Daily Archives: July 7, 2009

Kate Mackenzie

Commodities speculators: most of Congress hates them, George Soros criticises them, even Opec isn’t very keen.  After numerous congressional hearings over the past few years, the CFTC is about to formally consider whether it should set limits on speculative positions, particularly in energy commodities:

Our first hearing will focus on whether federal speculative limits should be set by the CFTC to all commodities of finite supply, in particular energy commodities, such as crude oil, heating oil, natural gas, gasoline and other energy products. This will include a careful review of the appropriateness of exemptions from these limits for various types of market participants.
Aggregate Position Limits and Review of Hedge Exemptions for Energy Futures Markets

Sheila McNulty

The price of oil has, as usual, been keeping everyone on their toes. But with oil prices up from recent lows, that is not an issue for the oil majors.

What might well be an issue when their second quarter results come out later this month is the refining end of the business. ConocoPhillips, the US’ third biggest oil company, said in releasing its interim results today that its refining and marketing results for the second quarter will be impacted by factors such as low worldwide distillate margins.

Kate Mackenzie

On Energy Source:

Commodities correction

Crunching the numbers on Waxman-Markey in the Senate

Using Russian hydro to power China

Markets: Oil stabilises

The climate change guide to the G8

Energy R&D spending, charted

What is the point of a gasoline tax?

Peru’s oil and gas reserves and its ‘hidden’ tribes

Elsewhere:

Global warming will see productivity drop (NY Times)

Is Chris Anderson’s ‘Free’ compatible with peak oil? (The Atlantic)

Le Monde Diplomatique looks at California’s green dream while Gregor says the state – and the entire US – faces collapse

Investors are closely monitoring the Niger Delta situation (Oil Voice)

Do green jobs pay? (SeekingAlpha)

Microsoft opens Hohm – but only to US users (CNet)

Hydropower, the forgotten renewable (Energy Outlook)

By Tracy Alloway

We like this chart from Goldman Sachs.

It shows their forecast that oil will rise to $85 a barrel by mid-January — and not a moment before!

GS WTI crude oil price forecast

In all seriousness, there’s been a step change in the commodities markets over the past week, with the US benchmark Nymex August West Texas Intermediate falling to $64.05 a barrel — the lowest in five weeks — after investors apparently (suddenly) came around to the fundamental economic realities of the market.

Kate Mackenzie

Political analysis blog FiveThirtyEight has extrapolated from the House voting patterns on Waxman-Markey to see the bill’s chances of getting a filibuster-proof 60 votes in the Senate. The Democrats now have a majority of 60 in the Senate, but FiveThirtyEight estimates nine of those – mostly from states with high per-capita carbon emissions – are likely to be ‘problematic’. In total, they put 50 votes in the ‘likely’ to ‘nearly certain’ ranges.

Nearly certainly yes – 24
Extremely likely yes – 14
Highly likely yes – 6
Likely yes – 6

Then it gets to the possibly maybes, of which there are three, including Republican Senators Snowe and Collins are likely to be crucial:

Snowe and Collins are almost certainly going to be necessary parts of any path to 60 votes and are almost certainly going to be easier gets than at least half a dozen Democrats. And I tend to think the model has erred a bit pessimistic on them here. But that doesn’t mean their votes are assured.

Adding up the Problematic Democrats (9), the Possibly Maybes (3) and the Republican Long Shots (4) would be enough to carry it.

As the site points out, the crucial vote will not be passing the actual bill but the cloture, or filibuster-breaking vote:

It’s not all that uncommon for a senator to vote for cloture and then against the underlying bill, or vice versa, although it seems to happen less often for major issues like climate change legislation.

Read the full post for a very clear description of their methodology.

Related links:

How can the climate bill get to 60 votes? (Five Thirty Eight, 06/07/09)

Oil prices stabilised on Tuesday after falling for the previous four sessions while base metals made modest gains and gold traded in a narrow range above $920 an ounce as concerns about the global economy’s recovery prospects weighed on sentiment among commodity investors.

Disappointing US employment data for June, released last week, has been cited as the primary cause for subsequent selling across commodity markets.

However, analysts at Goldman Sachs said the sell-off was “simply a correction in a commodity rally that had run ahead of itself.”

Goldman noted that recent economic data had, in general, been mixed, as solid industrial news contrasted with disappointment on employment.

Kate Mackenzie

Alexis Madrigal has posted two interesting graphs of US R&D spending:

First, within energy:

Then, in a wider context:

Both are from a report by Pacific Northwest National Labs – which Madrigal also posts in full.

Don’t feel too bad if you’re in the US, though: few OECD countries, it seems, can compete with Japan:

(This one is from a European Commission report, based on IEA data; the EU refers only to the EU17 and there are a few bits of data missing here and there, particularly for 2005, but you get the idea).

Related links:

The elusive green economy (The Atlantic, July 2009)

Kate Mackenzie

Discussion of a tax on miles driven is continuing in the US, often as an alternative to a politically unviable higher petrol/gasoline tax. But a miles-driven tax, as is frequently pointed out, might not effectively reduce fuel consumption, because it would not reward fuel efficient cars.

What is a a fuel tax, or a miles-driven tax, for? If demand reduction is the only goal, law professors Michael Levine of New York University and Mark Roe of Harvard say it could be done by giving the money back to drivers in the form of rebates. That way, average drivers would have an incentive to reduce their use. They write in the FT today:

Here is how it would work: Suppose you are the average driver, driving 12,000 miles a year in a 15 miles-per-gallon car. A $2 per gallon tax would cost you $1,600 a year. You would be unhappy about that. Sure, you would drive less if taxed and next time you would buy a car with better petrol mileage. But you would be so annoyed at the tax that you would not forgive your congressman for voting for it. But if you got a $1,600 cheque or a visible rebate on your taxes, you would understand that you were even: you might even think that with a little life adjustment, you could beat the game and come out ahead.

Your rebate would not change if you used less petrol. So you would have an incentive to keep some of that $1,600 by driving a little less often in a more fuel-efficient car. The country would import that much less oil, produce less carbon dioxide and get that much more freedom to manoeuvre in the international arena.

Heavy drivers, such as truckers and taxi drivers, would get bigger rebates. The auto industry would see new  opportunities from demand for smaller, cheaper cars. This, they say, would persuade three of the four groups most opposed to such a tax: consumers, politicians, and the auto industry. The energy industry would just have to be outnumbered for it to work.

Related links:

Fuel tax could be replaced with by-the-mile road tax (McClatchy, 01/07/09)
Rises in petrol tax ‘not feasible’ (FT, 28/05/09)

James Fontanella-Khan

Rio Tinto sells packaging assets for $1.2bn
Latest move by the miner to pay down debt (FT)

CNPC eyes $14.5bn bid for Repsol YPF stake
CNPC, Repsol executives in informal talks (Reuters)

Group urges cut in greenhouse gases
Greenland Dialogue calls would require India and China to cap growth from 2020 (FT)

Comment: How to make a petrol tax politically viable
Michael Levine of NYU and Mark Roe of Harvard propose a way to reduce demand (FT)

Interactive map: Brazil a model for modern energy
LatAm giant is set up to deal with the energy challenges (FT)

Jordan seeks oil riches from shale deposits
Oil wealth can be a mixed blessing (FT)

India plans oil pricing group, reintroduction of gas tax holiday
Government to set up an expert group to advise it on pricing (Platts)

Scotland lures ‘green’ computer centres
Lockerbie Data Centre plans to invest £800m (FT)

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