Guest post: The World Cup as a proxy for the world of energy

Soccer’s World Cup tournament is first and foremost a massively popular sporting event (despite Americans’ befuddlement). But it can also be a stage to play out all all manner of other international revalries and conflicts. Last weekend it was a sort of proxy for the BP/U.S. government conflict (it ended in a tie which was more like a defeat for the U.K.).
But Matt Smith, a commodity analyst at Summit Energy and author of the Energy Burrito blog is playing out the World Cup through the lens of the energy complex. In this guest post he breaks down the quarter-finals, with the semis and final to follow in coming posts.
So let’s play:

brazilvsnetherlands

Matt Smith/Summit Energy.

Emerging markets vs. European power markets.

Brazil v. Netherlands: The first quarter-final will see Brazil pitched against the Netherlands. Brazil represents emerging markets and the BRICs (= Brazil Russia India China). Brazil and Russia are both resource-rich countries in such commodities as steel, iron ore and crude oil, while India is set to become the most highly-populated country in the world in the next ten to fifteen years, surpassing China.
And while on the subject of China, their economy has grown 20% since the start of the global recession back in 2008 – a pretty astonishing feat. As for the Netherlands, their footballing past has a rich tapestry of great players, who have had varying influences on the Dutch team (from Ruud Van Nistelrooy to Ruud Gullit, from Johann Cruyff to Marco Van Basten). So for this energy-specific tussle, the Netherlands represent European power markets, as they too have varying influences pulling them in different directions every day; one day prices may move due to carbon pricing, the next coal, the next natural gas, and the next day, crude.

However, facing the mighty super-samba-ing Brazil, Netherlands falls short, and Brazil progresses to the next round.

argentinavsgermany

Matt Smith/Summit Energy.

Crude oil vs. Efficiency.

Argentina v. Germany: The next quarter-final sees Argentina representing the big bad daddio of the commodity world(tm) – crude oil. Crude, like the Argentinean team, has strong forwards (like Lionel Messi, Carlos Tevez, etc). Current pricing for crude is around $77, while forward-pricing is much stronger (July 2011 = $84). Also like Argentina, crude oil plays aggressive; we saw prices run up from $32.40 in January 2009 to finish the year at $80, as risk appetite returned and aggressive buying of crude began post-haste. So in summary, Argentina = not defensive and not for the faint of heart.
Their opponents in the quarter-final is Germany – arguably the most efficient country in the EU, so they represent energy efficiency.
When the ‘green revolution’ started, the consensus was that companies would illustrate their efficiency by using green energy or buying green credits. However, as this has played out, energy efficiency has been most successfully achieved through cost-cutting. This has been done by being smart about how to use energy, when to use energy, and why to use energy at certain times. (hence the smart car analogy). But pitched against the big bad daddio, however, Germany doesn’t stand a chance, and Argentina moves onto the semi-final.
And we move onto the big one….

francevsengland

Matt Smith/Summit Energy.

Ok, this one’s got nothing to do with energy, just Matt Smith’s sense of national pride.

France v. England: Okay, two points to make here (from a Brit’s perspective) : 1) Zinedine Zidane’s headbutt in the last world cup final, and 2) Thierry Henry’s handball in the qualifiers versus Ireland. Who wins this game? England. Why? Because I say so. And on we go.
Italy v. Spain: The final quarter-final sees two titans of Europe face each other: Italy versus Spain. Italy represents transportation, as it makes up a large portion of any country’s total energy consumption. For example, approximately 30% of Italy’s energy consumption is accounted for by transportation. In the commuter-driven society of the US, this number is even higher, at approximately 40%. But that’s enough about Italy, because Spain is where it’s at. Due to their use of hydro-electricity Spain is our proxy for sustainability.

italyvsspain

Matt Smith/Summit Energy.

Transportation economy vs. Sustainable economy.

There is a voluntary global reporting system for companies to report their greenhouse gas emissions called the Carbon Disclosure Project, and through this body over 2,500 companies in over 60 countries make their emissions data publicly available. This alone illustrates that sustainability is not a fad, it is not a fashion, but the future. And that is why Spain wins their way through to the semi-finals. And that’s where we are heading next.
To be continued…..