Drumbeat: December 8, 2010

Jeff Rubin: What will 2011 bring? Triple-digit oil

The strongest manufacturing numbers coming out of the Chinese economy in a seven-month period, coupled with plunging oil inventories in the world’s largest energy consuming economy, have sent oil prices to a 25-month high. With no let-up in China’s fuel demand, the world should be looking at triple-digit oil prices again within a quarter.

That may come as a shock to those who thought the bloated oil inventories that came in the wake of the last recession would provide a buffer against future oil price spikes. Suddenly, that buffer has literally gone up in smoke.

North America: The new energy kingdom

The American Petroleum Institute reports that the United States produced more crude oil in October than it has ever produced in a single month, “peak oil” or not.

This reversal of trend helps explain why U.S. domestic production for the year will be 140,000 barrels a day higher than last year (which was 410,000 barrels a day higher than 2008). Although the U.S. Energy Information Administration (EIA) says U.S. production will decline next year, who knows?

Could these numbers reflect the beginning of the end for U.S. dependence on Mideast oil?

Oil Falls a Second Day, Dropping From 26-Month High on Europe Debt Concern

Oil declined after breaking through $90 a barrel yesterday as on concern Europe’s debt crisis will hurt fuel consumption, and after an industry report showed U.S. gasoline supplies surged the most since January.

Futures fell a second day as traders secured profits from a rally to $90.76 a barrel, the highest in 26 months. The dollar strengthened after European ministers ruled out immediate aid for debt-ridden Portugal and Spain, dulling investor appetite for commodities. The American Petroleum Institute said gasoline stockpiles increased 4.8 million barrels last week.

Is Another Oil Spike Upon Us?

Once again Goldman Sachs has lifted its oil price forecast into triple digits. GS is not forecasting oil to reach US$100 in 2011, it is forecasting oil to average US$100 in 2011. To put that into context, oil is currently around US$90 but the 2010 average to date is only US$79. In other words, oil may yet spike in a similar fashion as it did in 2008.

OPEC has been down this road once before

Just a few days before OPEC ministers gather in Quito, Ecuador, for their final meeting of the year, crude is again hovering near US$90 per barrel. Could this be a replay of the last quarter of 2007, when crude rose 19 per cent in three months from about $80 in early October to more than $95 by the end of the year?

So far, the trading pattern looks similar.

OPEC to Maintain Quotas as Crude Exceeds $90

(Bloomberg) — Oil’s rally to a more-than-two-year high is unlikely to coax OPEC into raising production quotas at this week’s meeting in Ecuador, as member nations consider the global recovery strong enough to withstand price gains.

Energy commodity report: December 8, 2010

Oil bears are likely to be disappointed by the forthcoming OPEC meeting, judging by comments made by oil ministers from Angola, Venezuela and Libya, which suggest that the cartel will leave its output target unchanged at 24.845mbpd. Harder to interpret are recent comments made by Iran’s representative, Mohammad Ali Khatibi, who said that in 2011, it will be natural for crude to be supplied at US$100/bbl and that it is possible that OPEC members could be forced to decrease their output in the mid-term, given that the era of producing and supplying “cheap oil” is already over. While this ties into the narrative of peak oil which has gained significant traction over the past year, most recently thanks to the IEA’s World Energy Outlook 2010 which reports that conventional oil production peaked in 2006, Iran has long been one of OPEC’s most hawkish members and has a clear vested interest in “talking up” the oil price.

U.K. Power Consumption Reached Highest Level of The Year, Grid Data Show

Britain’s power use climbed to 60,085 megawatts yesterday, the highest daily consumption this year, according to National Grid Plc data.

Power for immediate delivery traded as high as 464 pounds a megawatt-hour on the National Grid’s balancing market at about 5 p.m. London time yesterday, the data show.

Discussing Gold, Bonds, Fiat Currencies, Economics And Investing With Nick Barisheff Of Bullion Management Group

Peak oil does not mean we are out of oil it just means we’re at peak production. So as production declines and demand increases (from the emerging economies), we’re obviously going to have an increase in the price of oil which will lead to an increase in the price of everything. Apart from printing money, oil is the only thing that can cause massive inflation across the board. So as we get into those conditions, there will be a global decline in GDP. The importing countries will face an increase in trade deficits that will have to be financed, which results in more money being printed. In each of these cases we are also generating higher and higher levels of unemployment that is basically systemic unemployment.

A united front will help region take on ‘magnificent seven’

Thirty nine years after it was founded, the UAE faces two challenges on the energy front.

As Nejib Zaafrani, the secretary general and chief executive of the Dubai Supreme Council of Energy, astutely observed last week, the MENA countries need to co-operate to satisfy their future energy demands in an environmentally acceptable way.

And, as well as working with its neighbours, the UAE needs to strengthen its internal energy policy.

Govt may consider diesel price hike – oil secretary

NEW DELHI (Reuters) – India could consider raising diesel prices before planned share sales of state-run companies Indian Oil Corp and Oil and Natural Gas Corp (ONGC), Oil Secretary S. Sundareshan said on Monday.

“It is extremely difficult for the government to pass on the entire burden to the consumers. We will have to go before the Empowered Group of Ministers (EGOM),” he said.

Aramco plans early start at Wasit

Saudi Aramco plans to bring the giant Wasit gas plant on line in 2013, earlier than expected, as it speeds up gas output expansion to meet rising domestic demand.

Saudi Aramco Wants Five-Fold Rise in Gulf Petrochemical Sales by 2020

Gulf petrochemicals producers should seek to raise their sales by as much as five-fold to $200 billion a year by 2020, Saudi Aramco’s chief executive officer said today.

Cheniere Plans to Export U.S. Gas Into Caribbean Power Markets, CEO Says

Cheniere Energy Inc., the Houston- based liquefied natural gas terminal owner, said it plans to sell shale gas in the Caribbean to cut the region’s dependence on power generated from burning oil.

Jamaica, Puerto Rico and the Dominican Republic are among those that could save money by burning gas to generate electricity instead of crude oil-based products such as fuel oil, Charif Souki, the company’s chief executive officer, said in an interview in Barcelona last week.

EU Proposes Regulations Against Power, Gas Market Abuse, Insider Trading

The European Commission, the regulator for the 27-nation bloc, proposed new energy market rules to prevent insider trading and manipulation and ensure consumers pay a fair price for electricity and natural gas.

Dick Cheney and others face charges in Nigeria

Lagos, Nigeria (CNN) — Nigerian investigators say they have filed charges against former U.S. Vice President Dick Cheney and others connected to the energy services company Halliburton, accusing them of paying bribes to secure a lucrative natural gas project in the 1990s.

Cheney and nine others are accused of charges that include “conspiracy and distribution of gratification to public officials,” Femi Babafemi, a spokesman for the country’s Economic and Financial Crimes Commission, said Wednesday.

Cities seek to cut strings tying up gas money

BEAUMONT, Texas – Advances in drilling have helped American towns and cities strike natural gas, and just in time, it would appear. With many facing cash crunches, the millions of dollars they’re reaping in royalties could go toward saving public services, jobs and badly needed road projects.

Not so fast. Because of restrictions built into deeds and federal grants, municipalities can’t use most of to their newfound wealth to plug budget shortfalls.

And so, while elected officials struggle to make ends meet, the money sits there, close enough to smell but just out of reach.

Nigeria oil industry at risk despite military success

OKRIKA, Nigeria (Reuters) – Wearing sunglasses, a gold necklace, and sitting outside his home in a village in the Niger Delta, ex-militant leader Ateke Tom is happy for the army to take over what were once training camps for his fighters.

Along with other former gang leaders who accepted a government amnesty last year, Tom now finds himself working with the security forces he long fought in Nigeria’s southern oil region, trying to persuade those still carrying arms to surrender.

Nigeria: Militants claim gunfight in oil delta

WARRI, Nigeria — A militant group in Nigeria’s oil-rich southern delta says the military started a gun battle with its members despite ongoing peace talks.

The Niger Delta Liberation Force, led by a militant calling himself John Togo, says the military attacked its fighters Wednesday morning with three gun boats. The group says the attack came as it had negotiated a temporary cease-fire.

Petrochems investment ‘can tackle Gulf jobs crisis’

Investing in petrochemicals research and development is one way for Gulf countries to tackle the growing jobs crisis in the region, the chief executive of the world’s biggest oil company said today.

Pipeline a ‘hazard’ U.S. letter warns

Warning that a proposed Alberta oil sands pipeline poses “major environmental and public health hazards” to the United States, more than two dozen members of Congress are pressing the Obama administration to conduct a new eco-review of the controversial project.

Utah oil sands project draws fire

NEW YORK (CNNMoney.com) — A plan to bring the first oil sands development to the United States is drawing stiff opposition from environmentalists concerned about global warming and water use, but backers of the project insist their new process is safe.

Report Finds Oil-Drilling Inspectors in Disarray

WASHINGTON — Federal inspectors charged with ensuring the safety of offshore oil drilling are overwhelmed, insufficiently trained, work without official procedures for some of their most crucial decisions and sometimes have insufficient support from their supervisors for resisting industry influence, according to a report released Tuesday by the Interior Department’s inspector general.

Transocean oil rig suffered start of blow-out in North Sea

Drilling company Transocean had an incident on one of its North Sea rigs similar to that which caused the biggest oil spill in US history earlier this year, it emerged today.

Obama should step in over Gulf spill fund: Alabama governor

ATLANTA (Reuters) – President Barack Obama should intervene to stop the $20 billion BP oil spill compensation fund from depriving claimants of their rights, Alabama Governor Bob Riley said on Monday, calling the way the fund was operating “extortion.”

National monument status urged for Arctic refuge

ANCHORAGE, Alaska – President Obama is being urged to bestow national monument status on the Arctic National Wildlife Refuge for its 50th anniversary in what supporters say would finally put the refuge’s coastal plain beyond the reach of oil companies.

Russia looks to extend PSAs

Russia may extend production sharing agreements to new oil and gas fields, Energy Minister Sergey Shmatko said today.

Russia approves Sakhalin-1 budget of $2.7 bln for 2101

The Russian government has approved a 2010 budget estimate of $2.7 billion for the Sakhalin-1 oil and gas project, Energy Minister Sergei Shmatko said on Wednesday.

“Sakhalin-1 budget has recently been approved … at $2.7 billion. We have seriously reduced the demands of the project operator,” Shmatko told the State Duma lower chamber.

Gazprom to supply 150-155 bcm of gas to Europe in 2011

(Reuters) – Russian state gas monopoly Gazprom will supply 150-155 billion cubic meters of gas to Western Europe in 2011, the group’s export CEO Alexander Medvedev said.

Gazprom eyes Belgian storage

Gazprom signed a gas storage accord with Belgian pipeline operator Fluxys today, a move which may see the Russian gas giant take up long-term storage capacity in Belgium.

WikiLeaks list of ‘critical’ sites: Is it a ‘menu for terrorists’?

Undersea cable landings off Japan, Hong Kong, and China; vital energy terminals in Saudi Arabia, Qatar, and Kuwait; natural gas pipelines from Canada to United States population centers; transformer plants in Mexico; vaccine manufacturers across Europe.

It’s a laundry list of “critical infrastructure” – a global grab bag as big as the world ­– hundreds of sites listed in a cable marked “secret.” It was compiled by US embassies and sent to Secretary of State Hillary Rodham Clinton as a cable in February 2009 – but released over the Internet by WikiLeaks Sunday.

Upton backed for House energy panel chair

WASHINGTON (Reuters) – Representative Fred Upton was chosen by a Republican organizing panel on Tuesday to become the next chairman of the House of Representatives’ Energy and Commerce Committee, considered one of the most power panels in the U.S. Congress.

White House open to nukes as ‘clean energy’

The Obama administration may consider caving to GOP demands to include nuclear and some coal production in a “clean energy standard,” Energy Secretary Steven Chu said Tuesday.

A national “clean” or “renewable” energy standard would require utilities to purchase a percentage of their electricity from nonfossil fuel sources and is seen as one of the administration’s few options for a broad energy policy after the death of the cap-and-trade bill.

Nuclear ‘Renaissance’ Is Short on Largess

The federal aid now in place for new nuclear plants is far from sufficient for the so-called “nuclear renaissance” that backers are seeking, a panel made up of members of Congress, high-ranking federal officials and leaders of major nuclear companies agreed on Tuesday.

After a bout of power cuts, Egypt looks to alternatives

In the summer, during the heat of a sweltering Ramadan, a number of Cairo’s elite experienced something of an unpleasant surprise: power cuts.

“That was a big one actually; electricity in some high net worth parts of the city was cut, maybe two to three hours, this never used to be the case,” says Omar Taha, an analyst at the private equity company Beltone Financial.

The outages were just the latest indication of Egypt’s faltering power infrastructure. Six years of fast-paced economic growth along with a concomitant expansion of its industrial and manufacturing sector has led to demand for electricity increasing some 8 per cent a year – pushing the country’s supply of 23 million megawatts (mw) to the limit.

Egypt’s nuclear ambition reignites

Four years ago, Egypt announced it was to restart its nuclear power programme – 20 years after cancelling it following the disaster at Chernobyl in Russia.

Uranium Prices Surge on China’s $511 Billion Investment in Nukes

China’s push for energy security is igniting a boom in the country’s nuclear power plant construction, rekindling demand for uranium and leading its price higher.

Chinese Tycoon Focuses on Green Construction

CHANGSHA, China — Zhang Yue has grounded his three private jets and personal helicopter. He has stored the midnight blue Rolls-Royce stretch limousine and canary-yellow Ferrari behind the conference center he built here as a reproduction of a French palace. This past summer, he kept the thermostat in his office at a steamy 81 degrees.

Mr. Zhang has embraced frugalities like working in heat rather than turning on an air-conditioner not because of any financial setback. He still shows up on lists of China’s wealthiest entrepreneurs, with a personal fortune estimated at $850 million. But Mr. Zhang, 51, has also emerged as China’s most outspoken tycoon on environmental issues.

GM, more than a dozen companies to build 20 hydrogen fueling stations by 2015 on Oahu

General Motors is partnering with more than a dozen companies to build 20 hydrogen fueling stations by 2015 on the Hawaiian island of Oahu, ahead of the expected arrival of fuel-cell vehicles.

Hertz Puts Electric Cars on the Fast Track, Starting in New York

Early adopters unwilling to drop around $32,000 on a new Nissan Leaf will be able to rent that and several other electric cars from Hertz as soon as next week. On Monday, Hertz announced it would be adding electric cars and plug-in hybrids to its urban and college fleets worldwide, starting with New York City, where they’ll be available in Connect at Hertz car-sharing locations beginning Dec. 15.

China seeks to mine deep sea riches

Humans have long dreamt of diving deep into the oceans, but economic pressures are an additional incentive, with new world powers such as China and India showing a limitless hunger for raw materials. Mineral resources take various forms: polymetallic nodules, manganese crusts and massive sulphides, a source of lead, zinc and copper mainly produced by magma spilling out of cracks in the Earth’s crust.

Clean Energy Sector Scrambles to Save Incentives

Representatives of the renewable energy industries are scrambling to salvage what they say is a crucial federal incentive that has helped keep them afloat during the worst of the recession.

Buy Anything that Burns: Billionaires Want Coal for Christmas

About a month ago, two of the world’s richest men abruptly visited the country’s least populated state.

You probably didn’t hear about it.

With seemingly only local fanfare, Warren Buffett and Bill Gates took a one-day trip to Gillette, Wyoming, the self proclaimed “Energy Capital of the Nation.”

Change is Upon Us, Part 4: Decarbonizing Our Economy

We are at a crossroads. The future is not going to be like the past. Our economic model, which requires growth to occur through economic development, is not sustainable. Climate change is happening as a result of human industrial development. We are currently living in an age of Peak Oil, where less oil is now being produced each year than there has been in the past, since about 2005-06, despite demand generally tending to grow year by year. As demand outpaces supply, the price of oil will increase. Higher oil prices will affect everything we do, especially the way in which we grow, harvest, and transport our food.

Must We Embrace the ‘Sacred’ to Survive Peak Oil?

There’s no doubt that religion and spirituality can be a divisive subject. I’ve asked before whether green religion will sink us or save us, and suggested that preaching at people is not the best way to win green converts. A similar debate seems to be hotting up within the Transition Movement, with some people suggesting that to survive peak oil, rediscovering the sacred is not just a collective imperative—but a personal one too. In fact, say the proponents of a spiritual transition, “…if you’re not spiritually connected to the Earth and understand the spiritual reality of how to live on Earth, it’s likely you will not make it.” That kind of talk has some other people worried. Very worried.

Scarcity, Sustainability & The Illusion of Choice

Energy scarcity intrinsically implies lack of wealth, lack of abundance, not enough to go around, or a serious depletion of a finite resource. With it comes fear, the need to control what resources are available and ensuing power struggles. We are hearing more about peak oil, and that demands on current energy infrastructures in many countries are reaching their limits. Peak oil means we will approach oil scarcity at some point, perhaps sooner than we think. Within the context of energy scarcity we begin to fall apart, but not because of scarcity, but because our definitions and concepts about energy are wrong, like a bad math equation that keeps us going in circles. The oil zoo on the planet is not the prevailing equation, as it’s now frankly being shown the door and on the decline. It’s only the prevailing equation for those who continue persist on working the energy monopoly game.

O&G Book Review: Tom Bower’s Oil

John Jennings, a former Shell chairman, once remarked, “Oil breeds arrogance because it’s so powerful.” And where arrogance and power meet stand the world’s top oilmen, wielding obscene amounts of money and influence while providing the world with its most critical resource. Tom Bower’s new book details how their behavior over the last two decades has made them some of the most hated and mistrusted people on the planet, and why that has had little effect on the world price per barrel.

FREE: #1 Best Selling Amazon “Energy” Book

Author Craig Shields makes available his best-selling energy book as a free download. The book is based on interviews with 25 of the world’s top researchers, authors, analysts and industry leaders. A surprisingly large percentage of these experts point to these “tough realities” that exist in the technology migration, the economic implications, and the political issues that affect the world energy industry. Says Shields, “The truth is, the energy industry faces tough realities in several forms, not only technology readiness, but more importantly the pushback from powerful vested interests.”

Justices to Rule on States’ Emissions Case

The Supreme Court agreed Monday to hear arguments on whether plaintiffs can turn to the courts to seek reductions in emissions by coal-burning utilities on the ground that the emissions are a “public nuisance.”

U.S. and China Narrow Differences at Climate Talks in Cancún

CANCÚN, Mexico — The United States and China have significantly narrowed their differences on the verification of reductions in greenhouse gas emissions, officials said, providing hope that a United Nations conference here on climate change can achieve some modest success.

Single, Overarching Climate Pact `Unrealistic,’ Former U.S. Officials Say

A single, legally binding global climate treaty is impossible to craft and the United Nations should give up trying, focusing instead on a series of measures to reduce global warming, two former U.S. State Department officials said.

Tentative Signs of Life for Greenhouse Gas Controls

For a patient suffering from paralysis, the movement of a single finger is momentous. So, in the face of a threatened hiatus in government-led action on climate change, what the Environmental Improvement Board of New Mexico has done in the last month or so is worthy of note. It has twice approved plans to cap and/or reduce greenhouse gas emissions, most recently on Monday evening, when a plan for annual 3 percent reductions beginning in 2013 won approval in a 4-to-1 vote.

If an island state vanishes, is it still a nation?

The rising ocean raises questions, too: What happens if the 61,000 Marshallese must abandon their low-lying atolls? Would they still be a nation? With a U.N. seat? With control of their old fisheries and their undersea minerals? Where would they live, and how would they make a living? Who, precisely, would they and their children become?

The Ice Man Warneth

CANCÚN, Mexico –- As the main plenary session at climate talks here was getting under way on Tuesday, I received word that Lonnie Thompson, a longtime student of ice and climate at Ohio State University, has a paper coming out in a behavior journal, The Behavior Analyst, concluding with unusual bluntness that humanity is in deep trouble.

A warning at climate talks: Glacier melt speeding up

CANCUN, Mexico (AP) — The lives and livelihoods of people in South Asia are at “high risk” as global warming melts glaciers in the Himalayas, sending floods crashing down from overloaded mountain lakes and depriving farmers of steady water sources, U.N. and other international experts reported Friday.