Daily Archives: May 5, 2010

Kate Mackenzie


BP has had one small success in its attempt to stop its damaged oil well leaking into the Gulf of Mexico: one of three leaks has been stopped. While the total rate at which oil is leaking won’t be affected, this will make the task of containing the oil easier, and it could be a step toward addressing the many uncertainties around the operation to halt the flow — uncertainties which credit ratings agency Moody’s has picked up on.

The credit ratings agency does not quite share the confidence of the equities analysts who believe that the costs to BP are unlikely to exceed a fairly manageable $3bn – $10bn. On Wednesday, Moody’s changed its outlook on BP’s Aa1 debt from ‘stable’ to ‘negative’, citing the “considerable uncertainty” around the financial liabilities and clean-up costs stemming from the Deepwater Horizon accident.

Kate Mackenzie

Iran’s oil minister may have considered the threat of gasoline import sanctions “a joke” last month, but a Reuters report on Wednesday suggests that the country’s motor fuel imports may have drop as much as 20 per cent in May, compared to last month.

Citing industry sources, the report says companies are pulling back from Iran, amid growing talk of sanctions over Iran’s nuclear programme.

Total is continuing to sell gasoline to Iran — the company is famously bold in its dealings with politically sensitive countries — and accounting for 50 per cent of the country’s imports, according to the report. But with traditional suppliers such as Malaysia’s Petronas and Russia’s Lukoil bowing out, along with big commodities trading houses Glencore, Trafigura and Vitol, who else is filling the gap — to the extent that it is being filled?

Well, that might be China.

Kate Mackenzie

The effect of rising oil prices is continuing to attract scrutiny. Credit ratings agency Fitch is now considering which sectors would be most vulnerable – and which would benefit — if/when crude oil prices reach $150. Not surprisingly, airlines are among those worst affected, although this is partly due to their limited hedging.

Other vulnerable sectors are: trucking, chemicals (though this could be mitigated somewhat by natural gas), and some consumer goods companies. Clear winners would be ethanol companies and rail operators, which could both benefit from attempts to save on crude oil input costs.

More details after the jump.

Fiona Harvey

Environmental issues were barely mentioned for the first weeks of the UK’s general election campaign, although that changed when a couple of weeks back, when the main parties started talking about the “green” sections of their manifesto.

Many of the green promises are of the “motherhood and apple pie” variety; as noted here previously, no-one is going to come out strongly against them. Many are uncosted and others are aspirations rather than firm policy goals. There is also a frustrating lack of detail, a feature of this election.

But the green parts of the mainstream parties’ manifestos only tell a small part of the story.

Kate Mackenzie

The political and regulatory fallout from the Gulf of Mexico oil leak is yet to be worked out, but there are already signs signs that it will be substantial.

Economist Matthew Kahn, who has previously written about the effects of several other environmental disasters such as Exxon-Valdez and Bhopal on regulations, floats several possibilities for this one:

Kate Mackenzie

Senate majority leader Harry Reid reportedly said the GoM oil leaks should expedite the passage of a climate/energy bill. This makes intuitive sense – after all, we’re hearing a lot about a backlash against offshore drilling, and some politicians have come out against it.

On the federal level, however, senators such as Mary Landrieu are maintaining their pro-drilling stance, although Virginia’s senators say they agree drilling should be delayed.

Complicated the issue further is that an expansion of offshore drilling was seen as a key sweetener for winning support for the bill.

Much of the vocal opposition from congressmen is coming from those who were already against offshore drilling — such as Senators Bill Nelson, Robert Menendez and Frank Lautenberg, who are pledging to block any bill that would allow new offshore drilling. They were among the 10 senators who wrote a letter saying they would oppose the climate bill if it expanded offshore drilling. And on our rough reckoning, they would make it extremely difficult for the climate bill to pass.

Ezra Klein contends that their reaffirmed opposition to offshore drilling, combined with last week’s Reid-Graham spat, makes a climate bill less likely. Michael Levi at the Council on Foreign Relations agrees.

There is one glimmer of hope for the climate bill/offshore drilling divide, however. The Hill’s Ben Geman mentions at the end of his story:

However, a Senate aide familiar with the Kerry-Graham-Lieberman plan said it would also allow states to pass laws that block lease sales within 75 miles of their coasts.

So perhaps there is a get-out clause there — if, say, Virginia’s senators Mark Warner and James Webb, thought to be likely supporters of a climate bill, were sufficiently enraged to block the bill based on offshore drilling provisions. Both are traditionally supporters of offshore drilling, however, and have only talked about delays and investigations, not an outright pullback on drilling.

Then there’s still the problem of a disgruntled Senator Lindsey Graham. On balance, the climate bill may not be in much more trouble than it already was. But that was fairly serious.

Related links:

Has the White House painted itself into a corner on climate change? FT Energy Source
US climate bill obstacles: The 10 anti-drilling senators, and more - FT Energy Source

Kate Mackenzie

- The BP oil spill blame game

- US exempted BP’s GoM drilling from environmental impact study

- Did a climate bill just get less likely?

- Industry leaders more open to energy descent issues

- The undying myth of US crude exports

- The oil spill’s ripple effect

Kate Mackenzie

- Obama backs call to raise BP liabilities cap - FT

- Louisiana acts to protect its coastline - FT

- Congress turns up heat on BP - FT

- BP counts cost of clean-up, and blow to brand - FT

- Statoil profit triples, beats estimates – Bloomberg

- Transocean prepares for lawsuits - FT

- BP attaches shut-off valve, begins shipping containment structures – NOLA.com

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