After finally resolving the dispute over Kashagan (a fair result financially, although not a kind one for corporate reputations), Eni was able to move on to happier news today with its announcement of a $50m investment in to solar energy research at MIT.

Italian business leaders have long resented the fact that cloudy Germany has a much better-developed solar power sector than they do, so it is an obvious interest for a company looking for a future beyond its established strength in oil and gas.

This route is becoming a well-trodden path, with all the oil majors including BP and even ExxonMobil investing in R&D for alternative energy. The question one has to ask, though, is whether they will benefit very much from it in the end. History shows that it is hard to realise the full potential of a new business that competes directly against your traditional core activity. Just look at IBM and Xerox.

We have not yet found the Microsoft and Apple of the energy world, but somewhere, they are probably out there.

An excellent analysis of how we got to $100 oil on the website of Cambridge Energy Research Associates raises the question of how much higher prices can go, but does not answer it.

The piece appears to suggest that the “break point” for oil prices, as illustrated in figure 6 with some cute little blue figures, is about $120. At that point, factors such as the rise of energy efficiency, alternative fuels and other policy changes, as well as the economic impact, really begin to take their toll on demand.

As CERA points out, however, the average price for WTI over 2007 was a “mere” $72 a barrel; $100-plus sustained for a year or more would do much more damage to the world economy than anything we have seen so far. The break point may well turn out to be pretty close to where we are now.

Opec’s efforts to defend $100 notwithstanding, I think a slowing world economy still means we are likely to see oil lower at the end of 2008 than at the beginning.

US crude has touched $100 a barrel at last – well, just about, anyway – meaning that I have scored the first success in the FT’s predictions for 2008.

It was, of course, a very easy call to make: it was impossible to believe that there would not be some event sufficient to push a volatile oil price up the few extra dollars that it needed. As it has turned out, the assassination of Benazir Bhutto, fresh attacks in Nigeria and a weak Institute for Supply Management survey of US manufacturing have done the trick.

Behind those immediate factors, the underlying factors behind the strong oil price are well-rehearsed. Opec agreed cuts in its production in 2006 and those cuts held for much of last year, helped by the fact that some members such as Iran and Venezuela would have found it hard to increase production even if they had been allowed to. Non-Opec production has been deeply disappointing, partly as a hangover from the years of under-investment at the beginning of the decade, partly because mature areas such as the North Sea have been declining faster than expected, and partly because some oil-rich countries such as Russia have become  less hospitable to foreign investment. At the same time, demand for oil in emerging economies, particularly China and the oil producers themselves, has grown strongly.

Yet while that combination of forces sent oil from $60 a year ago to $100 today, it is hard to see it being sustained, at a time when the outlook for the world economy, and in particular the US, is so troubling. China attracts the attention in terms of the oil market, because it is the biggest source of demand growth, but the consumption of China and India together is less than half that of North America. An important question for the oil market as the year wears on will be how far China can avoid the turbulence created by the economic problems of the US. Recession in the world’s biggest oil consumer plus a slowdown in the world’s strongest-growing oil market do not sound like a prescription for high oil prices.

The only way you can realistically remain an oil bull and an economic bear – which is what the markets seem to be right now – is if you take a very negative view of the supply outlook, and the evidence to support such a view remains unconvincing. Today’s Lex column takes a timely pop at peak oil theorists, pointing out that while Marion Hubbert was right about the US, he was way off on his predictions of world output. The latest warnings about Opec’s long-run supply potential, published in Opec’s own review, are sobering, and suggest a future of tighter supplies and higher prices. But in the near term, it looks likely that demand for oil will take a hit – partly, of course, as a consequence of the high price – while supply is rising, and in the months to come we will see a retreat from $100.

The most bizarre event so far of the third Opec summit in Riyadh, which properly gets under way today, was the accidental broadcast yesterday of about half an hour of the proceedings of the private meeting of energy, foreign and finance ministers, discussing the idea of including a mention of the weak dollar in the summit’s final declaration. The footage was shown on the widescreen TV in the press room, and it is rumoured, right through the TV system in the Intercontinental Hotel, where the meeting was being held, until Saudi officials worked out what was going on – possibly alerted by wire service reports – and rushed to pull the plug.

The most sensitive comments were made by Saud al-Faisal, the Saudi foreign minister, who warned of the danger of a dollar "collapse" if the final statement mentioned the dollar. "Just indicating that we have charged finance ministers with studying this issue … would mean a decision taken by Opec would have the opposite effect and the media would pick up on this point," he said, in Reuters’ translation. "And then perhaps we would find that the dollar had collapsed, instead of us having done something in the interest of our countries."

His point was that any signs the group is further cooling on the dollar as the currency in which oil is priced – and more importantly, in which oil wealth is held – would alarm currency markets and trigger further dollar sales.

It is an embarrassing point to be caught making in public, in part because it carries a suggestion of Saudi politicians defending US interests. But in fact, defending the dollar’s value is an important policy objective for Saudi Arabia for purely selfish reasons. As Adam Robinson and Edward Morse of Lehman Brothers pointed out in a great piece in the FT last month, the weak dollar is already undermining the value of Saudi Arabia’s $800bn in dollar reserves. The Kingdom certainly does not want to weaken it any further.

The IEA could not have stage-managed a more dramatic backdrop for the launch of its 2007 World Energy Outlook. $100 oil says more about Chinese demand than a thousand forecast charts ever could. When the IEA’s Fatih Birol warns that "the wheels could come off" the world’s oil supplies, you have to believe him.

There are many good points well made in the IEA’s analysis. But there is something of a contradiction in its position: it wants oil producers, including Opec, to invest in capacity to produce more oil, while trying to persuade the world to use less of it. It is no wonder Opec is suspicious.

As Mr Birol says, however, the threat of oil shortages is fundamentally less of an issue than climate change. The world can eventually adjust to oil running out. Our chances of adjusting to a world that is six degrees C hotter do not look so good. And that, unfortunately, is about the size of the temperature increase implied by climate models given the IEA’s projections of what will happen under "business as usual" scenarios, with China doubling its coal-fired power generation capacity between now and 2030.

We should probably be grateful if the world never does get beyond 100m barrels a day of oil production, as Total’s Christophe de Margerie thinks it won’t. That would at least help keep climate change within manageable bounds. The IEA’s "alternative scenario", including more energy efficiency and renewables, needs a mere 100m barrels of oil a day in 2030, and keeps the temperature increase down to a – just about – bearable 3 degrees C. Unless we make up the shortfall from coal to liquids, of course.

After Martin Wolf put the case for the prosecution on biofuels, here comes the defence, represented by Ricardo Hausmann of Harvard. While he must be right that biofuels could play an important role in providing secure supplies and cutting greenhouse gas emissions, I thought the most telling phrase in his piece was this one: "Technology is bound to deliver a biofuel that will be competitive with fossil energy at something like current prices."

In other words, what he wants is not the environmentally and socially damaging biofuels we have today, but some ideal future biofuel that has solved all those problems. While I agree that such a fuel would be very welcome, we still have to engage with the reality of today’s actually existing biofuels.

To argue, as Archer Daniels Midland has done, that the subsidies for first-generation ethanol are necessary because otherwise we will not get the second and third generation fuels looks like a large pile of steaming biomass.

Royal Dutch Shell, in spite of some apparently disappointing progress so far, is still plugging away at second generation biofuels. It believes that current subsidy schemes actually militate against the more advanced technologies such as the production of ethanol from plant waste. (They also hold back the cheaper and greener Brazilian ethanol from potential opportunities in the US and the EU.) If the regulations encouraging biofuel use are volume-based, then fuel suppliers will always tend to go for the lower-cost option, which for the forseeable future will be conventional ethanol. A reform of the system to give rewards for cutting emissions would seem a no-brainer, but always in this area, reform is a question not of brains, but of guts.

We thought there might be some fireworks, but PetroChina’s listing in Shanghai has been even more spectacular than we expected. With a notional market capitalisation of over $1,000bn, based on the value of the Shanghai-traded A shares, PetroChina is not only the biggest company in the world by value, it is about twice the value of ExxonMobil.

Prosaic realists will point out, like the FT’s Lex column, that that valuation is as phoney as a street-market Rolex. Tight supply and frenzied demand have blown the A share price out of all contact with reality. PetroChina’s business, while impressive, is still humble in scale beside Exxon.

Yet there is still a potent sybolism in the comparison. This is an industry in which emerging market competition is stronger than ever before. Are Exxon and Chevron the GM and Ford of the next decade?

There was a flurry of excitement in the oil market this afternoon when it appeared that France had decided to release oil from its strategic reserve. The truth was less dramatic: the government was actually releasing 285,000 tonnes  – about 2m barrels – of diesel and heating oil to offset problems at two refineries, and the oil was not coming from its strategic petroleum reserve.

All the same, the story raised the question of whether, given all the talk about whether today’s oil price is a speculative bubble, US and other governments should release enough oil from their reserves to give the speculators a bloody nose. If they succeed, they can replenish their stockpiles at much lower prices.

The history of currency interventions suggests they are most successful when markets have got far out of line with fundamentals, and intervention acts as a slap in the face to bring the market back to reality. Daniel Yergin of Cambridge Energy Research Associates argues that oil prices are becoming "decoupled from the fundamentals of supply and demand." If he is right, then an intervention in the oil market just might work.

It would, admittedly, be a gamble. When all the commercial players seem to want to be long of oil, it would be a brave energy minister who decided to go short. Much better to get Opec to do the job for them. 

Our own Martin Wolf has let fly with both barrels at the insanity of  US and EU support for biofuels, using for ammunition the devastating case made by  the Global Subsidies Initiative.

When Martin, green campaigner George Monbiot and blogging "Big Oil" engineer Robert Rapier are all on the attack against a policy, it is hard to imagine that it will stand. But the farm lobbies of the US and EU alike are redoubtable opponents.

John Maynard Keynes famously wrote at the end of the General Theory: "The power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas." But he never had to try to kill a farm subsidy programme in Congress.

After holding out for a year and a half, the Chinese government has at last bowed to the pressure of the crude oil market and raised the regulated prices of petrol, diesel and jet fuel by almost 10 per cent. Beijing is worried about inflation and the discontent caused by the rising cost of living. But the combination of soaring crude prices with regulated product prices meant the refiners were losing more than ten dollars on every barrel they processed. Sinopec, China’s biggest refiner, is said to break even at a crude price of $60 a barrel; $94 must have been killing it. Many small refiners shut down altogether, and the result was fuel shortages, with reports of long queues at petrol stations and rationing  spreading from the coast across the country to the  outskirts of Beijing. Ultimately the government seems to have decided that more expensive fuel is better than no fuel at all. Taiwan faces a similar dilemma.

The effect on the world’s oil market will in the short term be to increase demand. Those refiners that were offline will probably come back up to get a piece of the pent-up demand, and they will need more crude. In the longer term, though, rising prices may take some of the edge off the Chinese market, which is currently the single biggest contributor to the growth in demand for oil. Regulated product prices are a big reason why Chinese demand has been so robust as the price of crude has soared.

If, as Econbrowser argues, the rise in the price of oil is all about the balance of supply and demand, China’s move is one step towards reining in that demand.

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