Number of the week:
The number of WTI crude oil contracts that the Deutsche Bank’s Powershares DB Crude Oil Double Long may end up liquidating on September 9 – according to, ah, Deutsche Bank analysts
Image of the week:
Natural gas storage trends, from the EIA
Quote of the week:
“If needs be we are prepared to walk out of any negotiations that threaten to be another rape of our continent.”
- Ethiopian Prime Minister Meles Zenawi, who will represent the African Union at the UN climate conference in Copenhagen.
A diverse bunch of economists, commentators, free-marketers and even Exxon’s chief think that a carbon tax is better than a cap-and-trade scheme. The argument mostly goes that it is simpler, cheaper to administer, and by providing more certainty over the price of carbon, it gives businesses a stronger incentive to invest in low-emission technologies and infrastructure.
The problem is, the idea of a whole new tax is basically a political ‘third rail’ – and talking about externalities won’t very likely reverse that. But France is planning to introduce a carbon tax anyway. Well, perhaps.
Saudi Arabia’s prince Turki al-Faisal is not impressed by talk of energy independence in the US.
Reuters, via Yahoo, quotes an article Prince Turki wrote for Italian newspaper Il Sole 24 Ore, which the newswire says was translated into Italian (and then, presumably translated into English by Reuters).
Anyhow, here is their grab:
“There is no technology on the horizon which can replace oil to satisfy colossal needs of U.S. industry, transport and armed forces. Any future scenario will be characterised by mix of renewable and non-renewable energies whether you like it or not,” Turki said.
Update: As commenter -jhl- points out, it is quite similar to Prince Turki’s much longer article in Foreign Policy’s oil edition published two weeks ago. In it, he points out that the US and Saudi Arabia are interdependent, and says Saudi Arabia has made great efforts to keep oil supplies adequate and affordable:
This realization need not strike fear into the hearts and pocketbooks of Americans. Saudi Arabia has a long record of specific actions that prove its strong commitment to providing the world with stable energy supplies. We have consistently pushed for lower prices than any other OPEC members have, and we sharply increased supplies after the Iranian Revolution, during the first Gulf War to replace the loss of Iraqi production, and immediately after the Sept. 11, 2001, terrorist attacks – all in order to calm jittery global markets.
Does Saudi Arabia still matter? (Foreign Affairs, 2002)
We now have the results of the study by the Copenhagen Consensus – a group of economists brought together by Bjorn Lomborg, author of The Sceptical Environmentalist – showing which options for averting dangerous climate change they judge to offer the best value for money. Five economists – Finn Kydland, Thomas C. Schelling, Vernon L. Smith, Nancy L. Stokey, and Jagdish Bhagwati (the first three are Nobel laureates) decided the rankings.
Here are they are in full:
1. Marine Cloud Whitening Research – methods for increasing the reflectivity of clouds, for instance by spraying seawater into the air. Whiter clouds would mean more of the sun’s rays reflected back into space, but some scientists fear it could cause unintended consequences such as a lack of rainfall in regions such as the Amazon.
2. Energy R&D – we need much more research into new forms of energy, the group concluded.
3. Stratospheric Aerosol Insertion Research – shooting particles such as sulphates into the highest reaches of the atmosphere. This would mimic the actions of volcanoes, which are known to cool the climate as the particles they send into the atmosphere reflect sunlight away from earth. But would it also cause acid rain? Or changes to rainfall patterns?
4. Carbon Storage Research – the science of capturing and storing carbon dioxide is still in its infancy.
Amid the coverage of Brazil’s new oil legislation earlier this week, we noticed this at the end of an Oil & Gas Journal report: a Brazil-based Credit Suisse analyst, Emerson Leite, revised down estimates for oil in the Santos presalt basin from 50bn to 28.2bn barrels.
According to Leite, the revision was necessary because the region is becoming clearer as more wells are drilled. He noted that in July two wells, drilled respectively on BM-S-22 and BM-S-52 blocks, turned up dry.
“The market tends to get used to more dry wells in the subsalt, given that no exploratory area has a rate of 100% success,” he said.
Libya’s decision to require foreign companies to appoint Libyan chief executives to their joint ventures will come as unwelcome news to oil and gas companies investing there – if the past few weeks haven’t already done so. The country has held four bidding rounds for its substantial oil reserves since UN and US sanctions were lifted earlier this decade, but the furore over the transfer of Lockerbie bomber, Abdul Baset Ali al-Megrahi, from Scotland to Libya highlights the political delicacy for oil companies doing business in Libya.
In a striking example of this, The Times reports today that a consultant for BP spoke to British Justice Secretary Jack Straw on the subject in 2007 – with BP reportedly confirming it did raise concerns over delays in progress of a prisoner transfer agreement.
Oil groups face Libya ultimatum
Country rules foreign joint ventures must have local chiefs (FT)
Lamy warns of risk to Doha if climate talks fail
‘Relying on trade measures to fix environmental problems will not work’ (FT)
Workers in Alaska avoid chill of recession
Boom in oil and gas exploration has kept jobs in region (FT)
Opec to keep production quota steady a third time, survey shows
Urges members to complete record supply cuts (Bloomberg)
Stockpiling hits natural gas
Market plunges after weekly government report on gas inventories (FT)
Inquiry stokes unease over trading firms that shape markets
Allegations that Optiver profited by manipulating oil prices (NYT)
Another astroturf campaign
Oil lobby drums up opposition to climate change legislation (NYT)
Yamal-Europe gas pipeline back on stream
Russia’s state-controlled Gazprom resumes shipments (Argus)
Conoco’s Alaska oilfield unit wins US approval
Federal officials approve oil and gas leases in new oil-field unit (Reuters)
Spice remains confident
New environmental legislation helps generate contracts (FT)