Number of the week:
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A couple of novel proposals to climate change dilemmas came out this week:
First: one that seeks to address those difficult moral and philosophical questions of how developing countries should be expected to cut emissions. These countries point out that their wealthier peers got rich by using lots of fossil fuels without regard for the cost of emissions; is it fair that their own economic development should be burdened with the higher costs of making their energy use cleaner and more efficient?
It is intuitively fairly easy to argue that speculators drive up prices and create volatility: it falls naturally into a sort of good guys/bad guys narrative where the speculators make commodities more expensive for the ‘commercial’ participants, such as oil companies, airlines and manufacturers and those who service them.
The main defence of speculators, for those who haven’t heard, is that commodities users who want to hedge their exposure to future price volatility actually need the speculators – otherwise, who else is going to take the bets required for those hedges?
Interestingly, the CFTC’s own research has so far failed to find evidence that speculation causes price shifts. Read more
The meeting of the G8 and the Major Economies Forum has been derided as a failure in the environmental campaigning community and among non-governmental organisations.
But this is not very fair. Anyone who expected a breakthrough at this meeting on the vexed issue of 2020 targets for emissions cuts, or the question of financing from rich countries to help poor nations cut emissions and deal with the effects of climate change, was deluding themselves. It is too early in the process for these to be decided.
The fact that the meeting did not agree these things is not surprising and should not badly affect progress on these issues before Copenhagen in December. Read more
Respected UK economist Nicolas Stern has joined the Global Carbon Capture and Storage Institute, which was established in Australia earlier this year. This is not only a win for the carbon capture movement but also something of a coup for Australia’s prime minister, Kevin Rudd. The joint announcement with President Obama proved a hit back home for Rudd (though with some outlets more than others).
But as news website Crikey points out, it is one not entirely without self-interest; Australia is after all a big exporter and consumer of coal, and comes third after China and the US in the global production ranks.
And it is also welcome politically. Read more
Oil retreated below the $60 a barrel mark on Friday as crude’s recent weakness slump continued unabated.
A mildly bullish mid-term outlook from the International Energy Agency did little to lift sentiment.
The IEA, the energy watchdog of the developed world, said it expected global oil demand to rise by 1.7 per cent next year as economic activity is rekindled, with demand coming mainly from developing economies.
Wednesday’s US inventories data showing large increases gasoline and distillate inventories continued to drag on the market. Read more
Desperate bulls won’t get much relief from the IEA, which has kept its 2009 oil demand growth forecast steady.
However its latest monthly oil market report is rather more optimistic on 2010; the demand forecast was upgraded from 1.4 per cent growth to 1.7 per cent, making next year look rather positive:
If you think it looks too optimistic, however, the IEA points out that the 2010 forecast is based in part on a rebound from a sharp fall in 2009. Read more
Refining is becoming an increasingly problematic segment for the US oil majors. ConocoPhillips warned earlier this week in its interim report that its refining segment suffered difficulties in the second quarter, and now Chevron has confirmed the trend.
In announcing its interims, the US’ second biggest oil company said its refining profits were being squeezed by higher crude prices and the weak demand for petrol and diesel. Refiners are being forced to pay more for rising crude, but cannot pass that rising cost onto customers when demand is low. Read more