ODAC Newsletter - 14 March 2008


Welcome to the ODAC Newsletter, a weekly roundup from the Oil Depletion Analysis Centre, the UK registered charity dedicated to raising awareness of peak oil.

Another week, yet another oil price record. This time crude futures touched $111 per barrel before easing, prompting the IEA to convene a meeting next Monday with oil companies and financial regulators to discuss whether the price surge reflects ‘fundamentals’. OPEC officials continue to insist that the market is well supplied and prices driven by speculation, while fresh research from Goldman Sachs argues strongly that the causes are structural.

Three years ago Goldman Sachs predicted oil might hit $105 in the event of geopolitical turmoil. In their latest batch of reports (two of which can be found here), they note that the oil price has reached that level without any major political crisis, and in spite of the gathering US recession. The soaring price has produced “no meaningful supply response” and they now foresee the “great flattening of non-OPEC supply” as a “distinct possibility within the next decade”. This is a curiously coy way to describe the non-OPEC peak that is widely expected around 2010, but it seems to be what they mean.

Meanwhile, Goldman says demand growth in China and India is ‘structural’ because prices are regulated at below-market levels, meaning the international price of oil will have to rise further to secure the necessary cut in demand in the US, Europe and Japan. Their price forecast has now risen to $95 for 2008 and $110 for 2010, and they warn that any “rebound in US growth or a major supply disruption could lead to $150-200/bbl oil.”

Goldman’s argument provides a persuasive explanation of why the oil price continues to rise stubbornly despite alarming indications that a deep US recession is imminent, including extreme volatility in the financial markets, and increasingly panicky responses from the Federal Reserve.

There is plenty of evidence this week of the ruinous impact of the oil price surge on the food supply, in combination with growing demand, inadequate harvests and competition from biofuels. This week UN Secretary General Ban Ki-moon and the British government’s new chief scientific advisor Professor John Beddington joined the growing chorus of dire warnings on hunger.

In this context Alistair Darling’s maiden budget was deeply disappointing. There were a number of welcome measures: doubling the vehicle excise duty on gas guzzlers; raising aviation tax by 10%; studies on congestion charging and whether to raise the UK’s carbon emissions reduction target from 60% to 80% by 2050. But there was also a distinct whiff of cowardice as the chancellor deferred a 2p-per-litre rise in fuel duty until October, and shelved action to force energy suppliers to do more for those in fuel poverty. Overall it was a collection of penny-ante micro measures. In the face of peak oil and climate change, once again British energy policy failed miserably to square up the enormity of the challenge.

The good news is that the recent gas standoff between Russia and Ukraine has officially been resolved. The bad news, according this week’s guest commentary, is that the issue is likely to flare up again next year when Ukraine faces much higher gas prices.


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Disclaimers

Oil

Oil Drops From Record in New York on Concern Demand May Decline

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Oil watchdog to analyse record highs

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IEA sees slower oil demand, cheap crude era dead

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Aramco man points finger at estimates

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Oil spike to last through 2008: OPEC president

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Tougher rules out for new oil sands plants, coal-fired power plants

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Iraq vows to block oil contracts signed by Kurds

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Gas

Russia and Ukraine end gas stand-off

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Gazprom: Central Asia to sell gas at European prices in 2009

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Ofgem review paves way for big shake-up

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Coal

Ministers challenged over backing for coal-fired power station

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Climate

Climate ‘threatens’ European security

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Queen tells Commonwealth: Rich nations must help poor in tackling global warming

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Economy

Darling plays it safe amid turmoil

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Central banks make $250bn move to ease the credit crisis

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Fresh fears hammer US markets

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Trichet signals alarm at euro’s rise

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Food

The New Face Of Hunger

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Hunger is set to grow as global food stocks fall

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Food crisis will take hold before climate change, warns chief scientist

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Snowstorms send food prices in China to 'unbearable' highs

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Arab world must address food crisis, says PM

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Price rises feed through to your shopping basket

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Transport

Gas-guzzlers hit with higher taxes

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Mass transit use hits 50-year high on pump prices

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Environment Agency joins Heathrow third runway critics

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Lufthansa Raises Fuel Fee 21% as Oil Price Increases

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Oil price casts a dark cloud over BA profit

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EasyJet fears damage to airlines from rising oil price

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Disclaimers

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