Monthly Archives: July 2012

According to the newly published 2011 Census for England and Wales the population is 3.7m higher than it was a decade ago and several hundred thousand higher than expected.

The debate on the Census has focused on immigration policy.  But the figures also show that we have been making significant gains in energy efficiency.   

The continuing saga over the UK policy on subsidies to renewable energy supplies should serve as a warning to investors not just in wind power but across the whole energy sector.  Public policy risk is a permanent reality.  The Treasury is right to question the subsidy regime and producers have to be realistic about the nature of the business they are in. 

Why are oil prices so high?  After falling by over $30 in a matter of weeks the oil price has crept up again – back over $100 for a barrel of Brent crude.  With nothing in the fundamentals of  supply and demand to justify an increase, is the market anticipating (and perhaps over anticipating ) a crisis yet to come? 

The announcement that Areva are to join with China’s Guangdong Nuclear Power Holding Company to bid for new capacity in the UK represents a bold statement in favour of globalisation and against established judgments of national energy security by the UK government.

The traditional view has been that the UK’s strategic resources should be under the control of nationally controlled or “friendly” entities.   When BP’s privatisation in the 1980s failed in the face of a market downturn and more than 20 per cent of the shares were picked up by the Kuwaitis, Mrs Thatcher reacted vigorously and the Kuwaitis were forced to sell down.

The main concern has been Russia. 

Shares in EON have risen by 10 per cent over the last two weeks and have led a limited rally among Germany’s hard pressed utilities.  The deal reached after years of negotiation with Gazprom sets a precedent and puts a big question mark over the pricing structures and energy mix across the whole European electricity sector.

The scale of the price reduction has not been announced but was sufficient for EON to add over €1.5bn to their net profit forecast for this year.  The cut in prices is a reflection of reality.  European gas demand has been falling and supplies are plentiful.  In addition to continuing production from the North Sea , supplies from Russia, central Asia, north Africa, west Africa, Qatar and Trinidad are all competing to supply European consumers.

That is before counting any exports of gas from the US ( which are due to start in 2016 ) or any production from Europe’s extensive shale gas resources.

The reality of falling prices is a global phenomenon.