline positions in both Tehran (over the country’s nuclear ambitions and its impossibly tough contract terms) and Washington led to an environment in which not even France’s Total – the gutsiest of the big oil companies – could dare to invest.
This time around, the sentiment is a little different.
Ever since Europeans began exploring (and colonising) the roasting deserts of north Africa, esoteric-minds have pondered ways of using all that heat and sunlight for something other than producing sweat.
According to Tuesday’s Sueddeutsche Zeitung a consortium of 20 companies, among them Siemens, Deutsche Bank and Munich RE, believe that European consumers could one day swap diminishing fossil fuel supplies for electricity generated from the searing Saharan sun.
The news that TNK-BP plans to raise its investment this year is the latest sign of how oil’s recovery to $70 is reviving activity across the oil sector.
(Another indication is the rash of M&A deals or possible deals announced recently, and some successful moves to raise funds.)
TNK-BP, owned 50/50 by BP and the AAR group of Russian tycoons, last year agreed a $3.4bn capital spending budget for 2009, then cut that to $3bn. This week, it put it back up again to $3.4bn. In rouble terms, that means capital spending will be about the same as last year, even though it is well below 2008′s $4.3bn in dollar terms.
Magenn's MARS prototype
Wired takes a look at several companies working on high altitude wind turbines: ranging from floating, kite-like devices tethered to long power cables to quaint-looking power-generating flying machines.
The devices are very diverse. Magenn‘s helium-filled devices resemble floating kites; Sky Windpower has a ‘controlled helicopter’ with four rotary blades keeping it suspended. Kite Gen’s devices describe a figure eight in the air.
There’s no doubt the wind is stronger at high altitudes, and the devices would take up less ground space, perhaps avoiding one key objection to wind turbines. The attractions are many:
Wind’s power — energy which can be used to do work like spinning magnets to generate electricity — varies with the cube of its speed. So, a small increase in wind speed can lead to a big increase in the amount of mechanical energy you can harvest. High-altitude wind blows fast, is spread nicely across the globe, and is easier to predict than terrestrial wind.
Companies also claim the devices would pose less of a threat to avian life, and emit lower noise pollution than regular wind turbines.
But they’re not without drawbacks.
Commodities enjoyed a broad bounce on Tuesday, with crude rising back above $71 a barrel, as a weaker dollar lured investors back into the market and the US currency’s reserve status was questioned by Russia.
The S&P spot GSCI commodities index gained 1.1 per cent as the dollar fell against a basket of competitors. Dmitry Medvedev, the Russian president, had earlier called for the creation of new reserve currencies, comments which added to speculation over the future of the US dollar.
Nymex July West Texas Intermediate, the US benchmark, gained 71 cents to $71.33, while ICE July Brent rose 84 cents to $71.08 a barrel. WTI has now gained 53 per cent since the start of April, with Brent rising by 48.6 per cent.
Read the full commodities report
- Exxon must pay interest and own legal fees in Valdez case
Court affirms amount of punitive damages at $507m (Reuters)
- TNK-BP acts to hire foreigners
Starts to reverse exodus of non-Russian staff (FT)
- Rosatom agrees deal for 17% stake in Uranium One
Deal could boost Russian nuclear group’s international expansion plan (FT)
- Mexico may ‘go naked’ on oil hedges as crude rebounds
Latin America’s biggest oil producer profiting from hedges so far (Bloomberg)
- Climate change groups urge Australia probe into companies
Rio, Xstrata, Woodside, Caltex, Boral and BlueScope named in complaint (FT)
- Anil Ambani wins Reliance gas supply battle
Court sets 30-day deadline for deal (FT)
- Heritage nets £132m for Iraqi Kurdistan fields
Company confident region’s oil licences to stay intact (FT)
- New FTSE indices to reflect ‘green’ growth
Provider to introduce seven indices covering Aim, Japan, US and Europe (FT)
- Lex: Essential oil and Anglo American
- View of the Day: Oil reaches sticking point