oil prices

  © Samuel Kubani/AFP/Getty Images

There were two contenders for this year’s award. The most obvious, and certainly the man who has won the most coverage in this (and every other) publication, is Vladimir Putin. Mr Putin has certainly been highly visible, but he has actually changed very little in the energy market. Russian gas still flows to Europe and to Ukraine, helped by western payments of outstanding debts. Europe may be rethinking its energy mix and opening new and more diverse sources of supply, but any change will be very gradual. Russia will trade more with China and India, but that was coming anyway and is a natural and logical balancing of supply and demand. Read more

As Martin Wolf has noted in the Financial Times, world oil prices have fallen 38 per cent since the end of June. A Martian listening to George Osborne’s Autumn Statement would have no idea of this. For consumers lower oil prices can have positive effects but for mature producing provinces they are very damaging and could be fatal.

Mr Osborne proposed a cut in the supplementary charge on oil company profits by 2 percentage points from 32 per cent to 30 per cent. There is to be a “cluster” area allowance to help the development of small fields which sit next to each other. The ringfence expenditure supplement is to extended from six years to 10. Wow! That will really keep the investment flowing. Read more

One of the most exhilarating aspects of working in the energy business – at least for a humble economist such as me – is that companies think and act on a timescale measured in decades. Projects are built to last for 30-40 years, and often longer still. This is in sharp contrast to the government where timescales are measured in hours and where long-term means the not-too-distant horizon of the next election. It is also in contrast to sectors such as telecommuications where the pace of change is so fast that thinking more than five years ahead makes no sense. But, as the current slide in oil, gas and coal prices demonstrates, a long-term perspective does not make investment judgments easier.

Most oil and gas fields, coal mines, nuclear power plants, wind farms and other energy sources are designed to last for decades. The construction time can be long: a liquefied natural gas plant can take six or eight years; a new nuclear power station a decade or more especially if the technology is unproven or excruciatingly complex. Payback only comes when the plants have been on stream for several years. Beyond that, however, the operating costs are usually low and the cash flow is strong and secure. Or, at least it should be. Read more

BP oil platform in the North Sea  © Reuters

After 40 years of production that far exceeded original expectations, the North Sea oil and gas industry is in serious jeopardy. At the beginning of the year, there was a degree of optimism following Sir Ian Wood’s report and the establishment of a new, more interventionist regulator considered capable of driving a further wave of activity. But with the fall in oil prices over the past four months, the mood has changed dramatically. Read more

Nowhere is the failure of the talks between the international community and Iran over Tehran’s nuclear programme more welcome than in Riyadh. A fudged deal would have given legitimacy to the government in Tehran and confirmed the weakness of the strategic alliance between Saudi Arabia and the US.

More important still, it would have raised the prospect of the Saudis having to make serious cuts in oil production and exports to support the price of the output from Opec, the oil producers’ cartel. These are cuts the kingdom can ill afford. But, sooner or later, Iran will be on its way back into the oil market. Read more