Like Arsenal supporters, carbon prices have been depressed for several months, and arguably for several years.
The current price of carbon in the European Union’s emissions trading scheme is just above €15 – slightly higher than the €13 to €14.50 range that it has been trading in for some time. The price tested six- and seven-month highs recently, and although it is giving up some of the gains, we can expect carbon to stay around current levels for a while.
Whether prices will go high enough to spur investment in low-carbon energy, however, is another question altogether.
Environmentalists and shale gas drillers may both disagree about the level of uncertainty, but the sudden boom in shale gas drilling has raised a lot of questions about whether the horizontal hydraulic fracturing techniques used have any serious environmental consequences — questions which regulators are looking into.
One gas company, Cabot, was this month banned from drilling in Pennsylvania while it plugged three wells believed to have contaminated drinking water of 14 homes.
A Cabot spokesman said:
“It just isn’t scientifically fair to say in any short period of time that Cabot’s activities did or did not cause the methane in the groundwater,” he said.
A pioneering expert on Marcellus shale says that statement doesn’t reflect well on Cabot. But he argues the ill effects of shale gas drilling are also overstated by some.
For a long time, Total, the French oil company, has been one of the boldest of its peers when it comes to venturing to politically troublesome countries. Burma, Sudan and Nigeria are all on the list of countries in which it has investments.
The stock line has been that unless United Nations sanctions prohibit investment, Total will consider the country fair game.
As Royal Dutch Shell reports first quarter results – matching BP in comfortably exceeding analysts’ expectations – its chief financial officer Simon Henry has had some interesting things to say about the company’s plans in China.
Or rather, it would be more accurate to say, “with China”.
Both these companies reported much higher profit rises than consensus analyst forecasts had expected this week. Guess which one was overshadowed by a massive oil spill clean-up?
In fact BP’s 135 per cent increase versus forecasts of 85 per cent compare perfectly well to Shell’s 60 per cent increase versus a 30 per cent forecast.
But investors are of course are concerned about the cost to BP of containing the leak from last week’s Gulf of Mexico accident in which 11 workers are believed to have died – the fallout from which is drawing some rather ominous comparisons to the Exxon Valdez incident.
It wasn’t speculators, and it wasn’t fundamentals – at least, not short-term fundamentals.
The key to understanding what has driven crude oil prices since the financial crisis began, according to a new paper by Bassam Fattouh, is what oil market participants chose to believe about long-term fundamentals.
The Oxford Institute of Energy Studies fellow, who wrote a long paper for the world’s energy ministers last month on how oil prices (covered more briefly by us) are determined, argues that 2009 had two unusual characteristics:
- First, it witnessed the sharpest increase in spot oil prices in decades.
- Second, in the second half of 2009, it exhibited a high degree of relative stability despite a very uncertain and volatile global economic environment.
So, how did the stability arise after the tumultuous events of the previous months and years? And what are traders choosing to believe in 2010?
- Safety lessons in a dangerous industry
- Potential safety violations found in eight of 10 recent offshore fires
- Oil rig cook haunted by nightmares since blast
- Rising costs and rising risks of oil exploration
- Global downturn ‘cushioned peak oil’
- Obstacles faced by Mediterranean Desertec project
Senior US administration officials met today with BP’s top leadership – including group chief executive Tony Hayward – to discuss the response to the growing crisis from the oil well leak in the Gulf of Mexico. BP has been pulling out all the stops to contain the leak from the rig that caught fire and sunk last week, but officials said it could be 90 days before it is stopped. A few soundbites from the press conference today with US Coast Guard Rear Admiral Mary Landry:
If we don’t secure the well, this could be one of the most significant spills in US history…The risks are serious….We have not had success in securing the source…We don’t know of another spill this deep…This is quite unique.
Indeed, BP has been spending $6m per day to contain the leak, estimated at about 1,000 barrels per day, as it moves closer to shore. The authorities said it was about 20 miles from the shore on Tuesday. For the next few days, given wind and current patterns, the spill should not hit the shoreline, but the authorities are not sure what will happen after that. And they are clearly getting nervous. The meeting with BP was a signal. But the authorities did not stop there.