Crude oil rose, heading for its second weekly gain, as advancing equity markets restored faith in the prospect of an economic recovery.

Oil is set for a 5.7 percent gain this week. The Standard & Poor’s 500 Index has recovered 50 percent of the losses suffered after the September collapse of Lehman Brothers Holdings Inc. as a record number of companies beat analysts’ earnings estimates. German business confidence rose for a fourth month July.

“If the global destruction of the economy has indeed bottomed then so should the oil markets,” said Olivier Jakob, managing director of consultants Petromatrix GmbH in Zug, Switzerland. “The green shoots in macro inputs have not been invalidated by earnings reports.”

Crude oil for September delivery rose as much as 52 cents, or 0.8 percent, to $67.68 a barrel, on the New York Mercantile Exchange, trading for $67.51 at 9:43 a.m. in London.

Oil has increasingly moved in tandem with benchmark stock indexes. The Dow Jones Industrial Average and U.S. crude futures showed a correlation of 0.7 the past month, up from 0.06 in December, according to data compiled by Bloomberg. A correlation of 1 means the two moved in lockstep.

“The surge in oil prices has certainly been driven by equities,” said Victor Shum, senior principal at Purvin & Gertz Inc. in Singapore. “Some of the corporate earnings from the U.S. were pretty good. There are still many to come.”

Weak Fundamentals

Fuel consumption is still weak in the oil market, analysts said. U.S. gasoline and distillate fuel inventories climbed for a sixth week, the Energy Department said July 22, signaling demand in the world’s largest energy user has been slow to rebound.

“With oil prices close to $70 but products inventories in the U.S. growing week on week, the risk of a price correction, as what we saw at the start of July, is growing,” Shum said.

The Organization of Petroleum Exporting Countries will trim crude shipments by 1.7 percent in the four weeks ending Aug. 8, according to consultant Oil Movements, as refinery maintenance and faltering demand encourage members to implement supply cuts.

OPEC, a 12-member group that pumps 40 percent of the world’s oil, will reduce seaborne exports in the four-week period to 22.39 million barrels a day from 22.78 million a day in the month ended July 11, the tanker-tracker said today. It’s the sixth consecutive drop reported in Oil Movements’ weekly reports.

Brent crude for September settlement on London’s ICE Futures Europe exchange traded 27 cents higher at $69.52 a barrel at 9:01 a.m. London time.

China consumed 33.35 million metric tons of crude oil in June, which was up nearly 2.6% from the corresponding month of 2008, and the third month in a row to register a year-on-year increase in demand, a Platts analysis of official data showed July 22.

Collective crude oil throughput at Chinese refineries rose to a new high of 31.92 million metric tons in June, or an average of 7.8 million barrels per day, dwarfing the previous record of 31.19 million metric tons processed in May.

The government raised domestic fuel prices twice in June, providing refiners an incentive to step up production. The price hikes on June 1 and June 30 lifted gasoline prices by a total of Yuan 1,000 per metric ton ($17 per barrel) and gasoil also by Yuan 1,000 per metric ton ($19.65 per barrel).

Domestic crude production in June, however, failed to keep pace with the rise in refinery runs, inching up 1.8% from a year ago to 15.71 million metric tons (3.83 million barrels per day).

Meanwhile, China's year-to-date oil demand is slightly below 2008 levels, as the strength in the second quarter 2009 (Q2) could not fully offset the slump in the first quarter (Q1).

Chinese oil demand in the first half of 2009, at 186.32 million metric tons, was 0.23% below the same period of 2008, Platts estimates.

"China appears to have decoupled itself from the world's economic malaise for now, with Beijing's Yuan 4 trillion stimulus package stoking domestic consumption and gross domestic product (GDP) growth rebounding to 7.9% in the second quarter from 6.1% in Q1," said Vandana Hari, Asia news director at Platts. "The new peak in Chinese oil processing rates in June was no doubt also helped by the government's new domestic fuel pricing formula in use this year, which aims to protect refiners on costs and margins. But there is plenty of skepticism by oil market observers that domestic consumption will keep China's engine running at the current.

Platts calculates China's apparent or implied oil demand on the basis of crude throughput volumes at the domestic refineries and net oil product imports, as reported by the National Bureau of Statistics and Chinese customs.

The government releases data on imports, exports, domestic crude production and refinery throughput, but does not give official figures on the country's actual oil consumption or stockpiles.

Platts releases its monthly calculation of China's apparent demand between the 18th and 26th of every month via press release and via its website. Any use of this information must be appropriately attributed to Platts.

California could allow new oil drilling under a tentative agreement the state's governor and lawmakers reached to plug its $26.3 billion budget hole.

In a rare agreement with environmental groups, oil producer Plains Exploration & Production Co. (PXP) has proposed promptly expanding oil drilling off the coast of Santa Barbara, then shutting down four oil platforms and two onshore processing facilities in Santa Barbara by 2024. The company also agreed to donate $1.5 million to Santa Barbara County for new low-carbon bus technology and 4,000 acres of land for public use. The company would slant-drill into the state's seafloor from a platform it operates in federal waters.

Environmental and community groups in Santa Barbara have hailed the project, called Tranquillon Ridge, as a major milestone in their efforts to shut down the oil rigs off Santa Barbara's coast. Current law allows offshore drilling operations that were in place prior to a 1981 moratorium on new offshore drilling to continue indefinitely.

The company said in a statement it was pleased with the budget agreement and hoped it would "allow the benefits of the historic agreement PXP reached with the environmental community to come to fruition."

Gov. Arnold Schwarzenegger has championed the project as a new source of desperately needed cash to fill the state's budget gap. The state would collect an upfront payment of $100 million from Plains, followed by an estimated $1.8 billion in royalties over the 15 years of the project.

California's budget difficulties could be a boon for Plains. In addition to the company's potential opportunity to expand oil-drilling in California, where officials have expressed near-unanimous opposition to expanded drilling on the Outer Continental Shelf, Schwarzenegger scuttled a proposal by Democrats to increase fees on oil production in the state.

The Tranquillon Ridge project is one of the few bright spots in California's budget agreement, reached late Monday by Schwarzenegger and legislative leaders. Reports of the agreement indicate that it would scale back many state services, particularly to the elderly and the poor, and include less pay for government workers. The state Senate and Assembly could vote on the bill as early as this week.

About 1.6 million barrels per day of Nigeria's oil production has been shut down due to violence in the Niger Delta, home to Africa's biggest oil and gas industry, Nigeria's oil minister told Reuters on Wednesday.
The world's eighth largest oil exporter is currently pumping less than 2 million bpd, significantly less than its installed capacity of over 3 million bpd.

"This shut-in amount is more than half of our production capacity of 3.2 million bpd and this is all due to the activities of the militants in the Niger Delta," Rilwanu Lukman said after a cabinet meeting.

Oil production estimates in Nigeria vary widely depending on the government or industry official. A spokesman for state-run oil firm NNPC last month estimated shut-in production at 1.26 million bpd.

Industry experts say Nigeria has never been able to produce at its full installed capacity of 3 million bpd due to violence in the Niger Delta and to funding problems. Attacks by the Movement for the Emancipation of the Niger Delta (MEND), the country's main militant group, has forced oil companies to shut down around 300,000 bpd of production since May.

The militant group, which says it is fighting for a fairer share of the region's oil wealth, has declared a 60-day ceasefire to allow for peace talks with the government.

But it has threatened oil companies that if it tries to repair damaged pipelines, flow stations and other facilities that rebels will attack them again.

Editing by Keiron Henderson

BP Plc, Europe’s second-largest oil and gas company, said its North Sea output will drop about 9 percent this year, almost double the U.K.’s estimated overall decline.

Production from BP’s fields in Norway and the U.K. will be the equivalent of about 320,000 barrels of oil a day in 2009, compared with 350,000 barrels a day last year, the London-based company said on its Web site. BP said it plans to maintain output at 300,000 barrels a day for the next decade.

“For the majors like BP, Shell and Exxon, the North Sea is becoming less important,” said Alex Kemp, professor of petroleum economics at Aberdeen University. “The fields are relatively small. They are not terribly exciting for a mega- major.”

BP, which made the North Sea’s first discovery in 1965, said it remains committed to the region as rising costs and shrinking reserves encourage some explorers to scale back operations. BP operates more than 30 fields in the North Sea as well as 10 pipeline systems and the Sullom Voe oil terminal. The company estimates that it still has reserves equivalent to 3 billion barrels of oil in the region, according to its Web site.

“We want people to know that we are not leaving, and we intended to be here when the last drop of oil is recovered from the North Sea,” Bernard Looney, the head of BP’s North Sea business said on the company’s Web site.

Once the world’s fourth-largest oil and gas producer, the U.K. has been in decline since 1999, with energy output shrinking 5 percent last year as oil prices fell and the credit- market crisis hurt investment in energy exploration. The U.K. government is counting on North Sea oil and gas for tax revenue as the financial industry suffers in the worst recession since World War II.

Lobby Group

Industry lobby group Oil & Gas UK forecasts that oil and gas production will average about 2.5 million barrels a day in 2009, down 5 percent from 2008.

Norway, the world’s fifth-largest oil exporter and third- biggest natural-gas supplier, is seeking to boost output of natural gas and is opening more of its unexplored northern waters to drilling to counter a decline in oil output at maturing fields.

Norwegian crude output will fall to about 1.9 million barrels a day in 2009 from about 2.11 million barrels a day last year, according to Bloomberg calculations based on data from the country’s Petroleum Directorate. Natural gas output is forecast to rise to 102.9 billion cubic meters this year, the directorate said in January.

‘Remain Committed’

“North Sea assets are still very important parts in the overall portfolio mix,” for BP, said Tom Ellacott, London-based corporate analyst at Wood Mackenzie Consultants Ltd. “They have to remain committed now.”

BP plans to invest a record 21.66 billion kroner ($3.4 billion), in Norwegian projects this year, 64 percent more than in 2008, it said in January. It intends to raise its Norwegian oil output to 80,000 barrels of oil equivalent a day by 2012, through the development of the Valhall, Skarv and Ula projects.

In the U.K., where BP is the largest producer, the company is seeking to boost oil recovery at its Foinaven discovery in the West of Shetlands region. It has drilled three new wells as part of its Foinaven Panel 2 South project, the first of which started production last year.

“There is a lot going in to make sure that the decline in as little as that,” said BP spokesman Robert Wine. “Some of our fields are some of the oldest ones. We have to struggle harder to keep the older ones from decline.”

Royal Dutch Shell Plc, Europe’s largest oil producer, sold some U.K. assets last year, including its share of the South Cormorant, Cormorant North, Tern, Eider, Kestrel and Pelican licenses, non-operated interests in the Hudson license and interests in the Brent System and Sullom Voe terminal.

Converting rapidly from coal-generated energy to gas is President Barack Obama’s most obvious first step towards saving our planet and jump-starting our economy. A revolution in natural gas production over the past two years has left America awash with natural gas and has made it possible to eliminate most of our dependence on deadly, destructive coal practically overnight – and without the expense of building new power plants.

Whatever the slick campaign financed by the powerful coal barons might claim, coal is neither cheap nor clean. Ozone and particulates from coal plants kill tens of thousands of Americans each year and cause widespread illnesses and disease. Acid rain has destroyed millions of acres of valuable forests and sterilised one in five Adirondack lakes. Neurotoxic mercury raining from these plants has contaminated fish in every state and poisons over a million American women and children annually. Coal industry strip mines have already destroyed 500 mountains in Appalachia, buried 2,000 miles of rivers and streams and will soon have flattened an area the size of Delaware. Finally, coal, which supplies 46 per cent of our electric power, is the most important source of America’s greenhouse gases.

America’s cornucopia of renewables and the recent maturation of solar, geothermal and wind technologies will allow us to meet most of our energy needs with clean, cheap, green power. In the short term, natural gas is an obvious bridge fuel to the “new” energy economy.

Since 2007, the discovery of vast supplies of deep shale gas in the US, along with advanced extraction methods, have created stable supply and predictably low prices for most of the next century. Of the 1,000 gigawatts of generating capacity currently needed to meet national energy demand, 336 are coal-fired. Surprisingly, America has more gas generation capacity – 450 gigawatts – than it does for coal.

However, public regulators generally require utilities to dispatch coal-generated power in preference to gas. For that reason, high-efficiency gas plants are in operation only 36 per cent of the time. By changing the dispatch rule nationally to require that whenever coal and gas plants are competing head-to-head, gas generation must be utilised first, we could quickly reduce coal generation and achieve massive emissions reductions.

In an instant, this simple change could eliminate three-quarters of America’s coal-burning generators and save a fortune in energy costs. Around 920 US coal plants – 78 per cent of the total – are small (generating less than half a gigawatt), antiquated and horrendously inefficient. Their average age is 45 years, with many over 75. They tend to be located amidst dense populations and in poor neighbourhoods to lethal effect.

These ancient plants burn 20 per cent more coal per megawatt hour than modern large coal units and are 60 to 75 per cent less fuel-efficient than combined cycle gas plants. They account for only 21 per cent of America’s electric power but almost half the sector’s emissions. Properly assessed, the costs of operation, maintenance, capital improvements and repair of these antiquated facilities make them far more expensive to run than natural gas plants. However, irrational energy sector pricing structures make it possible for many plant operators to pass those costs to the public and make choices based exclusively on fuel costs, which in the case of coal appear deceptively cheap because of massive subsidies.

Mothballing or throttling back these plants would mean huge savings to the public and eliminate the need for more than 350m tons of coal, including all 30m tons harvested through mountain-top removal. Their closure would reduce US mercury emissions by 20-25 per cent, dramatically cut deadly particulate matter and the pollutants that cause acid rain, and slash America’s CO2 from power plants by 20 per cent – an amount greater than the entire reduction envisaged in the first years of the pending climate change legislation at a fraction of the cost.

To quickly gain further economic and environmental advantages, the larger, newer coal plants that remain in operation should be required to co-fire with natural gas. Many of these plants are already connected to gas pipelines and can easily be adapted to burn gas as 15 to 20 per cent of their fuel. Such co-firing dramatically reduces forced outages and maintenance costs and can be the most cost effective way to reduce CO2 emissions.

Natural gas comes with its own set of environmental caveats. It is a carbon-based fuel and its extraction from shale, the most significant new source, if not managed carefully, can have serious water, land use and wildlife impacts, especially in the hands of irresponsible producers and lax regulators. But those impacts can be mitigated by careful regulation and are dwarfed by the disaster of coal.

The writer is president of Waterkeeper Alliance

The figure was well down on the previous year's deficit of £8.5bn and resulted in a near halving of government grants to £898m in the period. The agency is funded by government grants and income from commercial operations, including electricity sold from some of Britain's oldest nuclear plants and property.

Commercial income totalled £2bn, an increase of £517m on the previous year largely as a result of increased output and price rises for electricity generated by its two remaining first generation nuclear plants, Oldbury and Wylfa.

Xstrata's coal production risesIncome from waste and reprocessing contracts rose to £1.1bn while efficiency savings contributed £183m. The business is also benefiting from a property revaluation and the prospect of selling land for new nuclear power plants on existing sites. Operating expenditure was stable at £2.7bn.

The authority has reviewed the total estimate for decommissioning and clean up and now puts the figure at £44.5bn, an increase of £404m.

A giant tidal energy scheme which the government is counting on to meet ambitious new green energy targets set this week should not be built because it would be so ecologically destructive, the chair of the Environment Agency has warned ministers.

The government's roadmap to a low-carbon UK called for a 34% cut in emissions by 2020, with the power sector contributing the bulk of that saving. The Weston barrage, running 10 miles across the Severn estuary between Weston-super-Mare and Cardiff, is by far the largest of four tidal power schemes being considered by government and would be the centrepiece of the nation's renewable energy plan.

It could generate 8.6 gigawatts of zero-carbon electricity from the Severn – the equivalent of eight large coal-fired power stations – and would be the single largest renewable energy project in Europe.

But the £5bn flagship scheme would permanently flood nearly 35,000 hectares (86,000 acres) of internationally protected wetlands. It would also destroy some of Britain's most important fisheries in the Severn, Wye and Usk catchment areas, said Lord Smith in an interview with the Guardian.

"The great wall across the Severn channel poses the classic environmental dilemma. It would generate 5% of all the UK's electricity needs but at a huge cost in terms of fishing and habitats. These immense environmental impacts outweigh the carbon reduction benefits which you would get. We are advising the government on this pretty strongly," said the government's chief environmental adviser.

"There must be ways of harnessing tidal power from the estuary without the gross impacts that the Weston scheme would have. I regret that we are not putting as much effort as we could into tidal reefs and defences. We should be addressing the possibility of tidal power around the country. Tidal energy should be one of the key ways of generating electricity", he said.

Smith's comments will not be welcomed by the government which this week committed itself to generating 20% of the UK's energy from renewable sources within only 11 years, but it is meeting technical and planning delays with wind power.

A decision on the barrage will be given next year but ministers are keen to see it started because it would contribute more to emission cuts than any other scheme. The energy minister, Lord Hunt, said this week: "The Cardiff-Weston barrage has the potential to save the equivalent of the yearly CO2 emissions from all homes in Wales."

The barrage, which would be a huge engineering feat on the scale of some of the world's biggest construction projects, is shaping up to be one the most contentious environmental issues of the decade. The National Trust, the RSPB and WWF, together representing more than 5 million people, have said that a barrage would be "economically dubious" and "ecologically disastrous".

They have also argued that 5m tonnes of CO2 would be emitted during construction and another 5m tonnes during transport of the materials, undermining claims that the barrage would help reduce emissions.

Smith also warned the nuclear industry, another part of the energy and climate change secretary, Ed Miliband's "trinity" of low-carbon electricity plans, that climate change could seriously affect their costs. He said the agency would demand that nuclear power companies build major sea defences to protect nuclear power against the sea level rises expected over the next 100 years.

"Virtually all the new [nuclear] stations are by the sea. We will look at them on a case-by-case basis but all sites must be fully defensible. The power companies know that they will have to defend them on a very large scale. Protection against flood risk must be absolute."

Smith also questioned Miliband's intention to preserve low-cost mass air travel, revealed in the Guardian this week. Calling for a debate on the future of aviation, he argued that climate change made it doubtful people could fly so much in 40 years' time. "By 2050 we should have reduced greenhouse gases by 80%, which means we will have 20% left. How much of that 20% should be taken by aviation?

"Aeroplanes will get more efficient but they will not be able to completely remove their carbon emissions. By 2050 we will need to have decided how much flying we can do. "

Workers staging a sit-in at Britain’s only significant wind turbine factory in an attempt to prevent its closure have accused managers of attempting to starve them out by blocking food supplies.

Last night, about 30 workers occupied the administrative block at the Vestas factory in Newport on the Isle of Wight. An attempt to deliver food supplies from a local supermarket was stopped by police at the factory gate yesterday evening, resulting in a stand-off with workers setting up camp outside the factory.

The Times revealed last week that the factory was closing down its production line within hours of the Government making a pledge to build 10,000 wind turbines - a fivefold increase on the present number - by 2020. More than 600 people are due to be made redundant on July 30 - 525 in Newport and 100 at a related facility in Southampton.

Mark Smith, one of those taking part in the sit-in, said that the workers were prepared to continue the occupation for several weeks but had emptied the plant’s vending machines and were down to their last few chocolate bars.

He said that Vestas managers had prevented workers outside the plant from delivering food parcels. Staff inside the plant had been throwing chocolate and bananas up to the first-floor balcony occupied by the protesters.

“The managers stopped that too. They seem to think they can starve us out but we are determined to stay as long as it takes,” he said.

“We want Vestas to come and talk to us about the redundancy package they have offered. But most importantly we want the government to nationalise the factory and save our jobs.

“They have been bailing out the banks so why not help people making products which help the world fight climate change? Ministers keep saying they want to create more green jobs but they are not lifting a finger to save our green jobs.” He said the occupiers had presented demands for nationalisation or better redundancy packages to the management, and were expecting a reply this morning.

Riot police entered the factory yesterday, but retreated, leaving the protesters in place. They draped the factory in banners reading “Gordon Brown - nationalise this”, and “forced to occupy to save our jobs”.

Mr Smith said that the protesters had managed to obtain one food parcel by lowering a rope from the balcony to a supporter on the ground outside the factory. However, this supply route had now also been blocked.

Police said they were not allowing food to be taken in, at the request of the management, and that protesters who came out to eat would not be allowed back into the building.

Last night, officers had sealed off the factory, leaving the protesters occupying the top floor, while managers camped out in the lobby beneath them, cutting off the occupiers from supporters outside.

A Whitehall source said the Government had held discussions with Vestas over the past six months and had been willing to discuss some form of support to help the company convert the factory to making a different type of turbine blade suitable for the British market. It has been making blades for US wind farms. The source said: “Vestas said they didn’t want any government money. They took the position that the plant had to close because of nimbyism which was blocking the development of wind farms in Britain.” Employees last night set up tents on the industrial estate outside Newport, promising to dig in for the long haul. “Everyone’s showing their support. The community’s behind them,” said Steve Stotesbury, a blade technician.

“”The government talks about renewable energey being a growth industry, that can create new jobs. But there are 600 jobs need saving, not creating.” He said employees had been forced to take direct action by desperation. “People have realised there is no other option. Jobs on the island are few and far between. It’s an unemployment blackspot.” Others were full of anger at a “miserable” redundancy package, alleging that many of the factory’s managers had been moved to jobs elsewhere. Managers contacted by The Times refused to comment.

One employee said: “This is a profit making factory. People from this factory have travelled to Denmark, Australia and the US to train people who are now taking our order book. It’s very frustrating.” He said relationships with management have always been fraught - “it’s always been stick rather than carrot” Another said: “They have closed the factory, apart from allowing senior management in. It’s a lockout.

“The Scottish Government has stepped in to save a wind turbine factory, so why can’t our Government do the same?” Earlier this year, the Scottish Government awarded grants worth £10 million to save a factory employing 100 people making turbine towers in Argyll.

The trade union Unite urged the Government to work with management to save the factory, warning that the loss of jobs would be devastating for the local community.

The union said that if the Government was serious about meeting its legally binding target on renewable energy and climate change targets it needed to take action to save England’s only wind turbine manufacturing capacity.

John Rowse, a national officer for Unite, said: “It is not too late to save these plants. If the Government addresses the blockages in the planning system to counter the not-in-my-back-yard brigade then there will be massively increased demand for wind turbines.” Caroline Lucas, the Isle of Wight’s Green MEP, sent a message of support to the workers and called for immediate government intervention to save the factory from closure.

“The decision to close the facility represents a spectacular failure by ministers to adequately promote green industries, and protect the future of manufacturing in this country,” she said.

“This isn’t just a huge blow for the skilled British workers who are set to lose their jobs - it destroys any hope the UK may have had for establishing itself in the eyes of the world as being at the forefront of technological efforts to create a greener and more sustainable future.” No one from Vestas could be reached for comment.

The UN's top climate official has said that the richest nations will have to put $10bn "on the table" during the Copenhagen climate change summit.

Yvo De Boer, who will lead the negotiations, said such a commitment was necessary for their success.

He insisted the burden of climate change must be shared and that the money would help developing countries.

Leading nations participating in the summit must, he said, sign an agreement to reduce greenhouse gas emissions.

Mr De Boer, head of the United Nations Framework Convention on Climate Change (UNFCCC), said the $10bn (£6bn) pledge would be "a good beginning".

"(It) will allow developing countries to begin preparing national plans to limit their own emissions, and to adapt to climate change," he told the BBC World Service's One Planet programme.

Mr De Boer was less keen to put an exact figure on the levels of emission cuts the biggest economies should commit to.

Some scientists have called for a 25-40% reduction by 2020 - a proposal he describes as "a good beacon to be working towards".

As well as the hard cash and paper pledge from developed nations, success at Copenhagen will come from one other factor, he revealed.

"If on that piece of paper, China, India, Brazil and other major developing countries have offered national actions, that will significantly take their emissions below business as usual... that for me will be a success."

China leads way

Mr De Boer, who helped negotiate the Kyoto Protocol on tackling greenhouse gases in 1997, admitted the recent financial turmoil had made his job more difficult as governments focus on "budget deficits and the banks they've just bailed out".

But he praised some countries for seeking to turn the troubles to their - and the environment's - advantage.

"A number of countries - with China and Korea in the lead - are seeing this economic crisis as an opportunity to turn a corner.

"Those countries are in a serious way making investments in renewable sources of energy; modernising their power sector; coming up with different types of vehicles that are more geared towards tomorrow's needs than yesterday's."

Despite his belief that some countries are seeing the economic potential of tackling climate change, Mr De Boer said he recognised that getting 192 nations - from Afghanistan to Zimbabwe - to agree on the issue was "a bit like herding cats".

"You can take one of two approaches, you can either try and herd them from behind with a stick, which generally has them shooting off in different directions, or you can walk in front holding a tasty fish and that will get them to follow you more willingly," he said.

In a proposal that appears to have astonished Western officials, the Indian government suggested that the price of co-operation would be for industrialised countries to pay at least 0.5 per cent of their GDP to help developing nations invest in cleaner renewable sources of energy and reduce their carbon emissions.

While the size of the demand was dismissed by US officials as unrealistic, Gordon Brown has proposed industrialised countries contribute to a £60 billion fund to help the developing world play its role and said Britain would pay "its fair share".

But Indian ministers have been particularly forceful on the issue. They have warned they will not allow international inspections of how the Asian powerhouse is meeting reduction targets unless Western countries pay an even greater 0.8 per cent of the GDP to fund what they call "mitigation and adaptation" – compensation for the West's historic role in contributing to global warming, and the cost of changing over to green technologies.

The Indian prime minister, Dr Manmohan Singh, accused the West of causing global warming on the eve of the G8 summit earlier this month. "What we are witnessing today is the consequence of over two centuries of industrial activity and high consumption lifestyles in the developed world. They have to bear this historical responsibility," he said.

He believes that added responsibility must be met with cash and a more liberal approach to technology transfers to help the developing world limit its emissions.

India has come under intense pressure in recent days from the US secretary of state, Hillary Clinton, and President Barack Obama's climate change envoy, Todd Stern, who met ministers in New Delhi.

Mrs Clinton warned that India's economic growth means its emissions will rise by 50 per cent over the next 20 years if it does not take drastic action.

India's hope that countries like the US and Britain will fund that action were dashed when Mr Stern dismissed the sum being demanded as "astronomical" .

Asked whether the US agreed with India's demand, he said: "I don't think the US agrees. It is an astronomical number, it's like $75 billion (£45 billion) a year. I don't think that is realistic."

India's demand would cost Britain almost £8 billion per year.

With the United Nations Climate Change Conference in Copenhagen only five months away, western diplomats are braced for increasingly vocal criticism from India, China and other members of the G77 developing countries as they haggle with the industrialised countries over what has been described as the "cost of saving the world".

Western diplomats in New Delhi said they had accepted their "historical responsibility" for global warming but fear India and China's rapid economic growth will compound the problem if they do not accept binding limits on emissions.

India's special envoy on climate change, Shyam Saran, said the developed countries must share new green technologies and collaborate on spreading solar energy, smart electricity grids, advanced vehicles and low emission cold technologies.

But he warned: "No Copenhagen outcome will be successful unless there is a considerable amount of resources mobilised for meeting the requirements of developing countries."

Beijing will use its foreign exchange reserves, the largest in the world, to support and accelerate overseas expansion and acquisitions by Chinese companies, Wen Jiabao, the country’s premier, said in comments published on Tuesday.

“We should hasten the implementation of our ‘going out’ strategy and combine the utilisation of foreign exchange reserves with the ‘going out’ of our enterprises,” he told Chinese diplomats late on Monday.

Mr Wen said Beijing also wanted Chinese companies to increase its share of global exports.

The “going out” strategy is a slogan for encouraging investment and acquisitions abroad, particularly by big state-owned industrial groups such as PetroChina, Chinalco, China Telecom and Bank of China.

Qu Hongbin, chief China economist at HSBC, said: “This is the first time we have heard an official articulation of this policy ... to directly support corporations to buy offshore assets.”

China’s outbound non-financial direct investment rose to $40.7bn last year from just $143m in 2002.

Mr Wen did not elaborate on how much of the $2,132bn of reserves would be channelled to Chinese enterprises but Mr Qu said this was part of a strategy to reduce its reliance on the US dollar as a reserve currency.

“This is reserve diversification in a broader sense. Instead of accumulating foreign exchange reserves and short-term financial assets, the government wants the nation to accumulate more long-term corporate real assets.”

State-owned groups, particularly in the oil and natural resources sectors, have stepped up their hunt for overseas companies and assets on sale because of the global crisis.

China Investment Corp, the $200bn sovereign wealth fund, has been buying stakes in overseas resources companies and has taken a 1.1 per cent stake in Diageo, the British distiller.

In an interview published in state-controlled media, the chairman of China Development Bank said Chinese outbound investment would accelerate but should focus on resource-rich developing economies.

“Everyone is saying we should go to the western markets to scoop up [underpriced assets],” said Chen Yuan. “I think we should not go to America’s Wall Street, but should look more to places with natural and energy resources.”

Japan’s oil imports fell in June for an eighth month as refiners and power utilities continued production cuts because of the global recession, slashing crude requirements in the world’s second-largest economy.
Japan shipped in 15.02 million kiloliters, or about 3.15 million barrels a day, of crude oil last month, down 19.1 percent from a year earlier, a preliminary finance ministry trade report released in Tokyo today shows. Imports of liquefied natural gas declined 9 percent in June to 5.16 million metric tons.

Ten regional utilities led by Tokyo Electric Power Co. reduced output last month by 5.6 percent on sluggish demand from factories, according to the Federation of Electric Power Companies, reducing their use of oil and LNG, the two main fuels for thermal power plants. Nippon Oil Corp. and Idemitsu Kosan Co. lowered operating rates at plants in response to weaker demand for automotive and industrial fuels.

Imports of coal, used for power generation and steel production, dropped 33.2 percent in June to 11.69 million tons, the ministry said.

Japan’s oil imports dropped 14.8 percent in the first six months of calendar 2009 to 104.79 million kiloliters, while shipments of gas chilled to liquid form decreased 8.9 percent to 31.6 million tons, the ministry said.

Global demand for commodities is showing signs of improvement but demand remains "modest", the world's largest mining company, BHP Billiton, said yesterday. But the market is still being pulled in both directions at once as countries struggle to adjust inventories of raw materials to the uncertain economic conditions, the group's quarterly production report said.

Steadily rising prices for key commodities such as copper and iron ore confirm the assessment that China's restocking of its inventories is "essentially complete", which will help to stabilise a vast chunk of global demand. BHP also reported rising demand from the developed economies of Europe, the US and Japan, adding: "We are now seeing evidence that restocking has commenced."

The trend is an index of growing economic confidence, as pared-down stocks are refilled in expectation of increasing activity in the near future. "The 2009 financial year proved to be very challenging, with significant demand contraction exacerbated by dramatic movements in inventory levels," BHP reported. "In the short-term we believe underlying demand trends are still being masked by de-stock and stocking activities across the value chain. However, commodity prices will be influenced by supply responses due to latent capacity currently existing in the industry."

Yesterday, the company reported higher production than was forecast across most commodity groups. The big exception was iron ore. In the 12 months to June, the enormous Pilbara mine in Australia was expected to produce 128 million tonnes of iron ore. But despite a 2 per cent rise in output, it came in about 16 million tonnes short because of delays caused by the mine's expansion programme and a series of accidents. Between April and June, the company produced just 27 million tonnes of iron ore – 10 per cent fewer than over the same period a year ago.

Copper output at BHP's Escondida mine in Chile also fell, hit by milling problems that, although partially offset by higher production elsewhere, saw the annual total of 307 million tonnes fall by 21 per cent on the previous year.

BHP's involvement in the full range of mining, from iron ore to diamonds to coal, give it a broad take on the overall state of the commodities market. Miners have been savagely affected by the recession as customers slammed the brakes on spending and relied on the backlogs in their warehouses.

For example, BHP Billiton was forced to defer delivery of 6 million tonnes of iron ore – equivalent to 5 per cent of its annual production – last November after a stockpile of up to 68 million tonnes built up at Chinese ports, with another 125 million tonnes standing idle at the country's steel mills.

The Anglo-Australian company cut its global workforce by 6,000 and in February reported that its half-year profits had been slashed by 57 per cent to just £1.8bn, despite revenues rising by 17 per cent. Following last year's hostile but ultimately abortive attempted takeover of Rio Tinto by BHP Billiton, a different kind of deal is on the table. BHP walked away in November, blaming its decision on Rio's $40bn (£24bn) debt mountain, which was accrued as a result of its top-of-the-market purchase of the US aluminium group Alcan.

BHP's withdrawal sent Rio into the arms of Chinalco, the state-owned Chinese company, but shareholder opposition and the improving economic outlook killed off the deal. Instead, Rio conducted a $15.2bn rights issue and formed a joint venture with BHP sharing the two companies' Pilbara assets return for a $5.8bn lump sum.

The UK economy will not fully recover from the recession until 2014, according to a leading thinktank which also warned today that house prices will keep falling for another three years.

The National Institute of Economic and Social Research (NIESR) predicted that it will take another five years until income per head has returned to the level seen before the recession started in the second quarter of 2008. In a gloomy assessment of Britain's economic prospects, it also warned the cost of servicing the country's soaring national debt will almost double within four years.

NIESR's latest forecast is that the UK economy shrank by 0.4% between April and June, which would mean the recession has lasted for five quarters. It believes the recovery will not begin until the last three months of 2009, and then only with anaemic growth of 0.5%.

"The recovery will be weak," warned NIESR economist Simon Kirby. "We see continued contraction in consumer spending and business investment [in 2010]."

On house prices, NIESR does not share the recent optimism that the market might be bottoming out.

"There has been talk of stabilisation and some recovery in the housing market, but we don't think this is the case," said Kirby. "We only see growth in the housing market returning in 2012."

Faced with the worst economic downturn since the Great Depression, the UK government is planning to spend its way back to recovery. NIESR warned that the resulting borrowing will put a heavy burden on the public finances, and called for aggressive cuts to government spending.

"The introduction of a more credible plan to return the public finances to a path of fiscal sustainability remains a necessity," it said, in a clear warning to chancellor Alistair Darling - and his possible successor, George Osborne.

NIESR's calculations assume that public spending will fall by 0.34% a year in real terms during the next parliament - which is more severe than the current government has predicted. But even then, annual borrowing will still be over £120bn in 2014 - some £23bn more than Darling's own estimate.

The government is expected to borrow £165.7bn this year to balance the books, with further massive borrowing already inked in for future years. Last month alone it borrowed £13bn to cope with a sharp fall in tax receipts.

According to NIESR's forecasts, the cost of servicing this debt will swell from £25.6bn this fiscal year to £50.7bn in 2013/14.

Recent economic data has dampened hopes that the UK economy was sprouting "green shoots of recovery". Just six weeks ago, NIESR itself predicted that the recession bottomed out in March.

Traffic volumes on the world’s busiest container ship route fell by a fifth in May against a backdrop of plummeting prices as the global recession leaves the industry facing its worst crisis in its 53 year history.

The figures for westbound Asia-Europe services, which compared volumes with the same month last year, were published on Tuesday by the European Liner Affairs Association a day after Singapore’s Neptune Orient Lines revealed it suffered continued volume falls in June and a still sharper fall in earnings from each container.

Falling trade volumes and an oversupply of ships have sent container lines’ earnings per container shipped well below day-to-day operating costs. Several lines, including Germany’s Hapag-Lloyd, are seeking fresh financing and there is speculation that one or more big container lines could fall into bankruptcy.

This year looks set to be the first in the 53-year history of container shipping to see a year-on-year fall in volumes. Volumes depend on consumer demand for the finished and semi-finished goods shipped in containers.

The ELAA figures – which the trade association compiles for all trades to and from Europe – showed westbound volumes from Asia to Europe down 20 per cent in May, compared with the same month a year ago. The figure is slightly better than the 22 per cent fall in the first quarter of 2009. But container lines are likely to be concerned by the length of the slump, which started in autumn last year and is eating into many operators’ cash reserves.

NOL’s figures, which covered all its operations rather than the individual routes covered by the ELAA figures, showed a volume fall of 14 per cent for the four weeks to June 26.

The volume fall was lower than the 24 per cent average for the year so far. However, the line’s average earnings per 40-foot container fell 29 per cent in the latest four-week period, sharply down on the 20 per cent average for the year so far.

The ELAA’s earnings figures, which cover only the first three months, showed prices per container between Europe and Asia were running at 49 per cent of the average figure for 2008.

One senior container shipping executive, who asked not to be named, said container shipping companies had “a long way to go” in raising prices before they were able to cover their costs.

Hundreds of container ships are laid up worldwide as lines cut services in an effort to fill their remaining sailings.

NOL is seeking S$1.4bn ($970m) in fresh capital to strengthen its balance sheet, while Hapag-Lloyd on July 8 told its shareholders it needed €1.75bn ($2.5bn) in fresh capital.

Chile’s CSAV is raising $710m as part of a rescue deal agreed by the owners of its ships.

Network Rail will electrify nearly 300 miles of Britain's busiest railway track over the next decade after the government today gave its approval to a £1.1bn programme.

The plans, announced by Gordon Brown this morning, will transform the Great Western mainline, which runs from London to Oxford, Newbury and Cardiff, via Reading.

Electrification will reduce carbon dioxide emissions and will mean faster and more reliable services for millions of passengers.

The prime minister travelled on one of the routes to benefit from the scheme this morning, arriving at Paddington station in London to journey on the Great Western line to Cardiff for a cabinet meeting.

The Great Western route from London to Swansea is to be electrified over the next eight years at a cost of £1bn.

The government is also spending £100m on electrifying lines between Liverpool and Manchester, with the work taking four years.

At Paddington, Brown said: "This is the future. It is green, it is faster and it's more reliable. This is about making the railways fit for the 21st century."

Asked if the government could afford such a scheme now, Brown replied: "We have set aside money for this. It's an important priority for us."

Only about one third of the rail network is electrified at the moment, with the Great Western route the last of the major routes to be still predominantly using diesel trains.

The electrification will include the lines to Oxford and to Newbury in Berkshire and will also make possible the direct replacement of the ageing InterCity 125 fleet by electric Super Express trains.

Electrification will shorten the London to Swansea journey time - currently just over three hours - by about 20 minutes. The plans will involve installing hundreds of miles of electric cables as well as alterations to tunnels, bridges and stations on one of Britain's oldest rail routes.

Travelling with the prime minister today was the transport secretary, Lord Adonis, who said: "We are electrifying 300 miles of track and we are also looking to extend electrification to other lines.

"There will be some disruptions while the work is going on but Network Rail plans to keep disruption to a minimum, with much of the work being done overnight."

Lord Adonis went on: "Electrification will mean faster, quieter and more efficient trains, which break down far less often."

Mark Hopwood, managing director of First Great Western, said: "We are really delighted with this news. It's going to transform our route and provide cleaner and more environmentally friendly travel."

The electrification announcement follows Network Rail's consultation document on electrification earlier this year, which also made the case for electrifying the Midland mainline route.

Lord Adonis said today that the government did consider Midland mainline and would continue to consider it.

Airlines typically make money in the summer and use it to tide them through the darker winter months. Yet this summer, like last summer, looks bleak for airlines and their cupboards are getting bare.

J.P. Morgan analyst Jamie Baker handicapped prospects for the most precariously positioned airlines in a report Monday. The availability of capital will likely determine what the airline industry looks like next year, he says.

AMR Corp., parent of American Airlines, US Airways Group Inc. and UAL Corp., parent of United Airlines, will all need more money. He thinks American has better sources of potential liquidity than United, and United has better chances to raise more money than US Airways.

Baker points out that while airlines are bad at making money, they’ve been darn good in the past at raising money. Investment banks, leasing companies, manufacturers and the U.S. government all have pitched in before to prop up airlines. So it’s a mistake to assume the weakest airline will die off, Baker says, even though a liquidation of one big airline would make the survivors stronger. Washington could push for weak airlines to merge, saving jobs — at least for awhile.

“One thing is certain, on our minds: the size and share of the industry may radically change over six-12 months, with leaner winter months witnessing the greatest potential upheaval,’’ Baker wrote.

It’s very hard to predict the future in the airline business. Last winter, the plunge in oil prices saved airlines. They could get lucky again this year if demand somehow surges, business travelers fly more often or oil prices fall from $60 to $30. But nobody is predicting that right now.

With the industry in a worsening state, it’s probably best for consumers not to hold huge stashes of frequent flier miles in weak airlines, and be careful when buying tickets many months in advance. A lot could change this winter.

Biofuel research should focus on planes and not cars, the think tank Policy Exchange has said.

A crop area the size of the USA would be needed to biofuel all the world's cars and alternatives, such as electricity, exist for them, it added.

Instead, it said the EU should fund research into using plant-based fuel for aviation to help cut emissions.

Sceptics say some biofuels create more carbon than they save and push up the price of food for the poor.

Most biofuels are derived from crops such as corn, sugarcane and rapeseed.

Bioethanol is usually mixed with petrol, while biodiesel is either used on its own or in a mixture.

The UK government, which is funding a £27m research centre to find economically viable alternatives to fossil fuels, says 25% of greenhouse gas emissions come from transport.

In April 2008, it introduced a "Renewable Transport Fuel Obligation", requiring 2.5% of all fuel sold at petrol stations to be biofuels, having revised its target from 5%.

Escalating emissions

The EU also changed its stipulation that 10% of transport fuel had to be from crop-based fuel, instead saying the targets could be met by any renewable source, including fuel cells, hydrogen or solar power.

Policy Exchange has previously said the government should spend its £550m annual biofuel subsidies on halting the destruction of rainforests and peatland, which remove carbon dioxide from the atmosphere.

Now the centre-right think tank says the EU should switch policy to subsidising development of biofuels for aviation because planes cannot run on other sources of energy.

Airlines including Virgin Atlantic have trialled flights using up to 20% biofuel to power the engines, although climate change campaigners say use of the fuel is not sustainable.

Policy Exchange claims using biofuels is the only way in the foreseeable future to meet people's desire to travel without escalating emissions of greenhouse gases.

Airlines should be mandated to blend biofuel with kerosene in increasing quantities from 2020, it believes.

By this time new generation crop-based fuels should have been developed which do not compete with food crops.

Green groups have been critical of the destruction of rainforest to create the fuels and the resultant loss of habitat for rare species.

They also say that with more farmland being turned over to grow profitable biofuels, food production has fallen and pushed up global prices, affecting supplies for the poorest people.

Richard Dyer, Friends of the Earth's transport campaigner, said the report was right that it was important to cut flights "if we are to stand a chance of preventing catastrophic climate change".

"But replacing aviation fuel with biofuels will take us further down a blind alley as these so-called green fuels are already increasing the climate-changing emissions that our cars, buses and lorries are producing," he said.

"Growing crops for fuel is driving deforestation on a massive scale - when the full impact of this is taken into account, the biofuels added to our petrol and diesel may be producing more than twice the carbon dioxide of the fossil fuels they replace.

"New fuels for planes must be proven to cut overall emissions before Governments commit to targets for them. In the meantime Ministers must scrap plans to expand the UK's airports."

A decline in car use due to the recession has contributed to a sharp fall in road deaths in Britain.

There were 2,645 fatalities in 2008, a drop of 13.5 per cent compared to the previous year when there were 3,059 deaths.

The trend was mirrored throughout Europe and across much of the world. Road deaths fell by 17.5 per cent in Ireland, 13.6 per cent in Belgium, 9.7 per cent in America and 8.5 per cent in Australia.

The Paris-based International Transport Forum (ITF) said that while the reduction in road deaths reflected improved road safety policies and enforcement, it was also linked to fewer vehicles being on the road.

“Certainly the economic downturn has had a significant short-term impact on traffic volumes in some countries, but the relative importance of traffic volume and [road safety] policy in reducing fatalities can not yet be disentangled with certainty,” a spokesman said.

Edmund King, the AA president, said that he believed the reduction in road deaths was also due to motorists cutting their speeds to save at the petrol pumps.

“We have figures showing that motorists are cutting back on certain journeys, but also that they are trying to reduce fuel consumption,” he said.

“The fact people are slowing down to conserve fuel, particularly when there have been record pump prices recently, is also a factor.”

The ITF said that firm conclusions could not yet be drawn from the 2008 figures on the effectiveness of recent road safety advances and tougher policing.

It said that longer-term trends were more relevant to policy analysis and these showed smaller and variable falls in road death rates over the three decades up to 2000.

The UK fatality level fell by 2.3 per cent in 1970-80, by 1.3 per cent in 1980-90 and by 4 per cent in 1990-2000. So far this decade (2000-2008), the fall has been 3.7 per cent.