Triple Crunch Log

The triple crunch log

2010…a log compiled by Jeremy Leggett emphasising matters relevant to the energy-, climate-, and financial crises, and issues pertinent to society’s response to this triple crunch

Editor’s note

This log represents one person’s reading experience of the unfolding dramas that most preoccupy him, among the all-too numerous dramas inherent in the human condition. I have compiled it while pursuing a near-full-time job in a solar energy company, and further part-time roles as a director in a private equity fund (throughout) and trustee of a charity (since 2006). Accordingly, there is far more source material from newspapers than academic journals and books, most of it culled and processed in evenings, weekends, and journeys. Magazine and journal reports are on the day of publication, some time (days) after the actual events referred to. Entries from monthlies appear on the first of each month. After the creation of the website (June 2009), references use url format where available.

Abbreviations:

boe: barrels of oil equivalent; CCS: Carbon capture and storage; CTL: Coal to liquids; mbd: million barrels per day; mcf: million cubic feet (bn: billion; tn: trillion etc); L: author’s library copy for further detail (either digital or paper); mcm: million cubic metres; oe: oil equivalent; p.a. per annum.

1.1.10. Head of FSA says next UK government must tax “bads” and spend on green stimulus. Adair Turner says “If we have to raise taxes – and we will to some extent – we can deliberately design those to tax bad environmental things, like overuse of fossil fuels, rather than good welfare-enhancing things, like employment for people.”1

Arup heads industry consortium aiming to retrofit UK homes with energy efficiency and create tens of thousands of jobs. GE and EDF are among the 25 companies involved in the Thames Gateway Institute for Sustainability, which plans to use the Thames Gateway as a showcase for what can be done. Funding is a big part of the project and the group is in “advanced talks with pension funds.”2

Oil company bosses will have to solve riddles to find success in 2010 , a Petroleum Review editorial asserts. Opec has more than 3 mbd of spare capacity, nearly 80% in the GCC, and if they can maintain discipline €75 oil is here for a long while. So what do you do if your incremental cost of production is higher, as so much IOC production is? And when exploration and development costs doubled between 2005 and 2008, only falling back 20% in 2009? And when investment in the oil sector as a whole fell 19% in 2009, according to the IEA?3

Total has completed Europe’s first complete CCS system at Lacq. The 30 MW capacity plant targets sequestration of 60,000 tonnes of CO2 pa from a gas-fired power plant in a nearby depleted gas field. It uses oxycombustion (where the fuel is burned pure oxygen rather than normal air) to see if the CO2 emissions can be cut in half. The plant is intended to run for two years, at a rate of 200 tonnes captured per day (i.e. 120,000 tonnes in all). France has perhaps 400 mt of stored CO2 capacity in depleted oil and gas fields, and 1-25 billion tonnes of capacity including saline aquifers.4

Vattenfall’s Schwarze Pump CCS plant one year on has had a better than 90% capture rate in a 30MW capacity plant. Extracted gas is shipped 350km by lorry to a Gaz de France field for use in enhanced gas production. Vattenfall’s head of communications does not reckon the plant can be commercial if scaled up to service the 1 GW Schwarze Pumpe plant.5

Photon forecasts saturation in one or more key PV markets by 2013. This will cause an earthquake for the industry bigger than the capping of the Spanish market and the illiquidity in H2 2008. Prices will collapse, margins will fall, installation volumes will drop. Photon has identified seven potential interconnected drivers, including emerging impact on the profit of utility business, causing massive resistance to PV. This could happen as soon as 20 GW installed (2010 in Germany) and is likely by 50 GW (2012 in Germany).6

VC funding for solar plummets 62% to $1.45bn in 2009. That was 85 deals. 2008 saw $3.85bn in 92 deals. The biggest 2009 deal was Solyndra’s $100m.7

3.1.10. World Bank accuses Shell of walking away from solar PV module warranties in Sri Lanka, leaving thousands with no maintenance service as many Shell-manufactured modules display problems. Damian Miller of Orb Solar: “in Sri Lanka, poor customers with average earnings of $1,500-$2,000 a month have bought Shell's 1 http://www.guardian.co.uk/business/2010/jan/01/fsa-adair-turner-green-economy 2 http://www.guardian.co.uk/business/2010/jan/01/business-academia-institute-sustainability-technology 3 Petroleum Review, Editorial, January 2010, no url.4 “Laq links up full-chain CCS in France,” Recharge, January 1010, no url.5 “Germany’s Schwarze Pumpe: one year on,” Recharge, January 1010, no url.6 Photon magazine, January 2010.7 Photon magazine, January 2010.

1

Triple Crunch Log

solar systems. The system is equivalent to 30% of their annual income,” he added. “They could only afford a system because they could get a loan from microfinance institutions or other banks. But now there are reports of thousands of Shell's [branded] solar panels failing in the field and Shell seemingly is not replacing them.”8

UK manufacturing sector refutes UK Chancellor’s claim of a British "green" jobs revolution , thanks to government support. Rather, the UK is in danger of “missing the boat”, the industry body, the EEF, says. Over 90% of the €2bn earmarked for the London Array, the UK’s biggest project, is being spent abroad. A Department of Business spokesperson says it is unfair to pick one project, albeit the world’s bigggest: "British companies are successfully competing for work on schemes around the world such as the Masdar city project in Abu Dhabi. The government has unveiled a range of new initiatives, such as support for the Dalton Nuclear Institute in Manchester and the Nuclear Advanced Manufacturing Research Centre in Rotherham.”9 Europe's first electricity grid dedicated to renewable power takes a step closer to reality this month as nine countries formally draw up plans to link their renewables projects around the North Sea. The thousands of kilometres of highly efficient undersea cables, designed to counter the influence of weather on supply, could cost up to €30bn (£26.5bn). An EC working group will produce a plan by the end of 2010.10

Will Hutton sees an upbeat 2010 for the UK economy, thanks in part to government intervention. “Over the last nine months, the stock market has recorded the third biggest rise since 1693, according to the Bank of England, and if it carries on rising just a little more in January it will be the biggest sustained rise for 317 years. A stock market cannot jump on this scale and with this ferocity without matters quickly improving on the ground.” Unemployment has risen less than expected and fell sharply in December. “The two great students of the impact of credit crunches, Carmen Reinhart and Kenneth Rogoff, calculate in their remarkable book on 800 years of banking crises, This Time Is Different, that the average rise of unemployment in countries experiencing major systemic banking crises since 1930 is 7% of the workforce. In Britain, this would have meant an unemployment rise of around 1.75 million. It is not going to happen, catching everyone out, including me. Unemployment will certainly carry on rising in 2010, but the eventual rise will be around 1.25m; serious, but not as cataclysmic as it could have been.” “We have witnessed a powerful example of how public policy can head off putative slumps.”11

City economists see fiscal deficit as main problem in a sluggish UK economy. 37 of the 79 economists polled said the UK was threatened by a fiscal crisis that could derail any revival. Howard Davies: “The major risk is the loss of confidence in the government’s ability to get the public finances back under control.” In that case, investors would eschew the high priced government bonds, and interest rates would rise. Sir John Gieve, former deputy governor of the central bank: inadequate plans for addressing the fiscal deficit could result in sharp rate rises and a fall in the pound.12

Russia halts oil shipments to Belarus after a dispute on pricing similar to previous on in January 2007. The Russians object to Belarus importing oil, refining it, and selling it on the Europe at lower price than Russian oil. The knock-on worries in Europe about an oil price war between Russia and its former satellites are less than for gas, because oil is more fingible than gas.13

Fed chief says tougher regulation is still needed. “Borrowers chose, and were extended, mortgages that they could not be expected to service in the longer term,” Ben Bernanke says. “This description suggests that regulatory and supervisory policies, rather than monetary policies, would have been more effective means of addressing the run-up in house prices.”14

Beware the next financial crisis, around the corner, says Clive Crook in the FT. The rules have to be tightened, and they aren’t being. Something must be done about moral hazard (though not via a new Forget Glass-Steagal Act). “In good times, when lending is expanding quickly and financial institutions’ concerns about capital and liquidity are at their least, the requirements should tighten. Under current rules, they do the opposite.” Banks will oppose this of course, he notes.15

4.1.10. Oil price breaks $80 and FT’s Ed Crooks predicts $70-80 at the end of 2010. The current price rsie is mainly down to a US cold spell, and Carola Hoyos predicts in the FT that the Iraqi election in March will be the biggest determinant of the price ahead this year.16 Some politicians are already saying they will reverse contracts agreed with the IOCs. Ed Crooks’s forecast is based on Opec supply availability meeting Chinese demand, but is offered with appropriate caveats.17

Cairn Energy prepares to drill its first oil well off Greenland, with shares riding high on hopes of a find. Only 6 wells have been drilled in Greenland, all of them unsuccessful. But the USGS estimates many tens of billions of barrels of available resources. FT: “Greenland is a true frontier, which is what makes it exciting; ‘romantic’, as one analyst put it. It is also nerve racking when you are spending an estimated $300m for four wells – Cairn’s expected budget – and plan to drill for two or three years.”18

5.1.10. National Grid warns industrial customers their gas could be cut off as a cold spell intersects with the return to work. This “gas balancing alert,” and a surge in gas prices, show once more how low UK gas storage capacity is.19

Carbon Trust says UK offshore wind faces huge challenges, but they can be overcome. The government’s announcement of the result of offshore wind licensing in a few days will see the UK emerge as the biggest offshore wind market. But 5 MW turbines will have to be installed in 30 metres of water at the rate of 2 a day to hit government targets. And the market-enablement regime beyond 2014 is in doubt, which means the economics and investability is too.20 But the CT thinks it can be done, and would create 70,000 jobs by 2020,

8 http://www.guardian.co.uk/business/2010/jan/03/shell-sri-lanka-solar-warranty-row#start-of-comments 9 http://www.guardian.co.uk/business/2010/jan/03/manufacturing-sector-slams-darling-claim-government-supports-green-jobs 10 http://www.guardian.co.uk/environment/2010/jan/03/european-unites-renewable-energy-supergrid 11 http://www.guardian.co.uk/commentisfree/2010/jan/03/uk-economic-recovery 12 http://.ft.com/cms/s/0/e7b2258a-f8af-11de-beb8-00144feab49a.html 13 http://www.ft.ccms/s/0/45e87598-f863-11de-beb8-00144feab49a.html 14 http://www.ft.com/cms/s/0/a8fe3a18-f8af-11de-beb8-00144feab49a.html 15 http://www.ft.com/cms/s/0/46d725b0-f897-11de-beb8-00144feab49a.html 16 http://blogs.ft.com/energy-source/2010/01/04/oil-price-rallies-to-more-than-80-but-will-it-stay-that-way/#more-38666 17 http://www.ft.com/cms/s/0/dd836182-f57b-11de-90ab-00144feab49a.html 18 http://www.ft.com/cms/s/0/233587c0-f962-11de-80dc-00144feab49a.html 19 http://www.ft.com/cms/s/0/6990fba0-f999-11de-8085-00144feab49a.html

2

Triple Crunch Log

50,000 of them in the manufacturing that it hopes will come to the UK. The result would be comparable to the opening up of the North Sea for oil in the 1970s and 80s.21

Why don’t governments talk about peak oil? Could it be because they know it is a huge problem? So a researcher asks in a review on The Oil Drum. Shane Mulligan, a postdoctoral fellow at the University of Waterloo, examines every explanation he can find referred to in the literature. They just don’t “get it”, or they are overly committed to neoclassiocal economics, or they are hindered from realisation by cognitive biases, or they have been misled by the IEA or EIA, or we can blame it on the media, or they get it but they can’t talk about it, or they are actively avoiding the issue (as in the Wicks Review), or they’re on the case. He tends to the view that they do know about peak oil, and not acknowledging it is part of their policy response.22

6.1.10. FTSE rides on 16 month high, with RBS one of the star stock performers. The FTSE 100 benchmark closes at 5,530.BIS invites top bankers to Basle to discuss resurgance of “excessive” risk behaviour in banks. The Bank of International Settlements – the central banks’ bank – says “financial firms are returning to the aggressive behaviour that prevailed during the pre-crisis period”. Among those invited were the CEOs of Goldman Sachs and JP Morgan Chase, and they do not plan to attend.23

Iceland’s President says he will take government’s EU reparation pledge to a referendum. By doing this he effectively blocks legislation to repay Britain and the Netherlands more than €3.8bn ($5.5bn, £3.4bn) lost to shareholders in Iceland’s banking collapse. He risks making Iceland a financial pariah nation.24

Business leaders hail Scottish ministers green light for power line through the Highlands as vital for onshore and offshore renewable energy, 4GW+ of which needs to be linked to the central belt. Scottish and Southern Energy will upgrade the existing 137-mile electricity transmission line from Beauly, near Inverness, to Denny, near Falkirk. 25

7.1.10. Gas supplies cut to businesses in the British NW as freezing spell hits western Europe. 95 companies on interruptible contracts are affected. EEF the manufacturers association, says: “unless we invest in gas storage facilities to the same levels as other industrialised nations, this could have a very damaging effect on manufacturing companies in the future.” The spot price of gas has risen sharply to 56p per therm, but still well short of the 2006 peaks of over £2 per therm.26

Large parts of freezing China now face power cuts as gas is limited. Demand has gone up and coal production has been disrupted.27

EDF boss says nuclear is essential, and will be cheaper than gas, coal with CCS, and renewables. Vincent de Rivaz, CEO of EDF Energgy, says that “using gas, additional offshore wind or clean coal instead of nuclear could cost consumers dearly. EDF Energy is among the companies developing renewables towards the government’s target. But replacing the planned 16GW of new nuclear capacity with offshore wind beyond the existing renewables targets could add about £100 a year to typical domestic energy bills (NB EDF says £40 for nuclear …so less than half as expensive), or possibly more, according to our calculations. The impact of clean coal would be only slightly lower. Gas-fired generation could also carry a high price. If fossil fuel prices return to their 2008 peak, using gas to replace nuclear would add around £60 to annual household bills. Of course, depressed fossil fuel prices could reduce this impact. But using more gas would do little to cut emissions and would increase concerns about energy security. The message is clear: if we are to cut emissions and keep bills affordable we need the cheapest low-carbon technology – nuclear.”28

Google asks for regulatory approval as an energy supplier. Last month the internet search company created a subsidiary called Google Energy. Now it seeks approval from FERC to buy and sell power like utilities do. Google says its primary goal was to gain flexibility for buying more renewable energy for its power-hungry data centers. 29 But ….Google’s Green energy czar, Bill Wiehl: “We also saw a real gap in what I would describe as “engineering innovation,” between what happens in a basic research lab and what happens in a typical venture capital-funded company. From an engineering point of view, it seems like it ought to be possible to do this, but no one’s actually ever designed this thing to really drive the costs down really low. What if we were to try? What if we were to fund someone else to try?” His unit’s goal is to make renewable energy cheaper than coal. The three most likely candidates for the breakthrough, he believes are CSP, enhanced geothermal, and high altitude wind. B ut: “As a society, we have chosen to invest too little in alternative energy over the years, and that has made some of the choices much harder than they should be. We should have been investing much more in solar [photovoltaics] since the 1970s than we have.”30

8.1.10. £40bn bonus pa outs to bankers show government efforts to have made no difference. The $65bn handout by the world’s biggest banks means they have elected to take the UK Treasury's 50% tax hit themselves rather than pass it on to their workers. An Illinois pension fund has argued in a lawsuit filed yesterday that the payments harm shareholders. Goldman Sachs maintains the lawsuit is “completely without merit”.31 German firms win most of the deals in the UK’s giant offshore wind licensing round . Nine consortia sign agreements with the Crown Estate, the body with responsibility for renewable power in UK waters, to take their proposals through the planning stage. Only three have British majority stakes, and only 5 involve British firms. Eon, RWE and Siemens are big winners. Some $75bn in contracts and 70,000 jobs are at stake in the c 32GW of offshore wind (6,500 turbines) intended to generate 25% of UK electricity by 2020.32

UK imports electricity from France to meet demand in the cold spell. At 2.30pm today France was sending 1,766 megawatts under the Channel.33

21 http://www.ft.com/cms/s/0/bc088e70-fa34-11de-beed-00144feab49a.html 22 http://www.theoildrum.com/node/6100 23 http://www.ft.com/cms/s/0/310b5c88-fb0d-11de-94d8-00144feab49a.html 24 http://www.ft.com/cms/s/0/2019f466-faea-11de-94d8-00144feab49a.html 25 http://www.ft.com/cms/s/0/e792283a-fade-11de-94d8-00144feab49a.html 26 http://www.ft.com/cms/s/0/98d6049a-fbca-11de-9c29-00144feab49a.html 27 http://www.ft.com/cms/s/0/a08bea5e-fbb3-11de-9c29-00144feab49a.html 28 http://www.ft.com/cms/s/0/c970c97c-fbc1-11de-9c29-00144feab49a.html 29 http://bits.blogs.nytimes.com/2010/01/07/google-applies-to-become-power-marketer/?th&emc=th 30 http://greeninc.blogs.nytimes.com/2010/01/07/qa-googles-green-energy-czar/ 31 http://www.guardian.co.uk/business/2010/jan/08/bonus-time-city-banks 32 http://www.guardian.co.uk/environment/2010/jan/08/north-sea-wind-contracts 20 http://www.ft.com/cms/s/0/4742578a-fa37-11de-beed-00144feab49a.html

3

Triple Crunch Log

9.1.10. Chinese renewables boss sees limited scope for CSP in China, preferring PV but Chinese companies are pushing ahead developing plenty of CSP nonetheless. Li Jenfung says concentrating solar power works best when cheap water, cheap land and lots of sun are available in the same place, and this is a rare combination in China. he also expects it to prove more expensive per kilowatt-hour generated than PV. Li is a deputy director general for energy research at the National Development and Reform Commission, the top economic planning agency in China, and secretary general of the government-backed Chinese Renewable Energy Industries Association.

10.1.10. US banks braced for bonus backlash. Goldman Sachs, Morgan Stanley and others prepare to be assailed by protest as they hand out massive bonus packages. GS considers a programme that would oblige its top executives to give a percentage of their package to charity. This would copy a policy at failed bank Bear Stearns, with required a 4% charity contribution from 1,000 executives in a programme that ran for decades. “Goldman set aside $16.7 billion for compensation in the first nine months of 2009, and in good years, the firm dedicates about three-quarters of its compensation budget to year-end bonuses. The firm is expected to report later this month what could be record profit of about $12 billion for 2009, according to analysts’ estimates, compared with $11.7 billion in 2007.”34

New fears about future gas supplies, as UK government signs off on new gas power plants. This new “dash for gas is fuelling concerns that Britain’s infrastructure may become more vulnerable to extreme weather and supply disruption. Some 14,000 megawatts of new gas-fired generation have been approved. Gas-fired capacity abailable this winter is about 25,000MW,35 Fear about nuclear radiation are irrational, says Oxford physics professor. The health dangers from nuclear radiation have been oversold, according to Wade Allison, who argues that low levels of radiation can be easily tolerated by the human body and that the government is right to promote nuclear power for climate change, therefore.36

11.1.10. Deep within Gazprom’s HQ, an engineer in a control room explains how he could turn off the lights. “An engineer explains how easy it would be to turn out the lights in a foreign city with the click of a button on his desk,” Dan Roberts writes in the Guardian. Gazprom claims to have natural gas in Siberia equivalent to all the oil and gas fields owned by western energy companies put together. 50.1% state owned, its taxes provide some 20% of the Russian government’s income. “Rumours persist that senior government figures (including Vladimir Putin) have sizeable indirect holdings.” The gas giant has had a bad year, but is bouncing back, given the return to $80 oil. Sergei Kupriyanov, Gazprom’s official spokesman, hopes Gazprom will sell to British residential sector one day. "Yes, definitely. The British market offers ample opportunities of developing downstream operations – we appreciate the fact that it's a liberalised market and all of the infrastructure is in place." UK reserves near depletion in less than eight years at current extraction rates.37

Demand for oil is increasing at such a rate in Saudi Arabia that exports are likely to be constrained , analysts fear. Domestic consumption jumped 16.4 per cent year on year in August because of an unprecedented surge in the burning of crude. Inefficient power plants and shortage of gas led the reasons. As a result, the IEA has revised up its forecasts for Saudi domestic oil consumption to 2.8m barrels a day in 2010. Last year’s production was a record 12.5m barrels a day. The government has postponed some energy-intensive projects. Oil is sold for $5 a barrel in the Kingdom. “Even Saudis complain that subsidised fuel and cheap cars encourage wasteful use of energy, especially by young people who have little means of entertainment in the conservative kingdom except driving or participating in unofficial drag races.”38 UK wind farms produced “practically no electricity” during the cold snap. Low pressures cut the wind out so that only 0.2pc of a possible 5pc of the UK's energy was generated by wind turbines in the last few days.39

12.1.10. Geoengineering conference convened in March in wake of Copenhagen’s failure. Says Mike McCracken of the US Climate Institute, convenor of the California event: “Most of the talk about these geoengineering techniques says they should be saved until we get to an emergency situation. Well the people of the Arctic might say they are in an emergency situation now.”40

Coal stockpiles fall to low levels in China’s cold spell. Supplies for 11 percent of power plants connected to China State Grid’s network have fallen to less than three days’ worth and could be shut “any time,” Xinhua news agency says.41 Investors are putting trillions at risk by ignoring climate change, Ceres report says. A survey of leading asset managers shows the vast majority are not factoring climate-related trends into their short- and long-term investment decision-making.42 EIA expects US gas output this year to be down 3% due to steep new-well production declines. In its January Short-Term Energy Outlook, EIA forecast consumption averaging about 62.44 bcf per day, versus 2009 demand of 62.45 bcf daily. Growth in residential, commercial and industrial use is offset by declining demand from the electric power sector.43

13.1.10. Ofgem sees a “cliff edge” in UK gas supplies in 2015-16. Alistair Buchanan, head of Ofgem, tells the FT he sees a risk that new Russian and the Caspian gas supplies might not be available in time to meet UK demand as domestic gas production falls. UK gas production is down 40% since 2000. Buchanan questions whether the ultra-competitive UK market is structured in the right way to guarantee security of supply.44

Russian gas bailed the UK out as Norwegian supplies faltered in the cold snap , the Major Energy Users' Council says. Eddie Proffitt, chairman of the council's gas group: “The [British] gas industry has coped

34 http://www.nytimes.com/2010/01/11/business/economy/11goldman.html?th&emc=th 35 http://www.ft.com/cms/s/0/cd32ec4e-fe40-11de-9340-00144feab49a.html 36 http://www.guardian.co.uk/environment/2010/jan/10/nuclear-power-irrational-fears 37 http://www.guardian.co.uk/business/dan-roberts-on-business-blog/2010/jan/11/gas-oilandgascompanies 38 http://www.ft.com/cms/s/0/04bc672c-fed1-11de-a677-00144feab49a.html 39 http://www.telegraph.co.uk/finance/newsbysector/energy/6957501/Wind-farms-produced-practically-no-electricity-during-Britains-cold-snap.html 40 http://www.guardian.co.uk/environment/2010/jan/12/geo-engineering-summit 41 http://www.bloomberg.com/apps/news?pid=20601072&sid=aqX2L6dP3z1g 42 http://blogs.ft.com/energy-source/2010/01/12/climate-change-isnt-making-inroads-necessary/ 43 http://www.reuters.com/article/idUSN1219634020100112 44 http://www.ft.com/cms/s/0/1cde9d3a-ffe3-11de-ad8c-00144feabdc0.html 33 http://www.guardian.co.uk/commentisfree/2010/jan/09/energy-supplies-offshore-wind-power

4

Triple Crunch Log

very well but we have been lucky. It would have been desperate if we had seen the kind of disputes between Russia and Ukraine that have reduced gas flows on the continent in the past two or three Januaries.”45

Recession hit North Sea 2009 oil and gas production. An average of 600m barrels of new reserves were brought on stream each year between 2004 and 2008. Wood Mackenzie reports only eight oil and gas fields – expected to produce a combined lifetime total of 140m barrels of oil equivalent – began production in 2009. Investment in exploration and appraisal drilling in the UK North Sea fell by 37 per cent in 2009, and the oil price drop delayed projects as well. 43 companies were working in the UK North Sea in 2008. 24 are today. Tax revenues from the North Sea were £6.9bn in 2009, down from £12.9bn in 2008.46 Russia seeks bilateral role in Indian solar expansion. Indian Prime Minister Manmohan Singh launches the Jawaharlal Nehru National Solar Mission, aiming for 20 GW of solar energy for India by 2022, alongside Sergei Seredin, Russia's first deputy director general of economics and finance, who led a delegation from Moscow in the inaugural ceremonies. He says Moscow was interested in playing a role in New Delhi's strategy to construct solar power stations and manufacturing facilities.47 American consumerism threatens the planet, says the Worldwatch Institute. The average American consumes more than his or her weight in products each day. This culture of of greed and excess and the exporting of it is emerging as the biggest threat to the planet, according to the annual report of the Worldwatch Institute. It could wipe out any gains from government action on climate change or a shift to a clean energy economy. In the Noughties consumption of goods and services rose 28% to $30.5tn (£18.8bn).48

Wall Street bosses apologise for mistakes but still defend bonuses. Leading Wall Street bankers tell the US government’s Financial Crisis Inquiry Commission that they underestimated the severity of the crisis and apologise for making mistakes and needing to be bailed out with $360bn. Commissioner: “If you knew then what you do now, what would you have done differently?” JP Morgan CEO Jamie Dimon: a crucial blunder was “how we just missed that housing prices don't go up forever.”49

14.1.09. China Daily reports oil imports “hit alarming levels” in 2009. 52% came from abroad. “Analysts believe that by 2020, nearly 65 percent of the oil consumed in China will have to be imported. China's oil dependency reached 45 percent in 2006 and grew at two percent every year after that.” The country first became a net importer of crude oil in 1993.50

US climate envoy US will not cede control to the UN. The UN process is too ponderous, and main emitters need to negotiate as a group, Todd Stern says. The big test for the Accord comes on 31 st January, when countries have to table their formal commitments. Copenhagen was a hair’s breadth from collapse, he says, in his first public appearance since the summit.51 Stern’s deputy Jonathon Persching says the UN should be sidelined. Fewer than 30 of 192 countries have signed the Accord.52

Arctic permafrost leaking methane at record levels. New figures published in Science magazine show emissions rising by almost a third in just 5 years, by around 1m tonnes of extra methane each year between 2003-2007, driven by rising temperatures. The study also shows just 2% of global emissions are from the Arctic, but that is the fastest growing region. There is a clear positive feedback, says Paul Palmer of Edinburgh University, one of the researchers.Targeting of US weather reporters on climate-change denial has been brutally effective and may have been the most successful targeted campaign ever. Sea Kidney: “have a look at a story just published in the Columbia Journalism Review on the extraordinarily powerful impact on US public opinion of pseudo-scientist TV weather reporters.53 I first became aware of the assertive ignorance of some weather reporters when my news monitoring kept turning up denialist stories on the Weather Channel website, and I dived in to try and correct some of them. The Columbia Journalism Review story explains just how widespread the problem is and, at the same time, just how central weather reporter views are to the understanding of climate change by the US public. When asked in a national survey who they trusted for information about global warming, 66 percent of respondents named television weather reporters! Unfortunately, most weather reporters don't 'believe' in climate change. The underlying story is how the 'sceptic' Heartland Institute targeted weather reporters some years back, giving them free tickets to sceptic's conferences and the like. That would have to be one of the more successful targeted campaigns in history, helping block policy progress for years; it needs to be reversed.” Targetting investors in coal is the way to do that.54

China’s growing coal imports begin to look costly as thermal coal price hit $100 a tonne , and the FT speculates that long-term coal dependence could be under review. Domestic demand for coal began to catch up with domestic production about 2008 and China began importing from new sources recently.  More than half of China’s coal imports come from Australia, Indonesia and Vietnam, with Russia, Mongolia, and Canada the main second-tier suppliers. This month, for the first time, imports include Colombia coal. Prices for thermal coal hit $100/tonne this week.55 Jim Hansen in open letter to carbon traders: you “are choosing the path of corporate greed.” Cap-and-trade allows energy companies to add the costs of the right to pollute to consumer’s fuel bills in a hidden tax. The fee-and-dividend approach that he favours taxes fossil fuels at the point of extraction, and spreads the proceeds among the public so they can reduce their carbon footprint and avoid high fuel prices.56

Obama announces a levy that will recover $90bn from the 50 largest US financial institutions. The President calls the bankers’ bonuses “obscene” and tells them: “I’d urge you to cover the costs of the rescue not by sticking it to your shareholders or your customers or your citizens but by rolling back bonuses.” He urges other countries to follow suit.57 Obama needs to levy the fee to help cover a $117bn loss to the US treasury from

45 http://www.guardian.co.uk/business/2010/jan/13/russia-aids-gas-uk-gas-supply 46 http://www.ft.com/cms/s/0/e0db0b90-0099-11df-ae8d-00144feabdc0.html 47 http://www.upi.com/Science_News/Resource-Wars/2010/01/13/Moscow-eyes-role-in-Indias-solar-plans/UPI-17341263401397/ 48 http://www.guardian.co.uk/environment/2010/jan/12/climate-change-greed-environment-threat 49 http://www.guardian.co.uk/business/2010/jan/13/financial-crisis-inquiry-mistakes 50 http://www.chinadaily.com.cn/china/2010-01/14/content_9317561.htm 51 http://www.guardian.co.uk/environment/2010/jan/14/climate-change-us-envoy-copenhagen 52 http://www.guardian.co.uk/environment/2010/jan/14/climate-talks-un-sidelined 53 http://www.cjr.org/cover_story/hot_air.php?page=all 54 e-mail from Sean Kidney to undisclosed recipients, 14 January 2010. 55 http://blogs.ft.com/energy-source/2010/01/14/could-china-fall-out-of-love-with-coal/ 56 http://www.guardian.co.uk/environment/2010/jan/12/james-hansen-carbon-emissions

5

Triple Crunch Log

the $700bn TARP bailout, and wants it in place by June. He intends to apply a levy of 15 basis points, or 0.15%, on the liabilities of 50 large financial institutions with assets of more than $50bn. Jamie Dimon, JP Morgan CEO: “Using tax policy to punish people is a bad idea. All businesses tend to pass their costs on to customers.”58

The world's biggest banks are flouting the Equator Principles, environment groups say. They continue to lend to some of the most environmentally damaging energy and infrastructure projects despite the protocol agreed to seven years ago that was meant to stem such practices, including the financing of huge projects that fuel climate change. 86 campaign groups from 27 countries have sent a letter to 60 banks pouring scorn on the way the Principles are being flouted.59

Green technologies pose “the investment opportunity of our lifetime” says Deutsche Bank. Companies specializing in energy efficiency and renewable energy such as wind and solar power outperformed peers across the wider global economy last year, a Deutsche Bank report finds in a study. The Bank expects more of the same in 2010. Kevin Parker, global head of asset management: “The absolute imperative to prevent climate change is therefore also, I believe, the economic and investment opportunity of our lifetime.”60

15.1.10. FT editorial: “Obama is right to clobber Wall Street”. “Debate about the levy, however, must not distract from the question of how to construct a financial system where banks can fail safely. In future, it must be easier for bank debt to be turned into common equity in a crisis, and the fate of insolvent banks’ counterparties must be made clearer to prevent the panic that followed the Lehman bankruptcy. Capital requirements must also be raised.”61

Paul Krugman on the testimony of the “clueless” Wall Street bosses. “The bankers’ testimony showed a stunning failure, even now, to grasp the nature and extent of the current crisis. And that’s important: It tells us that as Congress and the administration try to reform the financial system, they should ignore advice coming from the supposed wise men of Wall Street, who have no wisdom to offer. There were two moments in Wednesday’s hearing that stood out. One was when Jamie Dimon of JPMorgan Chase declared that a financial crisis is something that ‘happens every five to seven years. We shouldn’t be surprised.’ ….Goldman Sachs’s Lloyd Blankfein, who compared the financial crisis to a hurricane nobody could have predicted.” 62

Areva weighs cheaper reactors after failure of Abu Dhabi bid. An internal review has been launched to assess whether to reintroduce the simpler second-generation CPR1,000 reactors, which it stopped building 20 years ago. “Safety standards in the US and Europe would not allow a second-generation reactor to be built,” an Areva executive acknowledges: but 20% of countries that would accept the lower safety standards. Areva's third generation EPR reactor, marketed as an advance in safety technology, has features such as a double shell reinforced to withstand an airline crash, and a secure chamber to contain waste from a core meltdown. EDF estimates the cost at about €4bn ($5.8bn) or even higher. This seems to have been too much for Abu Dhabi.63

17.1.10. A string of tech companies prepares IPOs in London after a drought of three years . “To float you need scale and and a good growth story. Many companies are talking about floating this year but I think you will be lucky if 20 per cent of them actually do,” says one analyst. In 2009 IPOs represented only 10 per cent of venture-backed exits, with M&A 90 per cent.64

SRI may be holding back sustainable investment: FT op-ed. Assets under management rose by 9 per cent a year to €53bn (£47bn, $77bn) by the end of June 2009. Some say this proves socially responsible investing (SRI) is more than a fashion. Yet SRI remains a niche area with SRI assets reaching a mere 1.11 per cent of total assets in Ucits funds this year. “We think part of the answer lies in the lopsided relationship between SRI and risk. SRI is often considered a non-financial overlay to the investment process. It seeks to protect the investor from making unethical, socially undesirable or environmentally unfriendly investments. Sustainable investment, however, has an investment return focus that regards sustainable development as an opportunity to invest based on a set of financial and non-financial criteria. These, therefore, are two very different animals and SRI may be holding back sustainable investing.”65

18.1.10. Goldman Sachs: oil shortages will reappear in 2011. By then supply demand will be outpacing supply because of underinvestment. Analyst Jeffrey Currie forecasts demand exceeding pre-crash levels by Q3 this year. “It’s as good as it’s going to get right now in terms of supply growth,” says Currie. Goldman predicted in December that crude would average $90 a barrel in 2010 and $110 per barrel in 2011. Goldman’s outlook for this year is joint-highest among 38 analyst estimates compiled by Bloomberg.66

ITPOES Letter to FT: Gas crunch that will prove a wake-up call for consumers. Sir, Your report “Ofggen foresees looming threat to gas supplies” (January 13) raises some serious concerns over national energy security. The “gas crunch” identified in your report is probably going to be matched, or exceeded, in its effect on the UK economy by a similar “oil crunch”. This prospect was first identified by the Industry Task Force on Peak Oil and Energy Security (ITPOES) in its report dated October 2008. Oil supply has very similar characteristics to gas, except that the run-down in indigenous production is more advanced and the availability of oil is more limited with respect to future demand. (The ability to extract “tight” gas from shale, at economic prices, has transformed the near-term international prospects for future gas supply.) A second report from ITPOES, updating and reinforcing the case, will be published by us on February 10. For those interested in the future security of UK energy supplies, it should be essential reading. From businesses to consumers, it is a wake-up call to every one of us about the future implications for our daily lives.Richard Branson, Founder, Virgin Group; Philip Dilley, Chairman, Arup; Jeremy Leggett, Chairman, SolarCentury; Ian Marchant, Chief Executive, Scottish and Southern Energy; Brian Souter, Chief Executive, Stagecoach Group67

BP joins with Sinopec in talks about shale gas exploration and development in China. Shell and Petrochina already have a shale gas programme. The deal hinges on Chinese access to western technology.68

Shell faces renewed investor pressure over tar sands. A coalition has forced a resolution onto the agenda of the May AGM calling for the Shell audit committee to do a review of risks. Catherine Howarth, chief executive of FairPensions, coordinator of shareholder opposition to the tar sands investments: “All (shareholders) are united in registering concern with the risks involved in Canadian oil sands. We expect that Shell's 2010 AGM could prove a watershed in the history of corporate accountability.”69

French nuclear industry in crisis as EDF and Areva go to war. EDF says Areva has halted uranium supplies and stopped removing spent fuel for treatment in an increasingly bitter row over their contractual relationship. The heads of the two state operators are asking Sarkozy to adjudicate. Areva supplies 68 per cent of the uranium used in EDF's reactors. EDF, which provides 77% of French electricity from its nuclear plants, has stocks for several months. The row has been cited as one of the factors behind France's failure to secure the contract to build reactors in Abu Dhabi.70 Germany removes nuclear waste from a salt dome repository that has “proven unstable”. Thousands of barrels of low-level waste are to be removed from Germany's Asse radioactive waste disposal facility. The

6

Triple Crunch Log

country's Federal Office for Radiation Protection (Bundesamt für Strahlenshutz, BfS describes the job as a “major scientific and technological challenge.”71 EON boss calls for rethink on retiring all coal fired power plants to make sure lights don’t go out. “There is a question mark over keeping one or two of these oil or coal fired plants mothballed to secure supplies for a few days per year when we get these conditions,” Paul Golby says.72 Coalition letter in Guardian urges higher solar UK feed-in-tariffs for UK. Signatories include the Home Builders Federation, the Federation of Master Builders, the National Housing Federation, many companies, and NGOs.73 Larry Elliot says “enjoy it while it lasts”: global credit bubble is far from over , and much depends on China. “Everybody knows what should happen in theory: the Chinese need to boost domestic consumption rather than relying on exports. Otherwise, with America unable to act as the world's consumer of last resort, the world is going to be flooded with goods that nobody wants. The lack of global demand will force down prices, making the threat of deflation extremely real and adding to pressure for trade barriers.”74

NY Times editorial describes “how retirees saved the banks”, and get a terrible deal in the process. “Measly savings yields are central to the government effort to buy time for the banks to earn their way back to health. It is important to rebuild the banks. But more attention must be paid to the collateral damage from that effort. Here’s what’s happening: By lowering the short-term interest rate it controls to virtually zero and creating lending programs, the Federal Reserve has enabled banks to borrow cheaply. The banks re-lend that cheap money, but not necessarily to consumers and businesses. They can, for example, lend it to back to the federal government by buying Treasury securities, and earn a nice spread between their cost of funds and Treasury yields. At the same time, banks are awash in deposits, much of it from investors who have pulled their money out of riskier investments. With money rolling in, big banks don’t need to compete with one another for savers, which further depresses the interest on offer. The result is presumably healthier banks and certainly poorer savers. Or, as William Gross, the legendary bond investor told The Times’s Stephanie Strom: “It’s capitalism, I guess, but it’s not to be applauded.” 75

19.1.10. Could China be the next Enron, Thomas Friedman asks. Maybe, after the Google fiasco. James Chanos, the investor who started the shorting of Enron stock and made a fortune, has said that China is akin to Dubai only 1,000 times worse. On 12th of January, Friedman concluded he was unlikely to be right. The reasons for his doubts started with the $2 trillion of foreign currency reserves.76 But today, he revises his view. After the government-backed hacker raid on Google, Friedman thinks “Command China” is increasingly at work with “Network China.” For this reason, Freidman thinks the Communist Party is worth shorting.77

20.1.10. UN drops deadline for emissions commitments under Copenhagen Accord. With the 31 January deadline looming, only 20 countries have filed. So the commitment becomes a “soft” target Un chief of climate Yvo de Boer decides.78

China's renewable energy consumption accounted for 8.3 percent of the total energy in 2009. So says an official from the National Energy Administration, Shi Lishan. China consumed 3 billion tonnes of standard coal equivalent in 2009, more than 90 percent from traditional fossil fuel sources, with over 70 percent from coal. China intends to raise total hydropower capacity to 300 gigawatts and wind power capacity to 150 gigawatts by 2020, Shi says. Total installed nuclear capacity should reach 80 gigawatts by 2020, while solar capacity should rise to 20 gigawatts.79

IPCC leader has to back down from claims Himalayan glaciers would melt by 2035 . “One paragraph, buried in 3,000 pages of reports and published almost three years ago, has humbled the head of the UN's IPCC. Facing global outcry, Rajendra Pachauri backed down and apologised today.” JL: So, another blow to credibility that will reverberate endlessly around the world, while the torrent of scientific bad news passes the the great majority by.80

Nature looks at “the real holes in climate science” and concludes they favour a worse outcome. The science magazine recounts six common myths:“- Climate models can't provide useful information about the real world. Models can reproduce much of the climate variation over the past millennium, but projections for the future are subject to well-described uncertainties, both in the understanding of climate and in estimates of future economic development. They cannot therefore provide decision-makers with exact information of the rate of future changes, but they can offer useful general information and they unconditionally predict a warmer world.- Global warming stopped ten years ago. Climate is not weather. The climate is the multi-decade average of the constantly changing state of the atmosphere. Natural variations can cause temperatures to rise and fall from year to year or decade to decade. Although global temperatures did not rise as quickly in the past decade as in previous ones, the most recent decade was the warmest on record.- Temperatures were higher in pre-industrial times. The consensus of proxy-based reconstructions of pre-industrial climate is that the second half of the twentieth century was probably warmer than any other half-century in more than a millennium. Warmer periods did occur in the more distant past, albeit under different orbital and geological conditions. In any case, warm spells in the past do not disprove human influence on climate today. The cause of any particular climate change needs to be investigated separately.- Temperature records taken in the lower atmosphere indicate that the globe is not warming. A decade ago, there seemed to be a discrepancy between surface and tropospheric temperatures. But this issue was resolved when long-standing calibration problems with satellite sensors were discovered. Satellite measurements show that the lower atmosphere is warming at a rate consistent with the predictions of climate models.- A few degrees of warming are not a big deal. In the most recent ice age, the world was only a few degrees cooler on average than it is today. The current rate of warming is in all likelihood unique in the history of humankind. There may be no such thing as an 'optimum' temperature for the planet, but modern human societies are adapted to the weather patterns and sea levels of the past millennia. The rapidity of global warming substantially adds to the problem.- Measured increases in temperature reflect the growth of cities around weather stations rather than global warming. Climate researchers have taken great care to correct for the impact of urbanization in temperature records by matching data from more-urban stations with data from rural ones. Moreover, some of the largest temperature anomalies on Earth occur in the least populated areas, including around the Arctic and the Antarctic Peninsula. Measurements also show warming of the surface ocean and deeper marine layers.”81

Bill Gates says nuclear is worth pursuing; solar and wind, though good, have limitations . This on his Gates Notes web site, relaying his views about social problems, launched today. Gates has invested in a Seattle-

7

Triple Crunch Log

based nuclear company working on reactor design, TerraPower. Solar is “way, way, way out of line” and has storage problems, he says in a podcast.82

21.1.10. Obama prepares for what he calls a “big fight with the banks” with limits on their trading. The day after a shock defeat for the Democrats in the Massachusetts Senatorial by-election, Obama makes a populist move. Proprietary trading operations, where banks use their own corporate funds to gamble in the markets, will now be limited. “We’ve got a financial regulatory system that is completely inadequate to control the excessive risks and irresponsible behaviour of financial players all around the world,” Obama says. “People are angry and they’re frustrated. From their perspective, the only thing that happens is that we bail out the banks... We’re about to get in a big fight with the banks.”83

The new banking regulation will be called “the Volcker Rule,” after its architect in the White House, Paul Volcker, the former Chairman of the Federal Reserve under Carter and Reagan.84 It prohibits any bank holding deposits guaranteed by the government from operating hedge funds, private equity funds, or from proprietary trading. On top of this will come a limit on the size of any bank.85

Goldman Sachs, announcing results, says it is exercising “restraint” in lowering bonus payouts to $16bn, so that the average pay packet is fractionally less than half a million dollars per employee. The proportion of revenue allocated to pay falls from 48% to 35.8%, the lowest proportion since the bank went public in 1999. Its compensation pool is reduced by a $500m donation taken from the pay of Goldman's 400 senior partners and given to a charitable foundation, Goldman Sachs Gives. CFO David Viniar: “We are certainly appreciative of the policies governments around the world put in place to help stabilise the world's financial system. We think they did a really, really good job.”86

UK could follow Obama lead on bank constraints. US officials will come to London to discuss co-ordinated action.87 But Darling has opposed a return to Glass-Steagal-type regulation, whereas the Conservatives say what Obama intends “needs to be done.”88

UK begins a programme to repatriate all radioactive waste from abroad. A cargo set sail for Japan last night, under an agreement that will cut Britain’s high-level waste stockpile by almost 40 per cent over the next ten years. All 925 tonnes of foreign atomic waste from Japan and four other countries will go. 28 steel canisters of waste, each weighing half a tonne but sheathed in 100-tonne steel flasks and under heavy security, are moved by rail from Sellafield, where they have been in temporary storage since the 1990s, to Barrow-in-Furness, there to be loaded on to the Pacific Sandpiper, a custom-built, double-hulled ship. Armed guards will protect the canister on their six to eight-week sea journey. The other countries involved are Germany, Italy, Switzerland and the Netherlands. Contracts from the 1970s and 1980s brought the spent nuclear fuel rods to Britain for reprocessing. But problems with the Sellafield plant and commercial disagreements led to lengthy delays. Some 5,000 steel canisters have been held at Sellafield. Direct exposure would kill a human being instantly. Japan will store the first shipment of canisters temporarily at the Rokkasho nuclear facility. It has not yet built a permanent-storage repository.89

22.1.10. FTSE and Dow Jones fall as investors fret over Obama’s move. Banks are the biggest losers of course, but Google’s spat with China isn’t helping.90

Brown to push for a Tobin Tax in wake of Obama’s gear change. But the City Minister Myners says the UK does not to copy the US because we already have a tax and requirement for living wills.91

Barclays elects to defer bonuses for top bosses in face of public pressure. Up to 100% will be deferred for three years.92

National Audit Office doubts ministers can deliver on promise of no public subsidy for nuclear. In a new report, the government’s own accountant doubts whether companies will be able to pay the full costs.93 VC investment down 37% in 2009, PWC reports. $17.7 billion went to 2,795 start-ups — 37 percent less cash and 30 percent fewer deals than in 2008. VC funds raised $15.2 billion, a 47 percent decline from the year before. Roger McNamee, co-founder of Elevation Partners: “the venture capital industry’s just lost its way, and it needs to reinvent itself. A very cynical game has developed where they make enough money off the fees to support a lovely lifestyle and they don’t have to work very hard.” Ten-year returns for the industry have dropped to 14 percent, from 36 percent in 2000, according to Cambridge Associates. Initial public offerings and sales of venture-backed companies were both sharply down: just 13 and 262 respectively.94

A quarter of the US grain crop is now being fed to cars, not people. So new 2009 figures from the Department of Agriculture show. This is enough to feed 330m people at average world consumption levels. Lester Brown: “Continuing to divert more food to fuel, as is now mandated by the US federal government in its renewable fuel standard, will likely only reinforce the disturbing rise in world hunger. By subsidising the production of ethanol to the tune of some $6bn each year, US taxpayers are in effect subsidising rising food bills at home and around the world.” 95

23.1.10. Prosperity without growth: it is possible, and imperative, Tim Jackson argues in his new book. “Questioning growth is deemed to be the act of lunatics, idealists and revolutionaries. But question it we must,” says Jackson in “Prosperity Without growth.” JL Review in Guardian: “For what it's worth, as a creature of capitalism – a venture-capital-backed energy industry boss, a private equity investor, and an Institute of Directors director of the month – I am convinced that capitalism as we know it is torpedoing our prosperity, killing our economies and threatening our children with an unlivable world. Tim Jackson has written the best book yet making this case, and showing the generalities of the escape route. The specifics, post-Copenhagen, are all down to us.”96

Banking lobbyists gear up to fight Obama’s reforms. The top 8 US banks spent $26m on lobbying last year – up 6% despite the crisis. They gave $78.2m to federal candidates and party committees in the first 10 months: more than any other business sector.97 They have a successful track record. A $300m lobbying assault during the Clinton administration saw the 1999 repeal of Glass-Steagal. Citigroup was a big beneficiary, and hired Clinton Treasury Secretary Robert Rubin soon after the appeal.98 An IMF paper has shown that the more a bank spends on lobbying, the bigger the risks it takes.99

If bankers had paid just 20% less in bonuses 2000-8, they would have had £75bn more capital – more than the taxpayer put in. So the Bank of England has shown, according to Will Hutton. Averting the crisis required £1.3 trillion of liquidity, guarantees and capital injections.100

24.1.10. Banks and investors are pulling out of carbon markets in the wake of the failure in Copenhagen . So Anthony Hobley, head of climate change and carbon finance at Norton Rose, and others, report.101

Shell CEO says Shell’s expansion in the tar sands will be “very much slower” in years ahead. The company is making a strategic shift away from unconventional oil, and rely more on conventional oil and gas for growth.102

8

Triple Crunch Log

Saudi lead climate negotiator says climate talks are a worse threat than rival oil producers, and says the Kingdown will build a solar capacity quickly. “It's one of the biggest threats that we are facing,” says Muhammed al-Sabban, head of the Saudi delegation to the U.N. talks on climate change. “We are worried about future demand ... oil is being singled out. We are heavily dependent on one commodity.” The kingdom sees “some truth” in studies that point to demand peaking in 2016. Saudi Arabia plans to invest heavily in solar, al-Sabban says, hoping to begin exporting solar electricity by 2020. Saudi Oil Minister Ali al-Naimi has also said the government aims to make solar a major contributor to energy supply in the next five to 10 years.103

25.1.10. Economic growth cannot be achieved while limiting global warming to 2 degees C , a new Economics Foundation report concludes. The levels of carbon intensity required are probably impossible to achieve.104

EPA may tighten anti-SO2 rules as another route to cutting US coal use. Bernstein analyst Hugh Wynne sees such an approach forcing coal into “secular decline” in the US, because the tightening proposed would require a cut in emissions of 50% by 2015.105 China is setting the oil price, Goldman Sachs analysts think. They point in their weekly review to a 1.6mb/d rise in Chinese demand more than offsetting the 1.5 mb/d fall in the US.106

More and more families are falling into debt with energy companies in the wake of the cold spell.107

Meanwhile, the cold spell has put £100m of additional profits for energy companies, analysts report.108

Recovery of public trust in business is patchy, and working with NGOs will help, a global survey for Davos shows. Trust in business has risen from 49 per cent to 53 per cent around the world, according to Edelman’s annual “trust barometer” of well-educated, highly paid and engaged “informed publics.” Trust in government rose from 44 per cent to 46 per cent globally (up from 30 per cent to 43 per cent in the US but down from 41 per cent to 35 per cent in the UK). China, in contrasts, score 77%. Trust in US banks is just 29 per cent, down from 36 per cent in 2008, and 69 per cent in 2007, when US banking was the number three most trusted industry. Now it’s second lowest after insurance. “The survey draws the clearest picture yet of an emerging ‘stakeholder society’, in which delivering financial returns for shareholders is no longer seen as executives’ sole priority,” the FT reports. Just over half of those polled saw service to “society at large” as equally important. A clear majority say they are more likely to trust companies that work with NGOs to tackle global issues.109

26.1.10. Cyber attacks on oil majors include reserves details. Christian Science Monitor reports that at least three US oil companies - ExxonMobil, Marathon Oil and ConocoPhilips - have been targeted by hackers, possibly in China. The hackers have accessed ‘bid data’: highly sensitive commercial information discoveries and reserve estimates.110

27.1.10. Obama singles out green energy and infrastructure jobs in his State of the Union address. $30bn of the money repaid by Wall Street will go to community banks for lending to small businesses. Large numbers of jobs can be created in infrastructure projects such as higgh-speed rail, and clean energy, the President says. 111

He briefly refers to the world pushing ahead with a climate change agenda, but does not mention global warming or the cap and trade bill.112

Barclays President Bob Diamond lashes out at Obama measures in Davos. “If you say that large is bad and we move to narrow banks the impact on jobs and the global economy will be very negative.”113

Darling has secret talks with bankers in Davos as top City bankers try to head off Obama-style measures in the UK. But FSA boss Turner says policymakers need more than interest rates to tame asset-price booms and calls for the creation a new macro-prudential body in Britain with the power to take pre-emptive action.114

FT commentariat split on the Volcker plan. Martin Wolf points to a number of difficulties, but John Gapper welcomes it, even though the investment banks escaape lightly.115

US courts set to become a major battleground on climate change as three cases progress. Three lawsuits have been filed around the US, and are gaining ground. Two federal appeals courts, one in Connecticut and one in Mississippi, have reversed decisions by federal district courts to dismiss climate-change lawsuits, allowing the cases to go forward. The third, an Innuit lawsuit in Alaska over eroding shoreline, is going to appeal. The American Justice Partnership argues that the conspiracy accusations on this case make it “the most dangerous litigation in America.”116 In a report last year, Swiss Re compared the suits to those that led dozens of companies in asbestos industries to file for bankruptcy. The reinsurance giant predicted that “climate change-related liability will develop more quickly than asbestos-related claims,” and said that pressure from the cases “could become a significant issue within the next couple of years.”117 UK opinion poll shows huge public support for feed-in tariffs. A survey of more than 2,000 people carried out for the Cooperative Group and others shows that two-thirds of people think that the government's feed-in tariff plans should be more ambitious, and that 71% of homeowners would consider installing green energy systems if the tariffs give a good return. JL: says that the new government scheme could yet deliver hundreds of thousands of jobs in solar photovoltaics and other small-scale renewables. “It could also cut significantly our country's increasing dependence on imported fossil fuels,” he added.118

Up to £160bn per field tax relief available for oil companies on the North Sea frontier, the Government announces. This applies to companies planning to exploit the estimated 4bn barrels of oil and gas equivalent lying in deep waters as far as 100 km off the west coast of the Shetland Isles. Total claims the projects will be uneconomic with support because of the long distance transportation requirements.119

Areva and GDF-Suez negotiate a partnership to develop the next generation nuclear reactor. Not yet signed, it will surely be opposed by EDF’s new boss. The deal will give EDF’s rival privileged access to the design and operation of the Areva/Mitsubishi 1110MW Atmea reactor, a smaller version of Areva’s flagship 1600MW EPR reactor.120

Toyota wins the Zayeed Prize, and then has to recall millions of cars in the US with faulty accelerators. More may need to be recalled in Europe and China.121

28.1.10. Saudi Aramco and Total bosses disagree on the peak oil threat in Davos. “The concern about peak oil is behind us,” Aramco chief executive Khalid al-Falih tells a forum of oil bosses at the World Economic Forum. Total chief executive Thierry Desmarest says 95 million barrels per day will be the cap -- 10 percent above present levels in “about 10 years ….The problem of peak oil remains.” Falih: “Of the 4 trillion (barrels) of oil the planet is endowed with, only 1 has been produced. Granted most of what remains is more difficult and complex (to exploit) ... there's no doubt we can do a lot more than the 95, 100 (million barrels) that are projected in the next few decades.”122

Global demand will be >100mbd by 2030, says Tony Hayward in the same forum. This will be a “supply challenge.” He pins major hopes on Iraq growing to . 10mbd. Peter Voser of Shell agrees, and says the

9

Triple Crunch Log

investment needed will be up to $27 trillion ….> $1.3 trillion a year. PWC estimates that only a third of global supply will go to the OECD by 2030. China sold 13m cars last year.Unconventional gas is a “complete game changer in the US,” says Hayward. “It probably transforms the US energy outlook for the next 100 years. It's yet to seen if it can be applied globally.” Gazprom seems un-nerved. A board meeting in Moscow this week apparently centred on the implications of US shale gas on its own investment plans for the northern Yamal peninsula, with export by ship to the US partly in mind. Meanwhile, the EPA is airing “serious reservations” about allowing shale gas drilling in parts of New York state in case NYC water supplies are affected. The EPA identifies 14 “contaminants of concern” in 11 private wells surveyed in the Pavillion farming community of Wyoming. Contamination has also been found in in Pennsylvania. Bills are under preparation in Congress that would tighten restrictions on unconventionals. In Taking over gas company XTO, Exxon inserted a clause enabling it to scrap the transaction if there were changes to the law that made hydraulic fracturing “illegal or commercially impracticable.”123

Environmental problems of fracking in shale gas production include air quality: elevated benzene. The Texas Commission on Environmental Quality has found elevated levels of benzene, a carcinogen, at 19 of 94 sites saampled above the Barnett Shale.124

29.1.10 Scientists say almost one third of warming in 1990s was down to stratospheric water vapour, an effect that had been underestimated. Susan Solomon’s NOAA team says their research does not invalidate projections of climate change, but it seems certain to be used by sceptics. Water vapour has dropped 10% since 2000. Solomon says: “We call this the 10, 10, 10 problem. A 10% drop in water vapour, 10 miles up has had an effect on global warming over the last 10 years.” She is not sure if this is a negative feedback or a natural effect.125

30.1.10. China is moving ahead so fast with green energy that dependency for West may be an issue. China became the largest manufacturer of wind turbines last year and of solar cells the year before. An article in the New York Times posits: “These efforts to dominate renewable energy technologies raise the prospect that the West may someday trade its dependence on oil from the Mideast for a reliance on solar panels, wind turbines and other gear manufactured in China.” Renewables jobs were 1.12 million jobs in 2008 and are climbing by 100,000 a year, says the Chinese Renewable Energy Industries Association. China’s domestic demand for electricity is rising 15 percent a year, and the International Energy Agency says China will need to add nearly nine times as much electricity generation capacity as the United States will. The government announced the creation of a National Energy Commission this week, composed of cabinet ministers in a “superministry” led by the Prime Minister Wen Jiabao. 126

31.1.10. Senior negotiators around the world say a climate deal in 2010 is impossible. A senior British diplomat said ahead of Copenhagen: “we can go into extra time, but we can’t afford a replay.” And he is proving right.127

1.2.10. Shale gas boom may leave US as a gas exporter, some independent producers are saying. How fast things change. In 2006, Wood Mackenzie predicted the US would be the biggest importer of LNG by 2010. Ths industry says it now has enough supply for 100 years.128

UK renewables industry welcomes microgeneration feed-in tariffs announcement. JL: “Feed-in tariffs are going to be a big boost for the industry and for the first-time, homeowners can see a decent financial return. We estimate homeowners can save and earn more than £1,000 per year for 25 years, increasing with inflation (of energy bills), giving a payback in around 10 years.”129 “That’s a better return on investment than you’d get from a bank.”130 “The scheme could lead to 100,000 new jobs in the UK solar industry by 2020.”131 UEA scientist hid climate data flaws, Guardian investigation by Fred Pearce shows. Chinese data used in 1990 to demonstrate only a small warming contribution from cities were inadequate - the locations having been lost - and Phil Jones of UEA withheld the information when it was requested under Freedom of Information. Jones also asked other climatologists to delete e-mails relevant to FOI requests.132

Nonetheless, concludes Fred Pearce, “the ‘climategate’ scandal is bogus and based on climate sceptics lies. Claims based on e-mail soundabites are demonstrably false – there is manifastly no evidence of clandestine data manipulation.” Palin, Inhofe and others have quoted “evidence” cut-and-paste together by professional sceptics who have used two devices: quoting out of context, and juxtaposing quotes from e-mails sometimes written ten years apart, as though related.133

US deficit will be nearly 11% of GNP this year, and more shockingly isn’t projected to get below 5% before 2020. NYT: “For Mr. Obama and his successors, the effect of those projections is clear: Unless miraculous growth, or miraculous political compromises, creates some unforeseen change over the next decade, there is virtually no room for new domestic initiatives for Mr. Obama or his successors. Beyond that lies the possibility that the United States could begin to suffer the same disease that has afflicted Japan over the past decade. As debt grew more rapidly than income, that country’s influence around the world eroded.”134

“Old Davos” is in retreat, Gideon Rachman argues in the FT. At the World Economic Forum, confidence has been shaken in the old belief – firmly held since the end of the cold war - that globalisation is good. Protectionist ideas are returning, and now it is the eastern nations that try to persuade the western that free trade is essential. Sarkhozy’s keynote address was an attack on financial capitalism. He made one Russian delegate nostalgic for the old days he remembered in the Soviet Union. Sarkhozy argues for a “carbon frontier tax” on the goods of countries that don’t act on climate change. Also, says Rachman: “Banker bashing rivalled skiing as the most popular sport at this year’s forum.”135

Petroleum Review assesses risk of “rapid rise in criminality in the oilfields” to Iraqi production , which the oil minister hopes will rise from 2.5mbd now to 12 mnd by 2016: more than Saudi Arabia and Russia. There are 13 regiments of the Oilfield Protection Force in the Basra region alone. Gun battles between this oil police force and local militias are now “frequent.” Locals are going to have to do most of the work: BP’s expats are expected to number only in the tens. Also in this ussue: OPEC spare capacity is not certain: it may be as low as 3 or as high as 6 mbd, 50-80% of it in Saudi Arabia and Kuwait. Chinese buyers of new cars face a three month delay despite round the clock shifts in factories.136 (L)Even promoters of new more efficient tar sands technology are sceptical of lifting production much : water use and gas use remain huge issues, with even CERA saying it could take up to 15 years to commercialise new more efficient technologies. 1.7 mbd of projects have been cancelled or delayed indefinitely since the oil price fell for $147.137 (L)Flawed arguments underly carbon trading, and massive fraud will be inevitable if it takes off. So an article in Petroleum Review argues. The value of total transacted carbon trades in 2008 was $126bn - $92bn of that in the EU ETS – up from $63 bn in 2007. If the US and others follow the EU, the market would be four times higher by 2014, en route to being bigger than oil and gas trading. Enron- and sub-prime-type malfeasance

10

Triple Crunch Log

would then be inevitable. Traders have moved effortlessly from Enron to the property market to the carbon market. Fraudulent deals have already started: in Asia, Austrlia and most notably in Europe, where taxpayers lost €5bn in a so-called carousel fraud involving VAT. When governments changed their tax laws to close the VAT loophole, carbon trading dropped as much as 90% in some countries.138 (L)Wind and PV comprise more than half all new power generation in 2009: 55%. Renewable energy installations in Europe totalled 61% of all new power generation in 2009 (25.9 GW). 10.1 GW of wind was installed, up 23% on 2008. At 39% of the total this was the single biggest source. Natural gas was second at 26% and PV third on 16%. Data come from EWEA.139

2.2.10. Paul Volcker issues a plea direct to Congress to support his Wall Street reforms. No member of the Senate Banking Committee has yet voiced outright opposition.140 IPCC chief Pachauri refuses to apologise for one mistake in a 3,000 page report (an un-peer-reviewed reference to Himalayan glaciers melting by 2035). To do so would a “populist” measure, genuflecting to a “factory” of sceptics looking for harmful “pinpricks” in the massively comprehensive and professional work of the IPCC, he asserts, for which the mistake was completely out of character.141 In another interview he accuses un-named companies of backing sceptics who are guilty of “skullduggery of the worse kind.” 142 And note: the Himalayan claim never made it to the Summary for Policymakers – the gold standard for negotiators, and was barely referred to in the press.143

3.2.10. Ofgem warns that only state intervention can keep the lights on. Energy bills may go up by 25% by 2020, as energy companies raise £200bn to invest in essential new generation. Many will be unable to afford to heat homes as a consequence. There is also a real risk of the lights going out by mid decade. Reform is urgently need: deregulation has failed, a free market approach is “no longer an option,” obligations may be to supply may be required of energy companies (just as banks face capital requirements), and nationalisation of power may be required. All this comes in Ofgem’s Project Discovery report, published today, after a consultation that began in October 2009. Already some are supportive of Ofgem’s proposal that there should be a central buyer for energy. Andrew Watkin, head of energy at property consultancy, Carter Jonas: “a centralised renewables market might sound Stalinesque but it may be what is required to bring a structure and concerted strategy to the major campaign of the coming years – creating energy and protecting its supply.” 144 145 Ofgem once enthusiastically advocated dergulation, but the financial crisis has changed regulator Alistair Buchanan’s mind. The big energy companies are not making the investments needed to replace old coal and nuclear plants.146

Ofgem’s forecasts could mean average energy bills of more than £2,000 by 2020. The consumer group u-switch says the figure could £4,000 if events conspire against markets. Now 4.6m households are in fuel poverty (spending >10% of income on energy).147

The Guardian takes a dim view of the state of UK energy, saying nationalisation is overdue. Terry Macalister: “The privatisation of the gas sector in 1986 and electricity in 1989 brought little in the way of strategic, long-term thinking and when the privatisation of the nuclear industry came in 1996 it swiftly brought problems, with British Energy having to be bailed out by the taxpayer within six years. Now ministers once again are being called on to intervene because companies left to their own devices will not invest in new nuclear, wind and other low-carbon technologies. Having sucked profits out of the industry when government "interference" was a dirty word, they are – like the banks, railways and even car industry before them – keen to see the state step in and help them out with a greener and more secure agenda. The government should seize its chance.”148

Moody’s warns that the US sovereign credit rating of AAA is under threat unless the deficit is cut or economic growth increases.149

German solar industry calls for protests as Merkel’s government dithers over cuts to feed-in tariff. As many as 10,000 workers from Solarworld, Q-Cells, First Solar and other companies will take to the streets tomorrow.150

4.2.10. Kuwaiti scientists forecast world conventional crude oil production will peak in 2014. The Kuait Univerisity / Kuwait Petroleum Company study, published in the journal Energy & Fuels, describes the development of a new version of the original “single cyle” Hubbert model that accounts for individual production trends (i.e. a “multi-cycle” model) to provide a global oil production forecast. The researchers analyse production trends of the 47 oil-producing countries supplying most of the world’s conventional crude oil.151 Petrobras CEO infers oil capacity, including biofuels, will peak in 2010 and drop rapidly, at 5% pa. A 1 December 2009 presentation Jose Gabrielli gave in Sao Paulo is translated on The Oil Drum. In it, he says that the world needs oil volumes to replace the equivalent of one Saudi Arabia every two years to offset future world oil decline rates …just to keep production constant at less tham 90 mbd. TOD analysis shows Gabrielli’s additions exclude additions from unsanctioned projects and from oil yet to be discovered, so many potential Iraq projects and Brazilian Santos basin projects are not included. BP professes Iraq might produce another 8 mbd by 2020. Petrobras forecasts an additional 2 mbd from Brazil by 2020, making another 10 mbd capacity by 2020. That still leaves a required lower capacity addition of 19 to 24 mbd in 2020 to come from other sources: equivalent to production from about two Saudi Arabias. SA production was an average 9.3 mbd in 2008 and new capacity addition over two years 2008&9 was less than this (9.2 mbd).152 Petrobras says that it does not predict peak in 2010. The above article makes an erroneous interpretation of a graph presented by Petrobras in December 2009. the slide was intending to show a reasonable estimate of the “challenges” that oil supply will face in the long term. “Although unsanctioned projects and oil yet to be discovered are not represented in the graph, this fact does not mean that we do not believe that these projects will add production capacity in the long run. Once again, we do not believe it is possible to predict a peak oil date. In particular, we do not believe it will happen in 2010.”153

Tony Hayward sees peak demand before peak supply – beyond 2020. “I personally – and BP – have never believed we will see peak oil because of supply. We always believed we would see peak oil because of demand. There will come a time – I believe it is beyond 2020 – when because of the changes in the energy portfolio, because of the drive for energy efficiency, because of the introduction of biofuels, demand for oil will peak.” There is plenty of oil in the world, not least in Iraq, expecting as he does production to grow from a couple of million barrels a day today to close to 10m. This makes it “a big part of oil security for the world.” he dismisses fears over dependence on Russian gas as “paranoic.”154

Shell will slow down tar sands operations in face of profits drop of 75% in fourth quarter . And more job losses, of course.155

11

Triple Crunch Log

Gazprom postpones giant Shtokman gas field as global demand drops in face of US shale gas. Shtokman is an LNG venture between Gazprom, Total, and Statoil and had expected the project to produce its first gas in 2013, with LNG shipments to North America beginning in 2014.156 IEA and other experts expect global gas glut to last until around 2015, and then for supply to tighten quickly. The new LNG production capacity in the Middle East plus new non-conventional sources of gas in the US, plus the recession, which has depressed demand in Europe by some 10 per cent. The International Energy Agency expects this glut to continue until around 2015, but many analysts predict the market will then tighten sharply. “Around the middle of the decade we expect a perfect storm of falling domestic gas production, economic recovery and tightness in the global LNG market,” says Professor Jonathan Stern, “and we might not get very much warning. It could flip in a matter of weeks.”157 NY Attorney general alleges two top BoA execs duped shareholders during Merrill Lynch takeover . Ken Lewis and Joe Price now face fraud charges.158

7.2.10. UK industry taskforce will warn this week of premature global peak oil by 2015. JL: “We are heading for a steep decline in oil production in a few years’ time and we are completely unprepared. Most people just assume this is not a scenario that can happen, but it can, and it will, unless we do something now.” Ian Marchant, SSE CEO: “Unless we acknowledge a shock may come, then a shock will come,” said Marchant. “The unit cost of energy will go up. The only way to offset it is to bring overall consumption down.”159 Further positive coverage of UK solar feed-in tariffs in Sunday papers. “These tariffs are going to generate rates of return that will beat high-street savings accounts by a mile, at the same time as they save carbon and generate jobs in a new fast growing, British industry. We reckon as many as 100,000 jobs by 2020, at the rates announced."160

UEA professor at centre of leaked e-mail scandal says he has considered suicide and is receiving death threats. Phil Jones is on beta blockers and sleeping tablets. Conservatives waver on climate in face of “climategate”: most MPs are now sceptical.161 Polls show the number of Britons who believe climate-change science of has fallen in the last year. A BBC poll, which surveyed 1,000 people, reveals that 25% of adults do not believe in global warming, up of 8% since a similar November. 75% believe climate change is a reality but of these one in three feel climate change has been exaggerated. Only 26% of people think climate change is “established as largely manmade.” An Ipsos poll of 1,048 people suggests those who believe in climate change has dropped from 44% to 31% in the past year.162

Most Tory MPs now have doubts about climate change in face of leaked e-mail scandal. Tim Montgomerie, founder and editor of the ConservativeHome website, says the issue could be as divisive for the party as Europe once was. “You have got 80% or 90% of the party just not signed up to this.” This includes at least six members of the Shadow Cabinet. “No one minded at the beginning, but people are starting to realise this could be quite expensive, so opinion is hardening.”163

8.2.10. Richard Branson and other UK business leaders warn of oil crunch within five years. “The next five years will see us face another crunch – the oil crunch. This time, we do have the chance to prepare. The challenge is to use that time well. ….Our message to government and businesses is clear: act. Don't let the oil crunch catch us out in the way that the credit crunch did.” There are signs that the UK government is already beginning to listen, and move away from the narrative given on peak oil by BP, Exxon and the Saudis. JL: “[We are] in regular contact with government; we have reason to believe their risk thinking on peak oil may be evolving away from BP et al's and we await the results of further consultations with keen interest.”164

BP joins Shell on investors’ tar sands target list. The Co-operative Asset Management, the UNISON Staff Pension Scheme, a group of clients from Rathbone Greenbank and the COIF Charities Investment Fund file a motion asking BP not to commit $10bn to its Sunrise oil sands development for carbon reasons.165 Unlike Shell, BP seems to press ahead. It is upgrading a refinery near Chicago to take tar sands oil. John Browne has expressed disapproval.166

Areva buys a US solar thermal company. Ausra, a linear Fresnel company founded in 2006, has no revenues, and yet the price is believed to be $200m.167 Areva lobbied Sarkozy to oppose Desertec.

9.2.10. World’s first retail carbon credit made in Pennsylvania. A homeowner with a PV system earns $17 a tonne from a company in Ohio. The sale was brokered by a website, My Emissions Exchange.168

Gazprom boss says UK wind plans are irrational, and more gas plants is the answer . Alexander Medvedev: "If we do not want to see the authors of the 2020 strategy decapitated in a public square, I do not think they can forget about gas. We at Gazprom believe gas should be treated on an equal footing as renewables. I just hope that after the disappointment post-Copenhagen that the decision-makers will take a more pragmatic and rational approach to this.”169

Gazprom boss says shale gas developmeny in Europe is “unimaginable.” The US Environmental Protection Agency will raise concerns about its potential contamination of drinking water in a forthcoming report, Alexander Medvedev says. 170

10.2.10. UK Industry Taskforce on Peak Oil and Energy Security releases its second report in a press conference at the Royal Society.171

Peak oil: The lessons from the financial crash ought to be stark. JL: The prevailing culture mocked the disbelievers, ahead of the crash. Gillian Tett, capital markets editor at the FT, saw the crisis coming because she was a trained anthropologist and knew how to recognise a cult when she saw one. She was accused of scaremongering from the stage of the World Economic Forum. The pattern is the same this time. BP, in particular, has a tendency to mock the concept of peak oil and its advocates. Meanwhile, as with the climate crisis, there is a general desperation to believe the comforting narrative ahead of the uncomfortable one. This is why it is so important that companies who understand risk speak out, as the taskforce companies have. It is why governments – who must lead in matters of national security – should listen to the uncomfortable arguments and, given the stakes, buy insurance against them. History is going to judge us all on how we manage the risk of premature peak oil. And soon.172 173

Wall Street Journal headline “The next crisis: prepare for peak oil” “The work of the Industry Taskforce on Peak Oil and Energy Security shouldn't be disparagingly dismissed. Its arguments are well founded and lead it to the conclusion that, while the global downturn may have delayed it by a couple of years, peak oil—the point at which global production reaches its maximum—is no more than five years away. Governments and corporations need to use the intervening years to speed up the development of and move toward other energy sources and increased energy efficiency.” “….even if the gloomsters should turn out to be wrong, the core of their message surely deserves attention. Governments should be doing all in their power to encourage

12

Triple Crunch Log

developments that lessen oil dependency. That will also enhance their energy security for, as Russia's Vladimir Putin has demonstrated with use of the on/off switch on the pipeline to Ukraine, it can be uncomfortable being dependent on other countries for energy.”174

Two big US companies decide to boycott suppliers sourcing fuel from Canada’s oil sands. Whole Foods Market, an organic grocery chain, and Bed, Bath and Beyond a household goods company, are responding to ForestEthics, a non-governmental organisation campaigning to lead the US corporate sector away from oil sands fuel because of its higher carbon content. “Companies are moving with lightning speed,” says Todd Paglia, ForestEthics’ executive director. “It’s a core issue they know they need to move on. The failure of Copenhagen makes companies more willing to do this; leadership must come from somewhere.”175

Vitol, the world’s largest oil trader says oil will trade in the current $70-80 band for the rest of the year. Goldman, in contrast, forecasts $95 a barrel by the end of the year, and above $100 in early 2011. The five largest oil traders – Vitol, Glencore, Trafigura, Gunvor and Mercuria – are believed to have achieved record profits of $3.5 - $4bn collectively last year. They make large sums of money on the back of volatile oil prices.176

11.2.10. Dynamics of the peak oil debate can be expected to change after UK government move . JL: “The head of international energy security at Britain's department of energy and climate change, Chris Barton, said: "We need to work together (with industry) to do more - eg to consider recommendations in the report that we're not currently acting on." His department will set up a forum for doing this. The outcome of this forum should be followed closely by every company that is not manufacturing its products with its own renewable power supply and distributing them by means of transport other than the internal combustion engine.”177 Around 60% of Germans still favour nuclear reactor shutdowns. The current legal obligation is to phase out nuclear reactors after 32 years of service. The latest public opinion polls show around 60 per cent favouring the current phase-out legislation, passed by the former coalition of Social Democrats and Greens. At least two of the country's 17 nuclear reactors would have to be shut down this year, and nuclear reactors provide about a quarter of the country's electricity.178

14.2.10. Lobby group including BP and Shell challenge California’s tar sands legislation in court. The National Petrochemical and Refiners Association says it is illegal for reasons including “undue and unconstituional burdens on interstate commerce.”179

Sellafield has similarities to Texas City, new ex-BP chief executive of NDA says. Tony Fountain admits there is still a long way to go. “If you look at Texas City, there were many kinds of practices, operating practices among them, where people had become habituated to a state of affairs that, if you stepped in from outside and took a look, was not appropriate for the nature of the activity. I think that is absolutely true of what happened at Sellafield… Legacy companies had a different set of priorities. There was clearly a set of practices that developed round those [untreated waste] silos that, if you stepped in there, did not have the right level of priority, did not have the right level of challenge, did not have the right level of spend – which is why it is where it is now and needs to be dealt with with the priority it is getting.” Asked if he has been shocked by anything he has seen so far, he says: “Shock is a strong word. But it would be right to say that the ponds and silos at Sellafield are attention-grabbing; striking in nature.” Sellafield consumes almost half of the total NDA budget.180

UK issues first licence to build a storage cavern for gas under the Irish Sea. Twenty salt caverns each around the size of the Albert Hall will be filled with 1.5 bn cubic metres, about 2 days supply, 750m below the seabed. When complete in 2014, the nations storage will have risen by a third.

16.2.10. BP and ConocoPhillips quit US Climate Action Partnership lobbying Congress to pass climate law, undercutting Obama's efforts to cast his climate and energy agenda as a pro-business, job-creation plan. “Cap-and-trade legislation is dead in the US Congress and that global warming alarmism is collapsing rapidly,” says Myron Ebell of the Competitive Enterprise Institute.181

Obama announces $8.3bn (£5.3bn) loan guarantees for nuclear: a company building the first new nuclear reactors in America in nearly 30 years. The pledge to the nuclear industry (made just a couple of hours before the oil companies quit the CAP) is seen as part of a strategy to win Republican support for the climate and energy bill. 182

Barclays top bosses forego bonuses and say they want to be part of the bank regulation debate . But Varley and Diamond made huge amounts the previous year.

17.2.10. Steven Chu is finding it hard to sway Congress with rational arguments. Describing how companies are not making investments and banks are not supplying loans because of the uncertainty about when, or whether, a cap on carbon will be imposed, he says: “We’re in a crazy never-never land situation. Let’s recognise that we’re postponing an inevitability,” and “[The Chinese] missed the first industrial revolution. They missed in large part the computer and biotech revolutions. They don’t want to miss this one.” 183

San Francisco now require all homes and offices to be wired for electric car chargers. This is written into new building codes. Obama will be able to deliver on his promise to put 1m electric vehicles on the road by 2015.But beyond Washington, a number of American cities and states are driving ahead. Nissan's president, Carlos Ghosn, has predicted that as many as 10% of sales will be electric vehicles by 2020. At Google, employees can already drive to work in one of the modified Priuses owned by the company – and then pull into one of 100 solar-powered parking spots and charge up.184

NII says AP1000 needs to be able to withstand a crashing airliner to get a licence. This is a blow to the Toshiba-Westinghouse group.185

French nuclear watchdog says EDF would face “massive investment” in extending life of reactors beyond 40 years. EDF is hoping to secure 60-year life-cycles for its plants, a term that is already applied in the US. Even then, he says, the plants might not be able to actually keep going that long. EDF has already been forced to invest hundreds of millions of euros replacing ageing steam generators on 34 of its 58 reactors. There is no set term for the life of reactors in France, where extensions are granted or not after inspections every 10 years. At the beginning of next year the two oldest plants in operation come up for a review to take them to 40 years. 186

Most US utility executives favour nuclear power and are climate sceptics, a poll suggests. More than 70 percent a survey of 329 executives oppose the current Obama legislation and 52 percent say the United States cannot afford the proposal. More than 75 percent think there is a future for coal-fired power plants. 44 percent don’t believe global warming is caused by human activity, and 7 percent don’t believe the planet is warming at all.187

18.2.10. Michael Grunwald in Time magazine describes “Why Obama’s nuclear bet won’t pay off.” “If you want to understand why the U.S. hasn't built a nuclear reactor in three decades, the Vogtle power plant outside Atlanta is an excellent reminder of the insanity of nuclear economics. The plant's original cost estimate was less

13

Triple Crunch Log

than $1 billion for four reactors. Its eventual price tag in 1989 was nearly $9 billion, for only two reactors. But now there's widespread chatter about a nuclear renaissance, so the Southern Co. is finally trying to build the other two reactors at Vogtle. The estimated cost: $14 billion. And you can be sure that number is way too low, because nuclear cost estimates are always way too low.”188

Fourth generation nuclear reactors are “no clean energy secret bullet,” FT notes. Fourth generation reactors are those targeting the idea that reactors use spent nuclear fuel as a feedstock depends. One version, fast reactors, relies on sodium cooling. The International Panel on Fissile materials has produced a resport on these saying that risk of sodium fire is very high.189

19.2.10 Polls and evidence favour carbon tax over cap and trade. Robert Shapiro, a principal economic advisor to Bill Clinton in 1991-2: “A national poll by Hart Research found that two out of every three U.S. voters now favor a straight carbon tax over a cap-and-trade system. And the record shows clearly that it works. Sweden adopted a carbon-based tax in 1990; today, the Swedish economy is about 50 percent larger (adjusted for inflation), and the nation's carbon emissions are 8 percent less than they were in 1990. By contrast, emissions have risen sharply across the European Union over the last five years, despite its adoption of a cap-and-trade program.”190

21.2.10. China’s Saudi oil imports now exceed those of the US. In 2009, the US sank below 1 mbd for the first time in 20 years, and China’s exceeded 1 mbd for the first time.191

RBS CEO is forced to forego his bonus for 2009, echoing the Barclays duo last week. State-owned RBS will still pay its investment bankers £1.3 bn 28% of revenues (compared to 30-40% in competitors cases).192

23.2.10. UK public scepticism about climate change threat drops rapidly. Only 31% now think it is “definitely” a reality, down from 44% in the last year, according to the latest Ipsos Mori poll. Only one in five believe it is caused by people, down from one in three last year. 9 in 10 still think some kind of warming is happening. A recent BBC poll showed 31% thinking the extent of climate science has been exaggerated.193

24.2.10. Oil & Gas UK survey shows fewer North Sea projects are being developed. There are 11bn barrels of oil and gas in existing projects, up 15pc from the previous year – enough to meet half the UK's demand in 2020. But companies will need to raise £60bn to extract this oil, but this is not likely under the current incentives.194

First British company begins wildcat drilling off the Falklands. Four small independent oil companies, all single asset plays, have raised considered sums for their punts. Argentina express outrage and other Latin American and Caribbean governments issue a statement agreeing with them.195

Putin threatens Russian oligarchs with fines and bans if they don’t invest in electricity generation like they promised to do at the time of liberalisation. Record demand during a severe winter is putting capacity under strain. Oligarchs could face huge fines or even be barred from markets.196

25.2.10. Chinese government refuses to let Chinese company buy the Hummer brand from GM. Fuel consumption is at least part of the reason. GM will now wind the brand down.197

Blame OPEC, not China, for high oil consumption, says CIBC’s Jeff Rubin. “Last year OPEC, Mexico, and Russia consumed 14 million barrels a day of oil -- two Chinas!” Rubin railed in a recent speech. “Have you ever filled your tank up in Caracas or Riyadh? If you did, you'll soon know. It's 25 cents in Caracas, it's about 50 cents in Saudi Arabia, but the point is it's 50 cents whether oil is $20 a barrel or whether oil is $200 a barrel, because that's just the way things are over there. OPEC is a very disparate place separated by history, religion, geography, but there's one common denominator: everybody has a God-given right to consume as much cheap fuel as they bloody well feel like.”198

World Bank has raised over $1 billion with Green Bonds. A day after launching a 600m Swedish Kroner Green Bond, the World Bank has launched another 10 new Green Bonds denominated in different currencies. The 10 bonds are primarily for the new, open-ended, Nikko World Bank Green Bond fund.199

Vermont Senate votes to close a nuclear power plant when its licence expires in 2012 , on the grounds of aging problems: 3 radioactive leaks, a burst pipe and a collapsed cooling tower. California took such action in 1989, but no state has in the 20 years since. With its original 40-year operating licence expired in two years, Entergy’s Yankee plant in Vermont had applied for a 20-year extension to keep it open once, as many of the US’s 103 nuclcear plants will have to do.200

Bloom Energy Corp. unveils its fuel-cell “power plant in a box” server unit. Bloom, a fuel cell company with $400m of venture capital to its name, has been one of Silicon Valley's most secretive startups. The size of a pickup truck, the 100 kW unit’s solid oxide cells are made mostly of sand, with no platinum or other precious metals thrown in as catalysts. K.R. Sridhar, Bloom's co-founder and chief executive officer, says the server will change the energy industry in much the same way that cell phones changed communications. The servers cost $700,000 to $800,000 apiece, but some have been solar already to companies including Coca-Cola, FedEx Corp. and Google Inc. e-Bay, who have bought five, hosted the launch event. Critics doubt that energy production can be maintained, but Sridhar says the servers can provide electricity at 9 to 10 cents per kilowatt hour, compared with 14 cents for power from the grid, with payback in three to five years, including 50% financial incentives from the federal and California governments. Former Secretary of State Colin Powell, who sits on Bloom's board of directors, says: “We want to move this product forward to the point where we can put it in an African village ... and they can have power, they can have light. Think of the potential."201

26.2.10. Centrica boss says “vast cost” could cause scrappage of UK offshore wind plans . Sam Laidlaw syas it is unclear whether the scheme to build an estimated 10,000 wind turbines will ever go ahead. Cenrica, owner of BG, would proceed only “if the economic conditions are right.” The problems are high costs for turbines and other equipment as well as limited government financial support. BWEA estimates the wind farms would cost an estimated £100 billion and create 70,000 jobs in the UK. The total generating capacity of all the projects in the latest, Round Three, would be 40 gigawatts. But Citigroup estimates the cost of installing one megawatt of offshore wind is about £3.5 million — roughly five times the cost of the same gas-fired capacity.202

27.2.10. Al Gore editorial in the NYT: “We can’t wish climate change away.” And if we did, we’d still have to tackle dependency on foreign oil and China’s lead in cleantech.203

28.2.10. Bank of America and Barclays Capital tell clients to brace for crude above $100 (£64) a barrel by next year, then relentlessly higher prices over the decade. “Oil has the potential to flirt with $100 this year. We forecast an average price of $137 by 2015,” says Amrita Sen of BarCap. “The groundwork for the next sustained step up in oil prices is now almost complete. Global spare capacity is likely to be reduced to low levels within a relatively short time. The global economic crisis has postponed, but not cancelled, a crunch which would otherwise be starting to bite now.” Francisco Blanch of Bank of America Merrill Lynch says crude may touch $105 next year, with $150 in sight by 2014. “Approximately 1.7bn consumers in emerging markets with a per capita income of $5,000 to $20,000 are eagerly waiting to buy cars, air-conditioning units, or white goods.” He

14

Triple Crunch Log

expects demand to rise by a further 2.8m barrels per day (bpd) in China and 2.5m bpd in India by 2015. Global use will increase by 8.8m bpd to 95m bpd.204

1.3.10. Competitive gas may be as bad for BP as Gazprom, Ed Crooks reasons in the FT: the more nonconventional gas there is in the market, and more the shift to spot-price selling – the two big trends in the gas market - the smaller the size of the long-term oil-linked lgas market.205

Oil companies not investing enough on exploration, Bernstein Research says. They have been overly optimistic about production from the discoveries made in the late 1990s.206

George Monbiot labels the UK solar feed-in tariff scheme a scam. The Guardian columnist writes: “Those who hate environmentalism have spent years looking for the definitive example of a great green rip-off. Finally it arrives, and nobody notices. The government is about to shift £8.6bn from the poor to the middle classes. It expects a loss on this scheme of £8.2bn, or 95%. Yet the media is silent. The opposition urges only that the scam should be expanded.”207

2.3.10. US consumers are dipping into their savings to pay for gasoline. There is a “supertrend” since 2000 of personal consumption expenditure (including gasoline) rising 0.14% per month. Within that, spending on food is rising only slowly, but spending on gasoline faster. How sustainable is that? Stephen Schtork of the Schtork Report: “The bottom line is that we consider yesterday’s PCE numbers very bearish. Consumers managed to pull savings out to pay for higher energy costs, but spending from your savings is rarely preferable and never sustainable. Consumer spending could collapse - thus refiners will not be able to pass higher crude oil costs on to consumers as they did during 2007 and 2008.”208

3.3.10. Big European companies could share a surplus of EETS pollution permits worth €3.2 billion by 2012.  So the Carnon Fat Cats study by Sandbag shows. The list is dominated by steel and cement companies. €3.2bn is more than double the EU's investment of €1.5 billion in renewable energy and clean technology as part of the economic recovery plan. JL response to the Monbiot attack on solar: Solar panels are not fashion accessories. Economies of scale in manufacturing are causing rapid reductions in costs. Feed-in tariffs work, and there will be no net transfer of funds from the poor in the UK scheme.209

4.3.10. Investors have filed a record 95 resolutions involving climate change this year, up 40% on last year. Ceres says that the resolutions have been filed with 82 US and Canadian companies who financial institutions and other businesses investors believe are not adequately disclosing and managing potential climate-related business impacts.210

Underground coal gasification questioned on environmental impact. Clean Coal Ltd has licences from the UK Coal Authority to perform UCG at five sites round Britain's coast. The first could be operational by 2014. The underground fire will generate carbon dioxide, methane and hydrogen. By converting coal to methane, you reduce the carbon dioxide emissions at the power station by more than half. The CO2 will be captured at the wellhead. As much as 30% can go direct back to space where the burning took place. The remaining 70% will have to find another home. “We are talking to people about what the options are, but it will be difficult. We want to be clean. But we may not be capturing all the CO2 from day one,” says a spokeswoman.211

5.3.10. Saudi Arabia is having trouble meeting its own needs for natural gas, much of which come from the oil industry itself. The state utility wants to add another 2,500MW this year, and 12,043MW by 2015. Some analysts believe it won’t be able to hit that target. The Kingdom has generous subsidies which bring prices to around US$0.015 - $US0.04 per kilowatt, promoting huge inefficiency. Demand is growing by a massive 8 per cent per. Oil is used for much of the national electricity generation.212

Financial speculators are driving oil markets, the FT shows. “10 or 15 years ago would have been that spot prices drove the forward markets. But in recent years it is the forward markets - dominated, incidentally, by hedge funds and swaps dealers - that are the cart pulling the horse. ….The big break occurred in 2004, when correlations between forward prices and spot prices strengthened considerably. This change…coincided with the explosion in futures and options trading, that was particularly focused on longer-dated contracts. ….This all means that expectations about the future is driving prices - rather than fundamentals of supply and demand - which is really a here-and-now thing, after all. And that, Kemp concludes, all goes a long way towards explaining why oil prices plummeted in the second half of 2008 as expected (when sentiment was focused on the financial crisis) and recovered extremely strongly in 2009, despite the persistent lack of demand (future sentiment focused on the recovery and possible medium-term shortfall due to an investment slump and resulting production squeeze).213

Alan Simpson MP response to Monbiot: you are wrong. The German feed-in tariffs work well. “Over the three-year period from 2004 to 2007, the effect of FiTs in Germany was to add two to three euros to the average monthly electricity bill. Look at the changes in your own domestic electricity bills during this period and decide which you would prefer. The most staggering of the Deutsche Bank conclusions, however, is that the savings made by the scheme outstripped the total cost of payments made to households. Between 2004 and 2006, German FiT payments came to a total of €8.6bn. Deutsche Bank then looked at what it would have cost for this amount of electricity to have come from additional, conventional generation. What they found was that the avoided costs (of fossil fuel energy generation) came to €9.4bn.”214

Monbiot response to Leggett: “We do not have a moral obligation to blindly support inefficient , expensive renewable technologies.” And £100 bet that solar PV won’t reach grid parity in the UK by 2013.215

7.3.10. Alberta is losing the PR battle on tar sands. The FT reports that the perception is growing that they do more harm than good. Alan Knight of Virgin argues that surface mining will need to be closed, if they are to have any chance of carrying the argument. 216

Ten leading companies launch a plan for a European super grid in the North Sea connecting Germany, UK and Norway. The expected cost is €34bn. The group includes Seimens and Areva. Bård Mikkelsen, chief executive of Statkraft, Norway’s state-owned power company: “Hydro power in Norway should be valuable for compensating for the irregularity of wind power. That position – being a swing producer to the European market – is a very important role for us.”217

Oil companies hunt shale gas all across Europe. FT: “Unlike unconventional oil, some unconventional gas can now be developed more cheaply than its conventional counterpart. This is one reason why ExxonMobil spent $41bn acquiring XTO, the shale gas specialist, last December, despite the collapse in the price of gas. The deal is the biggest the industry has seen in almost a decade and is the clearest sign yet that big oil companies see shale as the next big thing.” BP, Statoil and Total similarly have taken smaller deals out with Chesapeake Energy. Helge Lund, chief executive of Statoil of Norway: “It is far too early to conclude whether shale will make as much of an impact outside the US as it has done inside the US.” 218

15

Triple Crunch Log

Environmental concerns over fracking are pivotal for shale gas development. Alexander Medvedev, deputy chief executive of Gazprom: “Every housewife in the US has heard of the term shale gas. Not every housewife is aware of the environmental consequences of the use of shale gas...I don’t know who would take the risk of endangering drinking water reservoirs.”219 John Dizard in the FT: “ I think it might not be a bad idea to examine the faith-based assumption that the US has a virtually unlimited supply of natural gas from shale formations that can be extracted at a low price for the indefinite future. Perhaps the few people who think shale gas will be produced at a higher cost, and more slowly, than generally believed should be heard out, rather than be executed or sentenced to work in the salt mines.”

8.3.10. E&Y says up to £50bn of investment at risk in ost-election uncertainty. In the next three years £35bn-£50bn of investment will be needed in power stations, wind farms and gas storage, to hit government objectives for cutting carbon dioxide emissions while guaranteeing reliable electricity supplies. Ian Marchant, chief executive of SSE, who commissioned the report, says it is “a timely re-minder to all policymakers of the need to maintain a pro-investment climate in which investors can have confidence.”220

French anti-nuclear NGO holds leaked documents admitting crash risk to new reactors. The Sortir du Nucléaire Group, an alliance of 725 associations, says in a press release that it “has in its possession a secret defence document of EDF, the French Electricity Board, which clearly admits the danger to pressurised water reactors (PWR) in the event of a suicide crash. Because Madame Lauvergeon, Director General of AREVA, constructor of the reactor, maintains that it is built to resist to a commercial plane suicide crash, the group considers imperative to reveal the truth of the situation by publishing the contents of the secret defence document.”221

Danish environment minister says climate treaty is unlikely this year. This pessimism, from the chairperson in Copenhagen, adds to that of the FCCC222

Leggett response to Monbiot 2: I accept George Monbiot’s £100 solar PV bet. “I wish to make nine points in my response to George Monbiot's latest round in our disagreement about the importance of solar photovoltaics (PV) and the UK government's upcoming feed-in tariffs.” 223

9.3.10. Sarkhozy appeals to World Bank to finance nuclear reactors, ending a 50 year abstention, as part of a major international nuclear financing push. “Industry insiders believe no more than a handful will be built in the next decade,” the FT reports. “According to the Nuclear Energy Agency, a reactor costs roughly $4,600 per kilowatt to build, taking a mid-sized 1000MW reactor to $4.6bn (€3.38bn, £3.02bn). The NEA estimates between 100 and 400 new reactors could be built by 2030.” Roger Morier, World Bank spokesman, says there is no plan to change the ban on financing of nuclear set in in 1996, because it is "still not the least cost option in many areas."224

Lithium supplies uncertain as S Korea strives to extract the crucial battery element from seawater. They seem confident of an industrial process by 2014, but are hedging their bets, seeking – like Japan (who both have no domestic supplies, unlike China - deals in Chile and Bolivia in the past few years. Chile is the biggest producer, but Bolivia has the world’s biggest reserves - although they are not yet assessed as being economically recoverable.225

Synthetic Genomics optimistic about being able to bring algal biofuel to scale . Ina WSJ interview, Craig Ventor thinks Exxon’s $300m funding can make all the difference, and fuel could be in tanks within a decade, with all fuel from algae perhaps within 20-30 years.

11.3.10. Another assault from Monbiot on PV: no corrections despite many errors pointed out to him . “Solar PV has failed in Germany and it will fail in the UK.”226

16.3.10. Ten sites named in £4bn UK marine energy push. Up to 1.2GW will be generated, by devices including the Pelamis wave machine, and the SeaGen tidal machine. Alex Salmond, Scotland's first minister, hopes Scotland can produce 60GW, 10 times its electricity needs, and become the “Saudi Arabia” of marine energy.227

Sheffield steelmaker wins £170m to make nuclear forges. Sheffield Forgemasters has been in funding negotiations for more than six months, including a government soft loan of £65m, and now has secured the last remaining £20m from bank loans enabling it to build “a 15,000-tonne press to make large forgings used in modern reactors being built in the UK and overseas.”228

18.3.10. Germany will add 5GW of solar PV in 2010, government says. Up from 3GW in 2009, which was fully half the global installations in the €18bn ($24 bn) global market. The cumulative installed capacity in Germany at end 2009 was 9 GW. A 16-percent July cut in the deed-in tariff will be followed by a further 11-13 percent cut in January. “The crucial point will be the cuts of another 11 percent in January 2011,” a government spokesman says. The FIT was already cut by 9 percent in January.229

Leggett response to Monbiot 3: “George Monbiot's third article on government grants for domestic solar panels ignores the errors that I and others have protested about in the opening assertion in his first article. He alleged that the UK government's feed-in tariff regime is "about to transfer £8.6bn from the poor to the middle classes". In saying that, he managed to get three things wrong. The actual sum raised from the tariff levy from all electricity consumers, not just households, to 2030 will be £6.7bn; it will be spread over 20 years; and it will be more than offset – if the government is true to its word – by energy efficiency savings stimulated in parallel market-building schemes. Yet we see no retraction in George's latest, much less an apology for trying to turn feed-in tariffs into a new form of class war on a false premise. That was just where the problems began in the first article. In his third, he rewords many of his original mistaken views. I address those one by one on  my website.230

Jonathon Porritt offers an adjudication on the feed-in tariffs debate: “I’m sorry to say, on this occasion, that he (Monbiot) is way out of line. Jeremy Leggett’s detailed refutation of so much of what he was claiming in the original article demonstrates just how poor George’s initial research was, and how (on this occasion, at least) his love of adopting deliberately controversialist positions simply overwhelmed basic journalistic standards.”231

22.3.10. Government meets UK industry on peak oil: “it certainly felt like a pretty historic occasion to me”, says Rob Hopkins, a participant: “an event which could potentially be the day people look back to as the day when UK government finally starting to ‘get’ peak oil.”  Summary for the minister: The exact date of peak oil is an academic extraction, what matters is its inevitability. There is a high risk of its happening as soon as we come out of recession, in 3 or 4 years time. Prices will inevitably be higher. In the near term we will be able to rely on more natural gas thanks to unconventional gas (not sure about that one at all, I suspect that is one of that speaker’s pet techno fantasies!!). Government intervention will be inevitable. That behaviour change will be key, and government will need to message this carefully, stating that things will be different but no worse. We need improvements in public transport, including electrification. The land use planning system needs to

16

Triple Crunch Log

bear this in mind, and we may, at some point, be forced to consider rationing. “Although Chatham House rules prevent me from stating what the Minister said, there is clearly a desire to continue this dialogue on peak oil. 232

Engyco flotation seeks to raise up to €1bn to invest in existing Spanish solar farms. The model is to buy them cheap from distressed owners, and run them more cheaply than existing owners. John Roberts is non-executive Chairman. Former Solon CEO Thomas Krupke is a director.. A Q-cells founder is also aboard.233

24.3.10. Green Investment Bank announced in UK Budget will match RBS tar sands lending. It will be “throwing good money after bad,” says the World Development Movement. £2bn is not enough to transform UK into a low carbon economy, and the Government should take RBS in hand to increase its renewable investments and phase out its financing of fossil fuel companies. RBS has scaled back its lending to renewables since the bail out: it was lead arranger on six loans worth $499 million in 2009 having extended at least $2 billion in the previous three years. Platform meanwhile says the bank has underwritten $7.5 billion of loans to tar sands related companies.234

25.3.10. US Department of Energy official admits that peak oil may come as early as 2011. “A chance exists that we may experience a decline” of world liquid fuels production between 2011 and 2015 “if the investment is not there.” So says Glen Sweetnam, main official expert on oil market in the Obama administration, in an interview with Le Monde. Sweetnam is director of the International, Economic and Greenhouse Gas division of the Energy Information Administration at the DoE says the investments needed ar as yet “unidentified.” The DoE predicts decline of identified sources of supply at 2 percent a year, from 87 million barrels per day in 2011 to just 80 mbpd in 2015. But by then global demand is expected to be 90 Mbpd, meaning “unidentified” additional liquid fuels projects would have to fill in a 10 mbpd gap within less than 5 years.235

ConocoPhillips CEO Jim Mulva admits that pursuing new oil reserves no longer pays. Chris Nelder of Energy & Capital: “The remaining resources have become too marginal and too expensive, and the competition for them has become too intense. Rather than keep slugging it out with bigger and better-funded players in pursuit of growth, Conoco has decided to sell $10 billion worth of its assets over the next two years, all of them in the marginal category, and concentrate on producing its core assets. The proceeds will be used to buy back its stock, reduce its debt, and raise dividends — just as rival ExxonMobil has been doing for the last five years or so. When I inferred in Profit from the Peak that the oil majors were spending vastly more money on buying back stock than investing in new exploration because reserves were getting too expensive and risky, veterans of the Street greeted the idea with extreme skepticism. Now it's a plain fact. A Rice University study released in July 2008 found that the five largest international oil companies spent about 55% of their profits on stock buybacks and dividends in 2007, but only about 6% on new exploration and production. “Could we spend $20 billion or $25 billion [on exploration]? Absolutely,” Conoco spokesman Gary Russell said at the time. “Could we do it effectively, in a way that provides ultimate value to our shareholders? Probably not.”236

FTSE sees growing re-allocation of capital to low carbon sectors. FTSE Global All Cap is valued at $28.9 trn. Carbon Intensive Sectors are $8.9 trn of that. Environmental Opportunities All Share (companies need 20% or more revenue from EO to qualify) $1.8 trn, and growing. There are six sectors in EO, of which Renewable and Alternative Energy is one. There are 18 EO indices, and all of them out perform the FTSE All Share.237

26.3.10. Editor of Money Week compares UK feed-in tariffs to Mao’s Chinese steel production crusade . The government’s “backyard bribes” are akin to the failed “backyard furnaces of Mao’s China. Merryn Wed quotes Monbiot.com as evidence.238

28.3.10. Cleantech IPOs set for a comeback, Jefferies tells the FT. New Energy Finance reported $14bn (£9.3bn, €10.3bn) worth of clean energy IPOs in 2007, $4.3bn in 2008 and $3.4bn in 2009, with none in the first quarter of this year. But there are now 78 IPO prospects in the US alone, looking to raise $13.7bn. Rooftop solar is particularly attractive, Bruce Huber of Jefferies says.239

Tesco joins the “stampede” to supply DIY electricity, as solar panels go on sale this week. Lucy Neville-Rolfe, executive director at Tesco, said: “Tesco has always led the way by bringing affordable green products to the mass market. With low-energy lightbulbs, we cut the price and demand went through the roof. Now we are making solar power mainstream by giving customers a simple, high-quality product at the right price.” But “Tom Murley of HG Capital warns that if the scheme is too successful — in encouraging a flood of small-scale generators — it could depress prices and have a detrimental effect on the wholesale electricity market, making life hard for big nuclear and wind suppliers.”240

Power crunch looms for Britain, warns new RWE Npower CEO Volker Beckers¸and his company may not invest if conditions are not to their liking. “The country has to build two large plants or more every single year.” He infers RWE might invest in plants overseas: “The UK needs to make sure it has the highest level of attraction for investors.” And “Why discriminate against nuclear in favour of renewables? Why give offshore wind ROCs and make nuclear stand on its own feet?” Ofgem predicts a £200 billion bill for pipes, plants and turbines predicted by Ofgem, the regulator, translates to a cost of £8,000 for each of Britain’s 25m households. Times: “Npower’s German parent company could ultimately choose to put its money elsewhere. For example, 53 new nuclear plants are under construction round the world, with another 469 planned or proposed. In Britain, eight are on the drawing board. Half are planned by Horizon, the joint venture formed by Npower and its rival Eon last year. EDF Energy, the French giant, and its partner Centrica want to build the rest.”241

29.3.10. Siemens becomes the fourth wind turbine manufacturer to announce it will manufacture in the UK, with an £80m investment in a plant to build offshore wind turbines. The others are Mitsubishi, GE and Clipper.These plans have been greeted as a vote of confidence in the offshore wind business, which currently accounts.242

30.3.10. UK to rule out national gas storage to secure supply. DT: “A spokesman for the Department of Energy and Climate Change declined to comment, but added that it had been reluctant to sanction national storage in the past for fear of discouraging commercial investment.”243

Further delays at Okiluoto fuel talk of Areva chief's sacking. The new nuclear plant is already three years behind schedule and more than €2bn ($2.6bn) over its €3bn budget, and now the ongoing dispute between Areva and the Finnish regulator – on top of the defeat in Abu Dhabi - is causing talk in the French media of “Atomic Anne”’s departure.244

17

Triple Crunch Log

31.3.10. Businesses unsure how new UK commitment to carbon reduction will work. Indi: “Businesses are confused about and unprepared for the implementation of the Government's Carbon Reduction Commitment (CRC), the energy efficiency scheme which starts tomorrow. Nearly half of companies surveyed by the power supplier Npower said official advice about the new legislation had been "inadequate". About 49 per cent said they did not understand how to buy the necessary carbon allowances and 44 per cent said they do not know how to forecast their carbon emissions, according to a report published this morning. Some 5,000 businesses – between them accounting for about 10 per cent of the UK's harmful carbon dioxide emissions – will form the core of the scheme, with another 25,000 expected to register but unlikely to have to participate fully. Those affected have up to six months from tomorrow to register, and another 12 months to establish the necessary monitoring systems. The CRC is a variation of a cap-and-trade scheme. All organisations with half-hourly electricity consumption of more than 6,000 megawatt hours are required to submit annual carbon footprint audits and buy carbon permits for the following 12 months. Any surplus permits can be traded and any shortfall bought in the market. …The CRC does not make money for the Treasury. All the payments are refunded to those taking part six months later, with either a bonus or a deduction depending on the company's position in a league table ranked by reduced power use.”245

President Obama proposes oil drilling off US East coast, setting himself on course for confrontation with Democratic senators from coastal states. The Air Force had the first successful biofuel-powered test flight just last week, the president says.246

1.4.10. Oil reaches $87. It has been trading between $70 and $80 per barrel since summer 2009. Chinese demand is up more than 21% over last year's levels. Supertanker rates have risen, and nearly 13 million barrels of crude oil are sent every day to Asia from the Middle East. The US does everything it can to stem to descent, and production is actually up on last year. 502 rigs that are currently operating across the U.S, an 18 year high. With 103 rigs currently drilling in North Dakota, where the Bakken oil boom is in full swing.247

245 http://www.independent.co.uk/news/business/news/new-regulations-on-energy-efficiency-mired-in-confusion-1931580.html57 http://www.ft.com/cms/s/0/b11ad8ea-013e-11df-8c54-00144feabdc0.html 58 http://www.guardian.co.uk/business/2010/jan/14/barack-obama-tax-wall-street 59 http://www.guardian.co.uk/business/2010/jan/14/equator-principles-banks-environment-campaigners 60 http://uk.reuters.com/article/idUKTRE60D48F20100114?sp=true 61 http://www.ft.com/cms/s/0/54b1a434-0211-11df-8b56-00144feabdc0.html 62 http://www.nytimes.com/2010/01/15/opinion/15krugman.html 63 http://www.ft.com/cms/s/0/b51161ae-0174-11df-8c54-00144feabdc0.html 64 http://www.ft.com/cms/s/0/ed07a246-038e-11df-a601-00144feabdc0.html?nclick_check=1 65 http://www.ft.com/cms/s/0/029259ae-0203-11df-8b56-00144feabdc0.html 66 http://www.bloomberg.com/apps/news?pid=20601207&sid=axnm2BeGMveI# 67 http://www.ft.com/cms/s/0/53d59b84-03d2-11df-a601-00144feabdc0.html 68 http://www.ft.com/cms/s/0/39ba8172-0460-11df-8603-00144feabdc0.html 69 http://www.guardian.co.uk/business/2010/jan/18/shell-shareholders-fury-tar-sands 70 http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article6992750.ece 71 http://www.world-nuclear-news.org/WR_Germanys_waste_removal_decision_1801101.html 72 http://www.guardian.co.uk/business/2010/jan/18/eon-coal-plant-plea 73 http://www.guardian.co.uk/environment/2010/jan/18/rnewables-feedin-tariffs-drax-nuclear 74 http://www.guardian.co.uk/business/2010/jan/18/recovery-china-economic-reform 75 http://www.nytimes.com/2010/01/18/opinion/18mon3.html?th&emc=th 76 http://www.nytimes.com/2010/01/13/opinion/13friedman.html?ref=opinion 77 http://www.nytimes.com/2010/01/20/opinion/20friedman.html?th&emc=th 78 http://www.guardian.co.uk/environment/2010/jan/20/copenhagen-accord-deadline-climate-change 79 http://uk.reuters.com/article/idUKTOE60J03Y20100120 80 http://www.guardian.co.uk/environment/2010/jan/20/himalayan-glaciers-melt-claims-false-ipcc 81 http://www.nature.com/news/2010/100120/full/463284a.html 82 http://www.thegatesnotes.com/ 83 http://www.ft.com/cms/s/0/af927fe4-0640-11df-8c97-00144feabdc0.html 84 http://www.guardian.co.uk/business/2010/jan/21/profile-us-economist-paul-volcker 85 http://www.guardian.co.uk/business/2010/jan/21/obama-banking-restrictions-reform-wall-street 86 http://www.guardian.co.uk/business/2010/jan/21/goldman-sachs-bonus-cut 87 http://www.guardian.co.uk/business/2010/jan/21/uk-considers-obama-banking-rules 88 http://www.ft.com/cms/s/0/34722f64-06de-11df-b058-00144feabdc0.html 89 http://www.timesonline.co.uk/tol/news/environment/article6995925.ece 90 http://www.ft.com/cms/s/0/59a631a8-0720-11df-a9b7-00144feabdc0.html 91 http://www.guardian.co.uk/business/2010/jan/22/gordon-brown-tobin-tax-banking 92 http://www.ft.com/cms/s/0/6cb023c8-07aa-11df-915f-00144feabdc0.html 93 http://www.telegraph.co.uk/earth/earthnews/7046958/National-Audit-Office-raise-prospect-of-public-subsidies-for-nuclear.html 94 http://www.nytimes.com/2010/01/22/technology/start-ups/22venture.html?th&emc=th 95 http://www.guardian.co.uk/environment/2010/jan/22/quarter-us-grain-biofuels-food 96 http://www.guardian.co.uk/books/2010/jan/23/properity-without-growth-tim-jackson 97 http://www.guardian.co.uk/business/2010/jan/24/wall-street-lobbyists-banks-obama 98 http://www.guardian.co.uk/business/2010/jan/24/obama-banks-reform 99 http://www.guardian.co.uk/commentisfree/2010/jan/24/boris-johnson-will-hutton-bankers 100 http://www.guardian.co.uk/commentisfree/2010/jan/24/boris-johnson-will-hutton-bankers 101 http://www.guardian.co.uk/environment/2010/jan/24/carbon-emissions-green-copenhagen-banks 102 http://www.ft.com/cms/s/0/f7283aa8-0927-11df-ba88-00144feabdc0.html 103 http://www.reuters.com/article/idUSTRE60N0YE20100124 104 http://www.guardian.co.uk/business/2010/jan/25/world-economic-growth-climate-change 105 http://blogs.ft.com/energy-source/2010/01/25/the-death-of-us-coal/ 106 http://blogs.ft.com/energy-source/2010/01/25/china-setting-the-worlds-oil-prices/

18

Triple Crunch Log

PWC show how Europe and North Africa could get to 100% renewable electricity by 2050.  To do this would require policy substantial investment, but the reports’ authors profess that experience with other large infrastructure programmes shows the financing capacity “is there.” Such a system would result in a net decrease in power imports among the countries concerned.248 249

Natural gas not such a good idea when lifecycle emissions are measured. So says Robert Howarth, a professor of ecology and environmental biology at Cornell University, His preliminary calculations suggest to him that natural gas recovered from new hydrofracturing techniques appears to have higher emissions than combustion emissions alone would suggest: at least as bad as coal from mountaintop removal and perhaps worse. He suggests leakage of methane associated with shale gas is probably far more important than normal gas production. FT: “what’s most striking about Howarth’s paper is not the alarming implications of his very rough estimates, but his statement that rigorous estimates of the emissions from developing, processing, and transporting natural gas are not available - nor are such estimates available, he says, for coal-fired power. It would be interesting to see just how detailed lifecycle studies of different energy sources would need to be in order to be fully comprehensive - and how different sources, from fossil fuels to renewables, would stack up. Perhaps none of them are what they seem.”250

107 http://www.independent.co.uk/news/business/news/more-families-cannot-pay-their-fuel-bills-1878031.html 108 http://business.timesonline.co.uk/tol/business/industry_sectors/utilities/article7000918.ece 109 http://www.ft.com/cms/s/0/5d3466e8-09ee-11df-8b23-00144feabdc0,dwp_uuid=91d7b52e-0527-11df-a85e-00144feabdc0.html 110 http://blogs.ft.com/energy-source/2010/01/26/cyber-attacks-on-oil-majors/ 111 http://www.ft.com/cms/s/0/d2d709ae-0b8e-11df-8232-00144feabdc0.html 112 http://www.guardian.co.uk/world/2010/jan/28/obama-job-tour-state-union 113 http://www.ft.com/cms/s/0/f58ce0bc-0b30-11df-9109-00144feabdc0,dwp_uuid=91d7b52e-0527-11df-a85e-00144feabdc0.html 114 http://www.guardian.co.uk/business/2010/jan/27/davos-alistairdarling 115 http://www.ft.com/cms/s/0/f00aa3dc-0b7a-11df-8232-00144feabdc0.html 116 http://www.nytimes.com/2010/01/27/business/energy-environment/27lawsuits.html?th&emc=th 117 http://www.swissre.com/resources/7249eb804e42012db8a8bcb8626ab849-Publ09_FR_Globalisation_en.pdf 118 http://www.guardian.co.uk/environment/2010/jan/27/feed-in-tariffs-renewable-energy119 http://www.guardian.co.uk/business/2010/jan/27/oil-firms-shetland-tax-breaks 120 http://www.ft.com/cms/s/0/ff68e8da-0b83-11df-8232-00144feabdc0.html 121 http://www.guardian.co.uk/business/2010/jan/28/toyota-recall-widens-europe-china 122 http://www.reuters.com/article/idUSLDE60R1LZ20100128?type=marketsNews 123 http://www.guardian.co.uk/business /2010/jan/28/bp-tony-hayward-gas-shale-rocks 124 http://blogs.ft.com/energy-source/2010/01/28/how-healthy-is-barnett-shale/ 125 http://www.guardian.co.uk/environment/2010/jan/29/water-vapour-climate-change 126 http://www.nytimes.com/2010/01/31/business/energy-environment/31renew.html?th&emc=th 127 http://www.guardian.co.uk/environment/2010/feb/01/climate-change-deal-impossible-2010 128 http://blogs.ft.com/energy-source/2010/02/01/shale-boom-leaves-industry-considering-us-gas-exports/ 129 http://www.guardian.co.uk/money/2010/feb/06/solar-power-bright-investment 130 http://www.ft.com/cms/s/0/b37099b6-0ea1-11df-bd79-00144feabdc0.html 131 http://www.ft.com/cms/s/0/26fb8a42-0f62-11df-a450-00144feabdc0.html 132 http://www.guardian.co.uk/environment/2010/feb/01/leaked-emails-climate-jones-chinese 133 http://www.guardian.co.uk/environment/2010/feb/01/climate-emails-sceptics 134 http://www.nytimes.com/2010/02/02/us/politics/02deficit.html?th&emc=th 135 http://www.ft.com/cms/s/0/fec07306-0f68-11df-a450-00144feabdc0.html 136 Petroleum Review, February 2010.137 David Starchan, “Non-conventional oil: can it fill the gap?” Petroleum Review, February 2010.138 Maria Kelmaas, “Crunching credit and climate,” Petroleum Review, February 2010.139 “Wind in power: 2009 Euroepan statistics,” European Wind Energy Association, February 2010.140 http://www.ft.com/cms/s/0/db6a9ed8-101f-11df-841f-00144feab49a.html 141 http://www.guardian.co.uk/environment/2010/feb/02/climate-change-pachauri-un-glaciers 142 http://www.ft.com/cms/s/0/f9f86ef0-10cb-11df-975e-00144feab49a.html 143 http://blogs.ft.com/energy-source/2010/02/03/much-ado-about-climate-change/ 144 http://www.guardian.co.uk/business/2010/feb/03/energy-bills-unaffordable-system-overhaul 145 http://www.ofgem.gov.uk/Media/PressRel/Documents1/Ofgem%20-%20Discovery%20phase%20II%20Draft%20v15.pdf 146 http://www.guardian.co.uk/business/2010/feb/03/ofgem-uk-energy-supplies 147 http://www.guardian.co.uk/business/2010/feb/03/ofgem-investment-energy-bills-rise 148 http://www.guardian.co.uk/environment/2010/feb/03/ofgem-report-analysis 149 http://www.ft.com/cms/s/0/a82cfe04-10f5-11df-9a9e-00144feab49a.html 150 http://www.bloomberg.com/apps/news?pid=20601100&sid=aKR8zOS.OF6w 151 http://pubs.acs.org/doi/abs/10.1021/ef901240p152 http://www.theoildrum.com/node/6169 153 https://www.theoildrum.com/pdf/theoildrum_6206.pdf 154 http://www.guardian.co.uk/business/2010/feb/04/tony-hayward-bp-interview 155 http://www.guardian.co.uk/business/2010/feb/04/shell-job-cuts-profits-fall 156 http://www.ft.com/cms/s/0/c414ed56-11b9-11df-9d45-00144feab49a.html 157 http://www.telegraph.co.uk/finance/newsbysector/energy/7153724/How-long-before-the-lights-go-out.html 158 http://www.ft.com/cms/s/0/2d0110e8-11af-11df-bceb-00144feab49a.html 159 http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article7017865.ece 160 http://money.independentminds.livejournal.com/239030.html 161 http://www.timesonline.co.uk/tol/news/environment/article7017922.ece 162 http://www.guardian.co.uk/environment/2010/feb/07/climate-change-science-public-trust 163 http://www.guardian.co.uk/politics/2010/feb/07/climate-scepticism-grows-tories 164 http://www.guardian.co.uk/business/2010/feb/07/branson-warns-peak-oil-close

19

Triple Crunch Log

Photon magazine recommends regional feed-in tariffs in Germany as solar PV market soars . PV supply including inventories was 12.4 GW in 2009, 77% up YoY, and installations of 8.8 GW, up 36%. Germany installed 3.8 GW of c 9 GW globally in 2009. 2010 will be c 10 according to EPIA, and pressing 20 if you believe Photon. Total global PV installed is now 21 GW, c 10 of it in Germany. But over half is in in the two sunny southern states. Also: at 20 GW, Photon foresees major issues for utilities, not least on their profitability.251

2.4.10. Areva guilty of lethal uranium pollution in Niger mining operation, local activists claim. Der Spiegel: “Sherpa, a lawyers' organization from Paris that fights for the rights of workers. When a Sherpa attorney interviewed more than 80 mine workers, she heard the same stories again and again: There was allegedly no safety equipment until the mid-1980s, not even dust masks. One family claimed that doctors had sent a coughing mine worker home from the Areva hospital in Arlit after diagnosing him with diabetes. When the man went to see a doctor in a larger city, Agadez, he was diagnosed with lung cancer in an advanced stage. The Sherpa attorney confronted the chief physician at the hospital. He reportedly defended himself by saying that doctors never tell patients that they have lung cancer. Another hospital employee allegedly admitted that when cancer diagnoses were given, if at all, it was only to patients who didn't work in the mine. "When workers exhibit these symptoms, we talk about malaria or AIDS," he allegedly said. Areva says that the company doctors are "independent" and calls the charges "practically slanderous." The company also insists that the doctors have "all equipment required to carry out their work."” The Greenpeace activists showed up last November and 165 http://www.telegraph.co.uk/finance/newsbysector/energy/7182811/BP-faces-investor-revolt-over-Canadian-oil-sands-project.html 166 “BP claims green credentials as it prepares for tar sands project,” Recharge, 12 February 2010. no url167 http://www.ft.com/cms/s/0/babefaae-14e2-11df-8f1d-00144feab49a.html 168 http://www.guardian.co.uk/environment/2010/feb/09/world-first-personal-carbon-trading 169 http://www.guardian.co.uk/business/2010/feb/09/scrap-windfarms-says-gazprom/print 170 http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/7199259/Gazprom-scorns-shale-gas-as-danger-to-drinking-water.html 171 http://blogs.ft.com/energy-source/2010/02/10/peak-oil-or-oil-crunch-richard-branson-puts-the-case-for-uk-business/ 172 http://www.guardian.co.uk/environment/cif-green/2010/feb/10/oil-crunch-peril 173 http://www.youtube.com/watch?v=kaxJum8FD5g 174 http://online.wsj.com/article/SB10001424052748704140104575057260398292350.html?mod=googlenews_wsj 175 http://www.ft.com/cms/s/0/a9713b16-15e3-11df-b65b-00144feab49a.html 176 http://www.ft.com/cms/s/0/d588a942-1669-11df-bf44-00144feab49a.html 177 http://www.forbes.com/2010/02/11/peak-oil-crunch-opinions-contributors-jeremy-leggett_2.html 178 http://www.ft.com/cms/s/0/e4a2dad0-16ad-11df-aa09-00144feab49a.html 179 http://www.guardian.co.uk/business/2010/feb/14/oil-sands-ban-legal-challenge 180 http://www.guardian.co.uk/environment/2010/feb/14/sellafield-texas-city-nda 181 http://www.ft.com/cms/s/0/844be172-1b3a-11df-953f-00144feab49a.html 182 http://www.guardian.co.uk/environment/2010/feb/16/barack-obama-climate-change-laws 183 http://www.ft.com/cms/s/0/6f9abaa0-1c02-11df-a5e1-00144feab49a.html?nclick_check=1 184 http://www.guardian.co.uk/environment/2010/feb/17/san-francisco-electric-cars 185 http://business.timesonline.co.uk/tol/business/industry_sectors/utilities/article7029697.ece 186 http://www.ft.com/cms/s/0/a27d78ee-1b63-11df-838f-00144feab49a.html187 http://greeninc.blogs.nytimes.com/2010/02/17/utility-executives-like-nuclear-power-climate-science-not-so-much/ 188 http://www.time.com/time/politics/article/0,8599,1964846,00.html 189 http://blogs.ft.com/energy-source/2010/02/18/fourth-generation-nuclear-power-may-not-be-the-clean-energy-silver-bullet/ 190 http://www.aolnews.com/opinion/article/opinion-global-warming-scandals-offer-opportunity-for-progress/19362813 191 http://www.ft.com/cms/s/0/ba370018-1f19-11df-9584-00144feab49a.html192 http://www.ft.com/cms/s/0/a4643e02-1efd-11df-9584-00144feab49a.html 193 http://www.guardian.co.uk/environment/2010/feb/23/british-public-belief-climate-poll 194 http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/7301602/Companies-cant-afford-to-drill-for-North-Sea-oil-and-gas.html 195 http://blogs.ft.com/energy-source/2010/02/24/falklands-oil-questions-are-about-payloads-not-conflict/ 196 http://www.ft.com/cms/s/0/cb51016a-217f-11df-830e-00144feab49a.html 197 http://blogs.ft.com/energy-source/2010/02/25/hummer-has-no-home-thanks-to-chinas-gas-guzzling-aversion/ 198 http://www.businessinsider.com/jeff-rudin-i-know-a-place-where-demand-for-oil-grows-even-faster-than-china-2010-2199 http://climatebonds.net/2010/02/wb-over_1billion/200 http://www.ft.com/cms/s/0/f523bb7a-2235-11df-9a72-00144feab49a.html201 http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/02/24/MNIO1C6M96.DTL 202 http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article7041904.ece 203 http://www.nytimes.com/2010/02/28/opinion/28gore.html?th&emc=th 204 http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/7266837/Barclays-and-Bank-of-America-see-looming-oil-crunch.html 205 http://blogs.ft.com/energy-source/2010/03/01/a-more-competitive-gas-market-may-be-bad-news-for-bp-as-well-as-gazprom/ 206 http://blogs.ft.com/energy-source/2010/03/01/oil-majors-taking-the-wrong-kinds-of-risks/ 207 http://www.guardian.co.uk/commentisfree/2010/mar/01/solar-panel-feed-in-tariff208 http://blogs.ft.com/energy-source/2010/03/02/us-consumers-spending-their-savings-on-energy/209 http://www.guardian.co.uk/commentisfree/2010/mar/03/solar-panel-workable-future210 http://blogs.ft.com/energy-source/2010/03/04/investors-increasingly-concerned-about-climate-change/211 http://www.guardian.co.uk/environment/2010/mar/04/coal-gasification-ccs 212 http://blogs.ft.com/energy-source/2010/03/05/saudi-arabia-struggling-with-gas-needs/213 http://blogs.ft.com/energy-source/2010/03/05/how-financial-traders-changed-oil-markets/

20

Triple Crunch Log

stayed for nine days. They found elevated levels of radiation everywhere. A sand sample taken near the mine in Akokan contained 100 times more radioactive material than normal sand. In the streets of Akokan, the Greenpeace team apparently even measured radiation levels that were 500 times normal levels. 252

3.4.10. Kuwait Times: Kuwait needs to be more aware of peak oil and global warming . Staff writer. Abdullah Al-Qattan, speaking of the February report by Kuwaiti scientists that peak oil might be as close as 2014, writes: “If Peak Oil is this close, then, why are we failing to adapt? One reason might be widespread ignorance of the basics of environmentalism. Some people might not realize what terms such as 'green building' actually mean, with such critically important terminology missing from even our modern textbooks. This has led to a common unawareness of the global ecological crises and a consequent lack of any consideration for these urgent problems, such as global warming and pollution, which in turn will lead to further amplification of these problems.” If it wanted to, Kuwait could be a green country, developing plentiful renewables including solar, Al-Qattan says.253

Silane gas dangers in solar cell manufacture addressed with new chemical. Workers have died and been injured in silane gas explosions at manufacturing plants for solar cells and semiconductors. Scientific American: “But there is an alternative. Quebec-based manufacturer Sixtron Advanced Materials  has developed a way to make a more stable gas with similar properties via gasifying polymer pellets. The idea is to hook the SiXtron "Sunbox" to existing silicon photovoltaic manufacturing lines to provide a methyl silane gaseous mixture via the same pipes that would normally deliver silane from a canister. "The methyl silane gases are not pyrophoric, they are simply a flammable gas," says Bates Marshall, SiXtron's executive vice president of sales and marketing. "But a leak does not mean an explosion."254

4.4.10. “Modern capitalism is at a moral dead end. And the bosses are to blame:” Will Hutton op-ed title. “Capitalism will be continue to be demonised while our CEOs refuse to put their own corrupt house in order.” “Chief executives were paid 47 times average pay in 2000; today, they are paid 81 times the average. And all directly or indirectly colluded in the change that triggered the greatest economic calamity since the 1930s. None blew a whistle, raised a doubt or suggested strategic options. All trousered the bonuses. Nor was there any noteworthy collective improvement, despite all the dealing, in the performance of the firms they ran over and above what one might expect from reasonable stewardship.” The CEOs’ organisation, the CBI is opposing a national insurance tax proposed by Labour in the run up to the election: it will effect bottom lines nd therefore 214 http://www.guardian.co.uk/commentisfree/cif-green/2010/mar/05/solar-panel-feed-in-tariff-benefits215 http://www.guardian.co.uk/environment/georgemonbiot/2010/mar/05/solar-feed-in-tariff216 http://www.ft.com/cms/s/0/a917b8d2-2a0d-11df-b940-00144feabdc0.html217 http://www.ft.com/cms/s/0/b686ad54-2a15-11df-b940-00144feabdc0.html218 219 http://www.ft.com/cms/s/0/ccd8412a-2a11-11df-b940-00144feabdc0.html220 http://www.ft.com/cms/s/0/f15da07c-2a51-11df-b940-00144feabdc0.html221 http://www.sortirdunucleaire.org/index.php?menu=actualites&sousmenu=dossiers&soussousmenu=EPRrevelations&page=index222 http://www.ft.com/cms/s/0/d4fe86d0-2ace-11df-886b-00144feabdc0.html223 http://www.guardian.co.uk/environment/cif-green/2010/mar/09/george-monbiot-bet-solar-pv?showallcomments=true#end-of-comments224 http://www.ft.com/cms/s/0/4bd746ca-2b1a-11df-93d8-00144feabdc0.html225 http://blogs.ft.com/energy-source/2010/03/09/copper-and-lithium-scramble-to-power-the-energy-future/226 http://www.guardian.co.uk/environment/georgemonbiot/2010/mar/11/solar-power-germany-feed-in-tariff?showallcomments=true#end-of-comments 227 http://www.guardian.co.uk/environment/2010/mar/16/wave-and-tidal-power-scotland228 http://www.guardian.co.uk/business/2010/mar/16/industrial-strategy-nuclear-manufacturing-forgemasters 229 http://uk.reuters.com/article/idUKLDE62H0ZF20100318?pageNumber=3&virtualBrandChannel=0230 http://www.guardian.co.uk/environment/2010/mar/18/solar-energy-feed-in-tariffs-monbiot231 http://www.jonathonporritt.com/pages/2010/03/the_war_of_words_over_homeprod.html232 http://transitionculture.org/2010/03/24/government-‘peak-oil-summit’-starts-the-process-of-government-acknowledging-peak-oil/ 233 http://www.ft.com/cms/s/0/03edba14-35e8-11df-aa43-00144feabdc0.html 234 http://www.wdm.org.uk/cashing-tar-sands-rbs-uk-banks-and-canada’s-“blood-oil” 235 http://petrole.blog.lemonde.fr/2010/03/25/washington-considers-a-decline-of-world-oil-production-as-of-2011/236 http://www.energyandcapital.com/articles/the-end-of-peak-oil-denial/1111237 David Harris, Head of Responsible Investment, FTSE group, “Understanding environmental markets, London Stock Exchange, Environmental Opportunities Forum, 25 March 2010 (L).238 http://www.ft.com/cms/s/2/143af718-390a-11df-8970-00144feabdc0.html239 http://www.ft.com/cms/s/0/05645be6-3908-11df-8970-00144feabdc0.html 240 http://business.timesonline.co.uk/tol/business/industry_sectors/retailing/article7078855.ece241 http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article7078858.ece242 http://www.ft.com/cms/s/0/9adb2b90-3b2a-11df-a1e7-00144feabdc0.html243 http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/7536076/UK-to-rule-out-national-gas-storage-to-secure-supply.html 244 http://www.ft.com/cms/s/0/3ef33692-3b93-11df-a4c0-00144feabdc0.html246 http://www.bloomberg.com/apps/news?pid=20601207&sid=aI1saltlKjvM#247 http://www.energyandcapital.com/articles/energy-and-capitals-weekend-edition/1112248 http://www.pwc.co.uk/pdf/100_percent_renewable_electricity.pdf249 http://blogs.ft.com/energy-source/2010/04/01/a-gameplan-for-getting-to-100-renewables/250 http://blogs.ft.com/energy-source/2010/04/01/how-good-is-natural-gas-when-lifecycle-emissions-are-measured/251 Photon magazine, April 2010. And see JL notes on the April 2010 Photon conference, Stuttgart.252 http://www.spiegel.de/international/world/0,1518,686774-3,00.html253 http://www.kuwaittimes.net/read_news.php?newsid=NDU0MTk4MjMw254 http://www.scientificamerican.com/article.cfm?id=explosive-gas-silane-used-to-make-photovoltaics&sc=CAT_BS_20100402

21

Triple Crunch Log

bonuses. Contrast Ove Arup and John Lewis. They believed in the notion that firms were essentially moral enterprises and that the point of profit was to serve the business purpose of the firm. Lewis said "it is all wrong to have millionaires before you have ceased to have slums". "The present state of affairs is really a perversion of the proper working of capitalism," he thundered in 1957. "Capitalism has done enormous good and suits human nature far too well to be given up as long as human nature remains the same. But the perversion has given us too unstable a society.”255

Unilever CEO adds voice to business leaders saying “shareholder value” is a flawed concept, with all its implications of short-termism. Paul Polman: “I do not work for the shareholder, to be honest; I work for the consumer, the customer . . . I’m not driven and I don’t drive this business model by driving shareholder value.” “It’s easy to be a short-term hero. It is very easy for me to get tremendous results very short term, get that translated into compensation and be off sailing in the Bahamas.”256

BP lobbies to limit controls on shale gas drilling, trying to head off rising concerns about fracing at the US Environmental Protection Agency. BP also opposes public disclosure of the chemicals used in fracturing, on the basis that the information is commercially sensitive.257

5.4.10. Trial of Project Better Place network begins in Tokyo this month: a key step in the Californian firm's bid to build the world's first infrastructure networks for electric cars by next year. PBP’s model involves building networks of charging points and battery-switch stations, with a robotic mechanism to swap the empty battery in a car for a fully charged one, meaning "refilled" in minutes, rather than several hours to charge the batteries. Copenhagen already has a network of 100 public charging points, is already being trialed in Copenhagen. The first commercial network, based on data from the two trials, will launch in Israel at the end of the year. Renault Fluence electric vehicles will be used. PBP has raised about £460m in investment in the past three years.258

7.4.10. Private equity boss gives dire warning. Guy Hands, chairman of Terra Firma, says Britain faces a decade of pain, social unrest and unemployment.259

Goldman Sachs denies betting against clients. An eight-page letter to shareholders, signed by chief executive Lloyd Blankfein and president Gary Cohn, denies accusations that Goldman had repeatedly profited by inflating unsustainable financial bubbles. They admit that Goldman “went short” in the housing market while simultaneously continuing to trade mortgage-backed securities to its clients but argue that various sophisticated investors simply took differing views.260

BNFL memoir revives nuclear safety fears. Former British Nuclear Fuels director Harold Bolter publishes an autobiography recalling industry panic over 1990 report on clusters of illness surrounding the Sellafield plant. At the time, workers at Sellafield were advised not to have children.261

8.4.10. Petrol price reaches an all time high in the UK of £1.20 a litre. The average was £1.19 at its highest in July 2008. The RAC says “it is a dark day for motorists.” The weak pound and tax rises have contributed.262

9.4.10. World Bank approves a $3.75bn loan to build one of the world's largest coal plants in South Africa. An official says: “It was not an easy decision. Everybody recognised the concerns about climate change, but this was a balancing act.”263

Russia and Germany start work on £8bn Nord Stream pipeline under the Baltic. Its 55 billion cu metres a year from 2012 will give Russia a third of the EU gas market. The first leg of the project will carry 27.5bcm starting from 2011.264

Tories and Labour agree with industry that there is no need for strategic gas storage in UK. Industry argues it would take 4-10 years, and in that period nothing would be done by the commercial sector to build its own gas storage. 22 such projects are in planning, which would quadruple Brtain’s storage by 2020 as effective North Sea storage in gas fields depletes.265

First shale gas drilling in the UK. Igas will drill one of Europe’s first wells east of Liverpool, having as taken leases on 300,000 acres of shale. As in the US companies face two main problems. One is political resistance; the other is the danger of pollution and associated reputational risk. Wolfgang Ruttenstorfer, chief executive of Austria’s OMV, one of the companies exploring the potential of shale gas in Europe: “I don’t want to create these kind of hopes and fantasies that lack final results, so I’m extremely cautious whether [shale gas] will be an option at all”.266

11.4.10. US military warns oil output may drop unexpectedly, with missive shortages by 2015. The warning comes in Joint Operating Environment report from the US Joint Foreces Command: “By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 million barrels per day. While it is difficult to predict precisely what economic, political, and strategic effects such a shortfall might produce, it surely would reduce the prospects for growth in both the developing and developed worlds. Such an economic slowdown would exacerbate other unresolved tensions, push fragile and failing states further down the path toward collapse, and perhaps have serious economic impact on both China dn India.” “…..One should not forget that the Great Depression spawned a number of totalitarian regimes that sought economic prosperity for their nations by ruthless conquest.”267

13.4.10. IEA forecasts oil will hit record levels this year and threaten recovery: 86.6 million barrels of oil per day, 2% higher, up 1.67 million barrels a day. “Ultimately things might turn messy for producers if $80-$100 per barrel is merely seen as the new $60-$80, stunting economic recovery while prompting resurgent non-oil and non-Opec supply investment. A recovery in oil demand is moving apace. The return of economic growth and hence oil demand growth is fuelling the increase.” OECD recovery could be blighted, the monthly report concludes.268

255 http://www.guardian.co.uk/commentisfree/2010/apr/04/will-hutton-capitalism256 http://www.ft.com/cms/s/0/72d68b60-4009-11df-8d23-00144feabdc0.html257 http://www.guardian.co.uk/business/2010/apr/04/bp-shale-gas-environment-protection-agency258 http://www.guardian.co.uk/environment/2010/apr/05/tokyo-electric-cars-better-place259 http://www.guardian.co.uk/business/2010/apr/07/private-equity-boss-predicts-painful-decade260 http://www.guardian.co.uk/business/2010/apr/07/goldman-sachs-letter-shareholders261 http://www.guardian.co.uk/business/2010/mar/07/bnfl-director-book-sellafield-cancer-concerns262 http://www.guardian.co.uk/business/2010/apr/08/petrol-price-all-time-high263 http://www.guardian.co.uk/business/2010/apr/09/world-bank-criticised-over-power-station264 http://www.guardian.co.uk/business/2010/apr/09/russia-launch-baltic-gas-pipeline265 http://blogs.ft.com/energy-source/2010/04/09/labors-energy-platform-emerges/266 http://www.ft.com/cms/s/0/39c9ebf6-2d48-11df-9c5b-00144feabdc0.html 267 http://www.guardian.co.uk/business/2010/apr/11/peak-oil-production-supply

22

Triple Crunch Log

McKinsey foresees no tariff rises if Europe switches to green electricity. The Roadmap 2050 report examined ways of cutting greenhouse gas emissions by more than 80 per cent by investing in renewables, such as wind and solar power, finding that the impact of this on electricity prices in the long term would be little different to "business as usual". Reasons: the operating costs of renewables are far lower than for fossil-fuel power stations; and Europe's existing high-carbon electricity infrastructure will need to be replaced in coming decades. The report, for the European Climate Foundation, says a supergrid will be needed.269

Toulouse tests renewable pedestrian power. The weight of people on pavements will be tested for street lighting. The modules will be the same as used in Dutch nightclubs.270

As microfinance grows, big banks are increasingly making big profits from tiny loans. 60% of all microloans now come from banks and finance firms, rather than NGOs (35%), credit unions and rural banks (5%). Some banks charge 100% or more. Mohamed Yunus: “We created microcredit to fight the loan sharks; we didn’t create microcredit to encourage new loan sharks. Microcredit should be seen as an opportunity to help people get out of poverty in a business way, but not as an opportunity to make money out of poor people.” Chuck Waterfield, who runs mftransparency.org, a Web site that promotes transparency: “They call it ‘social investing,’ but nobody has a definition for social investing, nobody is saying, for example, that you have to make less than 10 percent profit.” The microfinance industry now has over $60 billion in assets The rush was started when Compartamos, a Mexican firm that began life as a tiny nonprofit organization, generated $458 million through a public stock sale in 2007. Mr. Yunus says interest rates should be 10 to 15 percent above the cost of raising the money. 75 percent of microfinance institutions would exceed that. NYT: “Questions had already been raised about Kiva because the Web site once promised that loans would go to specific borrowers identified on the site, but later backtracked, clarifying that the money went to organizations rather than individuals.” These sometimes are high rate chargers.271

15.4.10. Goldman Sachs charged by SEC with $1bn fraud over toxic sub-prime securities. The 22-page charges Goldman Sachs with working with a US hedge fund, Paulson & Co, to structure and sell a complex package of mortgages to clients knowing Paulson would take a “short” position betting that the very same mortgages would fail. Investors lost €1bn and Paulson gained around the same.272

Goldman Sachs prosecution threatens to open the floodgates on Wall Street as Geithner says banks must be made to pay. The case against Goldman could be the tip of an iceberg. Rabobank is accusing Merrill Lynch of a similar misdemeanour: marketing of a collateralised debt obligation (CDO) while omitting to mention a relationship with a hedge fund betting against the product's success. Bill Clinton meanwhile expresses regret, saying he should not have listened to the former treasury secretaries Robert Rubin and Larry Summers when they opposed tight protection when derivatives were gaining popularity during the 1990s.273

BP Shareholders reject a call to investigate the tar sands project. BP expects to make a final decision on its $2.4bn (£1.6bn) Sunrise project by next year. About 140 institutions backed the call for a review.274

Citi analysts, concerned about tar sands emissions, warn that shareholder action will grow. This is a setback, given that CalPers, the US’s largest public pension fund, has already joined the tar sands campaign.275

18.4.10. “Labour and the Tories are just too scared to take on the bankers,” Ruth Sutherland writes. Whereas SEC investigators are feeling Goldman Sachs’s collar in the States, and the Volcker Rule which would in effect restore Glass-Steagall and limit the size of banks so that their failure would not imperil the entire financial system. the Labour manifesto, however, simply proposes making banks keep more capital as a cushion against losses, a global levy on financial services and "living wills" to help wind down failed institutions without putting the entire system at risk. The Tories have promised a levy on banks, even if other countries do not do the same, clamping down on bankers' bonuses, and says he will seek international agreement on separating banks' speculative activities from their useful ones. “But the two main parties remain horribly in thrall to a powerful cabal of financiers and corporate executives, and are terrified of being accused of banker-bashing. It is so obvious that it should not need saying, but the financial elite to which they genuflect is both unelected and unaccountable.”276

“Now we know the truth. The financial meltdown wasn't a mistake – it was a con .” So writes Will Hutton in The Observer. “The global financial crisis, it is now clear, was caused not just by the bankers' colossal mismanagement. No, it was due also to the new financial complexity offering up the opportunity for widespread, systemic fraud.” “Just consider the roll call beyond Goldman Sachs. In Ireland Sean FitzPatrick, the ex-chair of the Anglo Irish bank – a bank which looks after the Post Office's financial services – was arrested last month and questioned over alleged fraud. In Iceland last week a dossier assembled by its parliament on the Icelandic banks – huge lenders in Britain – was handed to its public prosecution service. A court-appointed examiner found that collapsed investment bank Lehman knowingly manipulated its balance sheet to make it look stronger than it was – accounts originally audited by the British firm Ernst and Young and given the legal green light by the British firm Linklaters. In Switzerland UBS has been defending itself from the US's Inland Revenue Service for allegedly running 17,000 offshore accounts to evade tax. Be sure there are more revelations to come – except in saintly Britain.” “….The Icelandic banks, Anglo Irish bank and Lehman were all involved in opaque deals and rank bad lending decisions – but Goldman allegedly went one step further, according to the SEC actively creating a financial instrument that transferred wealth to one favoured client from others less favoured.” “….Brutally, the banks knowingly gamed the system to grow their balance sheets ever faster and with even less capital underpinning them in the full knowledge that everything rested on the bogus claim that their lending was now much less risky. That was not all they were doing. As Michael Lewis describes in The Big Short, credit default swaps had been deliberately created as an asset class by the big investment banks to allow hedge funds to speculate against collateralised debt obligations. The banks were gaming the regulators and investors alike – and they knew full well what they were doing.” “….We need to break up our banks, limit their capacity to

269 http://www.ft.com/cms/s/0/88d5231c-4695-11df-9713-00144feab49a.html270 http://www.guardian.co.uk/world/2010/apr/13/pavement-power-toulouse-streets 271 http://www.nytimes.com/2010/04/14/world/14microfinance.html?pagewanted=all272 http://www.guardian.co.uk/business/2010/apr/16/goldman-sachs-fraud-charges273 http://www.guardian.co.uk/business/2010/apr/18/goldman-sachs-prosecution-wall-street-crackdown 274 http://www.ft.com/cms/s/0/ab8872e0-48bd-11df-8af4-00144feab49a.html 275 http://blogs.ft.com/energy-source/2010/04/15/oil-sands-citi-gives-a-tick-for-carbon-costs-but-a-cross-for-emissions/ 276 http://www.guardian.co.uk/business/2010/apr/18/uk-politicians-afraid-regulate-bankers268 http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article7096486.ece

23

Triple Crunch Log

speculate and bring them back to earth. Britain should also launch an official investigation into what went wrong – and hand the findings to the Serious Fraud Office. This needs to become this election campaign's number one issue.”Crisis timetableSeptember 2007 Funding problems at Northern Rock triggers the first run on a British bank. It is nationalised in February 2008.April 2008 Bear Stern faces bankruptcy after a run on the company wipes out cash reserves in less than two days. Backed by the Federal Reserve, JPMorgan buys up shares at far below market value.September 2008 Lehman Brothers files for bankruptcy protection, becoming the first major bank to collapse since the start of the credit crisis.December 2008 Bernard Madoff arrested for operating the largest Ponzi scheme in history.January 2009 The Bank of England launches £200bn quantitative easing.March 2010 Former chairman of Anglo Irish bank Sean Fitzpatrick is arrested in Dublin after failing to disclose details of loans worth millions from the bank.April 2010 Northern Rock former directors, David Baker and Richard Barclay, are fined £504,000 and £140,000 for deliberately misleading analysts prior to nationalisation.April 2010 The US Securities and Exchange Commission accuses Goldman Sachs of "defrauding investors by misstating and omitting key facts".277

20.4.10. The Deepwater Horizon rig, working for BP explodes 50 miles off Louisiana, killing 11. The 1,500 metre riser collapses, and the wellhead begins pouring oil into the water.IMF proposes tough measures to cut banks down to size, taxing both profits and pay in a so-called Financial Activities Tax (FAT), stopping short of a Tobin tax. Gordon Brown claims credit for it.278

IMF says banks are more powerful now than they were before the crisis, and time is running out to deal with them. “The future financial regulatory reform agenda is still a work in progress, but will need to move forward with at least the main ingredients soon”, the IMF’s Global Financial Stability Review notes. “The window of opportunity for dealing with too-important-to-fail institutions may be closing and should not be squandered, all the more so because some of these institutions have become bigger and more dominant than before the crisis erupted.”279

21.4.10. FT.com suspects policymakers, economists and peak-oilists are starting to speak same language. “It’s still the rare politician or industry executive who would use the phrase ‘peak oil’. But in the UK, a country for whom domestic oil production decline is very much a concern, the issue has become almost mainstream.”280

None of the UK political party manifestos mention peak oil going into the election . And when asked about at the Guardian debate on the environment, the three environmental spokespeople - Miliband, Hughes and Clark – show varying degrees of complacency, Miliband worst.281

25.4.10. Chevron CEO sees no future for his company in the shale gas rush. John Watson that the “price tag is too high” to justify the investments required, a big contrast with those who insist that new drilling techniques are a “game changer” and lift projections of reserves of shale gas from 30 years’ worth of supplies to 100 years.282

28.4.10. Deepwater Horizon had no remote shut off of the kind required in Norway and Brazil. U.S. regulators don't mandate use of the so-called acoustic switch, a third line of defence. On all offshore oil rigs, there is one main switch for cutting off the flow of oil by closing a valve located on the ocean floor. Many rigs also have automatic systems, such as a "dead man" switch as a backup that is supposed to close the valve if it senses a catastrophic failure aboard the rig. The Deepwater Horizon had a dead-man switch, and nobody can explain why it didn’t work. With an acoustic switch a crew can trigger an underwater valve that shuts down the well even if the oil rig itself is damaged or evacuated. Regulators in Norway and Brazil require them. Norway has had acoustic triggers on almost every offshore rig since 1993. Shell and Total often install them even where regulators don’t require them. An acoustic switch costs about $500,000. U.S. regulators have considered mandating the use of remote-control acoustic switches or other back-up equipment. But the oil industry argued against the acoustic systems.283

29.4.10. US mobilises military as BP’s oil spill approaches Lousiana coast. BP’s value falls by £13bn as share price falls Some 5,000 barrels a day are still spilling beneath the rig and BP’s efforts to cap the well could take four weeks, by which time 150,000 barrels would have escaped. If that doesn’t work, a relief well would be needed, needing maybe 3 months, and meaning 300,000 barrels – bigger than the Exxon Valdez at 258,000 barrels.

30.4.10. White House bans offshore drilling until further notice as US Navy joins the effort to contain the spill (on the surface, that is).284

Costs of Gulf oilspill likely to exceed Exxon Valdez as backlash builds against BP. Brent Coon & Associates, an American law firm playing a large role in bringing cases against BP for the Texas City refinery fire in 2005, files a lawsuit on behalf of a rig worker injured in last week's blast, and argues that criminal charges should be brought against the company for its repeated failure to act after a series of industrial accidents in the US. “They don't learn their lessons, they are the most arrogant bunch of bastards I've ever dealt with,” says lawyer Brent Coon. “It's like they just don't care. At some point, we are going to have to put some of these executives in jail and withdraw their right to exploit our natural resources.”285

Goldman Sachs faces a criminal investigation. Federal prosecutors have opened a preliminary criminal investigation. The news sent Goldman shares down 9%.286

22 arrested in carbon trading inquiry, all but one in the UK, although Deutsche Bank has been raided in a German arm of the operation, involving 2,450 British and German tax officers. The issue is carousel fraud involving VAT, as result of which criminals have pocketed an estimated €5bn. A total of 58 have now been arrested across Europe. 287

1.5.10. British H&S watchdog has warned BP over safety on North Sea oil rigs. The HSE has issued an “improvement notice on the Schiehallion Field saying that the oil group “failed to ensure the safety of your employees and others not in your employment by not providing and maintaining a system of work for the control of that operation that was, so far as reasonably practicable, safe.” Another notice pertains to Magnus. After the Piper Alpha (167 dead) investigation, pipeline emergency shut down valves were made madatory. One failed on one field and others have been found to be at risk. The HSE has called on all operators to check ESDVs. Saftety stats in the North Sea showed a marked deterioration in 2009 on 2008.288

24

Triple Crunch Log

Warren Buffett defends Goldman Sachs, saying at the Berkshire Hathaway AGM that the losers on their suspect deal “made a dumb credit decision.” Though he adds a successful criminal prosecution would be “something more serious, and we’d look at that at the time.”289

2.5.10. “Virtually impossible” spill larger than previously estimated, experts say: 3,850 sq miles. BP’s safety analysis had suggested the spill was “virtually impossible.” Obama flies to meet Hayward in Louisiana.290

3.5.10. A third of French nuclear plants shut in heatwave, and electricity has to be imported from the UK. Times: “France is being forced to import electricity from Britain to cope with a summer heatwave that has helped to put a third of its nuclear power stations out of action. With temperatures across much of France surging above 30C this week, EDF’s reactors are generating the lowest level of electricity in six years, forcing the state-owned utility to turn to Britain for additional capacity. Fourteen of France’s 19 nuclear power stations are located inland and use river water rather than seawater for cooling. When water temperatures rise, EDF is forced to shut down the reactors to prevent their casings from exceeding 50C.”291

5.5.10. Three die in Athens as anarchists torch a bank during protests against the IMF / EU austerity programme, a condition of the €110bn bailout extended to the Greek government. The euro falls to a 14 month low against the dollar.292

Investors bet on a Tory win in UK election as they pile into gilts. The expectation seems to be that Cameron will deal best with the nation’s £163bn deficit – 11% of GDP, higher than Greece’s – and provide something of a safe haven in the troubled Eurozone.293 BP admits in a private congressional briefing that the oil escape could reach 40,000 barrels a day as White House backs a move by Senators back to put oil companies on the hook for $10bn for a spill. It could be retroactive, because under current laws (20 years old) BP’s liability is capped at $75m. BP faces 20 lawsuits to date.294

Moody’s changes BP’s Aa1 debt status from “stable” to “negative” on the basis of oil-spill fears, because it is “remains impossible to assess the full extent of the costs and business impact on BP’s results”. Equity analysts are more sanguine, having opined that the total exposure will be “limited” to $3-10bn.295

CBIC’s Jeff Rubin likens the Deepwater Horizon to Three Mile Island. Writing in the Globe and Mail, he says: “Will the unfolding environmental catastrophe from the ruptured Deepwater Horizon well in the Gulf of Mexico become deep-water oil’s equivalent to the Three Mile Island accident? In terms of environmental degradation and economic cost, it’s already become much more. The real legacy of Three Mile Island wasn’t what happened back in 1979, though, but rather what happened, or more precisely didn’t happen, over the course of the next 40 years in the United States. Literally overnight, the near-meltdown of the reactor core changed public acceptance of nuclear power plants. No company in the U.S. has built a new one since.”296

Blind voting on policies puts the Greens as the most popular UK political party. The website VoteForPolicies.org.uk lists policies and asks people to vote for those they prefer. A quarter of the 245,000 people who took the test ended up voting for the policies of the Greens, about 18% each for the LibDems and Labour, and 16% for the Tories.297

6.5.10. Hung Parliament in the UK. Meanwhile, Wall street is gripped by panic that Greek crisis will spread. Stliglitz and Roubini are doubtful that the Euro can survive. They do not think governments can or should squeeze their spending to the degree the IMF and EU stipulate. Professor David Blanchflower, former Bank of England monetary policy committee member, says it is "crazy" for highly indebted countries such as Greece, Spain, Portugal and Britain to enter a “death spiral” of spending cuts : “All anyone is talking about is austerity, but all you get is more unemployment and low growth. Then you find yourself in a spiral of debt as low growth forces you to cut spending further.”298

Citywire website: “Would you put up with what is being asked of the Greek people?” As part of the IMF/ EU bailout Greek leaders are proposing the following measures: Public sector pay to be frozen till 2014; Public sector salary bonuses – equivalent to two months’ extra pay – to be scrapped or capped; Public sector allowances to be cut by 20%; State pensions to be frozen or cut, with the contribution period up from 37 to 40 years; average retirement age raised from 61 to 63, and early retirement restricted; VAT to be increased from 19% to 23%; Taxes on fuel, alcohol and tobacco raised to 10%; A new one-off tax on profits to be introduced, plus new gambling, property and green taxes. 299

289 http://www.guardian.co.uk/business/2010/may/01/warren-buffett-defends-goldman-sachs290 http://www.guardian.co.uk/environment/2010/may/02/barack-obama-deepwater-oil-spill291http://www.timesplus.co.uk/tto/news/?login=false&url=http://www.thetimes.co.uk/tto/business/industries/ utilities/article2198065.ece292 http://www.ft.com/cms/s/0/fa96b574-5838-11df-9eaf-00144feab49a.html293 http://www.ft.com/cms/s/0/7817a4fc-5881-11df-9921-00144feab49a.html?nclick_check=1294 http://www.guardian.co.uk/environment/2010/may/04/deepwater-horizon-oil-spill-backlash-bp295 http://blogs.ft.com/energy-source/2010/05/05/oil-spill-cost-uncertainty-gives-moodys-pause-for-thought/296 http://www.theglobeandmail.com/report-on-business/commentary/jeff-rubins-smaller-world/oil-disaster-may-prove-tipping-point-for-world-oil-production/article1557220/ 297 http://blogs.ft.com/energy-source/2010/05/05/are-you-a-secret-green-party-sympathiser/298 http://www.guardian.co.uk/business/2010/may/06/debt-crisis-ecb-refuses-to-soften277 http://www.guardian.co.uk/business/2010/apr/18/goldman-sachs-regulators-civil-charges 278 http://www.guardian.co.uk/global/2010/apr/20/imf-tax-global-banks279 http://www.guardian.co.uk/business/banking+uk/uk280 http://blogs.ft.com/energy-source/2010/04/21/are-policymakers-economists-and-peak-oilists-starting-to-speak-the-same-language/281 http://www.davidstrahan.com/blog/?p=577282 http://www.ft.com/cms/s/0/272d6046-5088-11df-bc86-00144feab49a.html283 http://online.wsj.com/article/SB10001424052748704423504575212031417936798.html284 http://www.guardian.co.uk/environment/2010/apr/30/oil-spill-reaches-us-coastline285 http://www.guardian.co.uk/environment/2010/apr/30/bp-cost-deepwater-horizon-spill286 http://www.guardian.co.uk/business/2010/apr/30/goldman-sachs-faces-criminal-investigation287 http://www.telegraph.co.uk/finance/newsbysector/energy/7659747/Tax-officers-arrest-22-in-UK-carbon-fraud-probe.html288 http://www.guardian.co.uk/business/2010/may/01/bp-shell-north-sea-oil-rigs-health-and-safety-executive

25

Triple Crunch Log

Dome to stem the oil flow moved into place. The leak is now 5,000 barrels a day. The structure weighs almost 100 tonnes. Such a capping has never been undertaken in waters this deep.300

7.5.10. EU crisis goes global. European shares finish at a 6 month low as more shares change hands in London than at any time since the credit crisis in autumn 2008. Other exchanges are down too.301

EU drops new emissions regulations that could have shut Drax. Pressure from the utilities, arguing that they cannot get enough new generating capcity onstream until 2020. makes a key committee put off the industrial emissions directive from 2016 until 2019. The parliament is likely to ratify this in July. The Large Combustion Plants Directive remains in place.302

Critics focus on corruption of the rigs watchdog: a pattern repeated from the credit crunch? FT: “Just as the financial crisis revealed that US regulators were often too cosy with institutions that they were meant to supervise, BP's huge oil spill in the Gulf of Mexico has shone an unflattering light on the agency charged with regulating US oil resources. For more than a decade, the Minerals Management Service, a federal agency within the interior department, has been accused by government watchdogs of failing to inspect offshore oil leases and relying too heavily on industry data in collecting royalties and other fees related to oil and gas. In a low point for the agency, a scathing 2008 report by the inspector-general of the interior described a culture of "substance abuse and promiscuity" within the MMS department charged with collecting royalties on leases and revealed that two MMS employees had, literally, been in bed with industry contacts.”303

Environmental insurers see silver lining from Gulf spill. The Gulf of Mexico oil disaster could also be the largest non-insured business interruption loss in US history, and there is a potential silver lining. Insurers are writing business for gaps in eg the hospitality industry’s coverage. As for direct losses, Swiss Re estimates that the total insured loss could fall in the $1.5 billion to $3.5 billion range, with its own loss pegged at $200 million before taxes. Lloyd’s of London currently estimates net claims to be between $300 million and $600 million. A BP spokesman says the company is self insured, but did not provide further details.304

8.5.10. Hydrate crystals block the cofferdome as oil hits shore for first time. BP now plans to do a “junk shot”: blast the blow-out preventer with debris (shredded rubber etc) under pressure, hoping to block the leak.

9.5.10. Deep-water oil’s ability to offset depletion may hinge on the Macondo cofferdam operation. If it succeeds, it should capture around 85 per cent of the leaking oil, then the spill (around 100,000 barrels, 4.2 m gallons so far) will end up at less than half the amount spilled in the 1989 Exxon Valdez disaster and won't even make it into the top 100 oil spills by volume. But if it fails, the relief well might take three months, and the spill could reach 450,000 barrels, just under twice the Exxon Valdez (into the top 50 spills). Douglas Westwood says deepwater oil production has soared from under two million barrels per day in 2000 to 8 mb/d in 2010, almost 10 per cent of global consumption, and must rise further. Chairman John Westwood: “They can't ban deepwater because the industry has nowhere else to go.” 500 deepwater wells were drilled in 2009, costing up to $100m each. The Macondo field probably contains less than 50 million barrels – an oilfield minnow. Analysts Newedge USA say that if Obama’s moratorium is in place for long, oil supply could suffer a shortfall of up to one mb/d by 2016 to 2018.305

Solar printing-press company suggests it can cut PV costs by 90% . Omar Cheema, co-founder and chief executive of Solar Press, claims a breakthrough at Imperial College that produces an “ink” made from three electrical materials dissolved in a solvent. Deposited on to panels by a high-speed printing machine, passed through an oven, the solvents evaporate, leaving behind circuits that react with sunlight to generate electric currents. Cheema estimates cost reduction by as much as 80%, and the ability to produce between 200 and 400 square metres of solar cells in one hour and 24,000 square metres of solar panels in 12 days. That would mean production of nine to ten gigawatts a year: around the current output of the solar power industry. The Carbon Trust invested £1.5m a year ago to fund its spinout from Imperial College. Cheema is looking for several million more to ramp up production. “We believe we can be profitable by the end of next year,” he says. “We we need only $10m [£6.8m] in total before investors start to see a return. That’s because there is no capital outlay.” Solar Press aims to start commercial operations with lighting in the developing world.306

10.5.10. €750bn Eurozone resecue package agreed by Finance Ministers. Stock markets leap across Europe as the ECB emraces quantitative easing.307

Mood at annual Offshore Technology Conference unaffected by oil spill. FT.com “Perhaps ironically, the same week saw a big offshore drilling conference in Houston pull in record crowds. Although the organisers of OTC said the Deepwater Horizon event affected the “mood and tone of the event,” it didn’t appear to put a huge dampener on things, judging from the Houston Chronicle’s extensive coverage. On the first day, “discussion centered on what went wrong rather than concern about the future of deep water drilling” and that there was no indication of companies being “spooked” by the incident enough to reconsider offshore drilling and production. Attendees were getting their shoes shined and fending off strip club promotions, while the disaster was undoubtedly a big topic of conversation, a small protest outside the conference on Thursday elicited little response.”308

BP spill may have been due to methane hydrates: escaping gas blowing out steel casing cement. A presentation by Halliburton last month pointed to the dangers.309

11.5.10. BP, Transocean and Halliburton execs try to blame each other each in Congressional testimony. They are ticked off by Lisa Murkowski, the ranking Republican on the committee and senator from Alaska. “I would suggest to all three of you that we are all in this together because this incident will have an impact on the energy policy of our country,” she ys. “If you can’t convince people that you can operate safely, not only will BP not be out there, but the Transoceans won’t be out there to drill the rigs and the Halliburtons won’t be out there 300 http://www.ft.com/cms/s/0/e3282f4e-591e-11df-adc3-00144feab49a.html301 http://www.guardian.co.uk/business/blog/2010/may/07/market-turmoil-live-coverage 302 http://www.guardian.co.uk/business/2010/may/07/energy-pollution-drax-environment-regulations303 http://www.ft.com/cms/s/0/832382bc-5980-11df-99ba-00144feab49a.html304 http://www.environmental-finance.com/news/view/1168 305 http://www.independent.co.uk/news/business/news/oil-production-hit-for-decades-after-bp-spill-1968931.html306 http://business.timesonline.co.uk/tol/business/article7120555.ece307 http://www.guardian.co.uk/business/2010/may/10/eu-debt-crisis-bailout-imf-ecb308 http://blogs.ft.com/energy-source/2010/05/10/not-such-a-good-year-for-solar-so-far/ 309 http://blogs.ft.com/energy-source/2010/05/10/bps-oil-spill-fight-plagued-by-methane-hydrates-a-hazard-of-deep-water/299 http://www.citywire.co.uk/personal/-/blogs/money-blog/content.aspx?ID=398084

26

Triple Crunch Log

cementing.310 FT: “Essentially, the testimonies go something like this: BP: Why did the BOP fail? Transocean: Were there problems with the cementing and casings? Halliburton: We did what BP asked us to The regulator: Better testing standards needed for shear ram, cementing and other factors The academic: Why did multiple blowout barriers fail, and was there human error?311

Methane explosions in Russia’s largest coal mine kill 52 with 38 still missing. FT: “One miner interviewed at the scene said he didn’t understand how the blast could have happened as they had just installed new German ventilators and British methane detectors. The Raspadskaya Coal Company’s mine is the highest-producing coal mine in Russia, but also one of the deepest, with 311km of tunnels, which makes it especially vulnerable to methane gas build up. Despite government pledges to compensate families of dead miners with roughly 1m roubles apiece, many relatives were bitter about the way they have been treated. “We send our sons to die in these holes, and for kopeks,” said the mother of one miner who declined to give her name. “There is no other work to do here. Only the mine. They have no choice.”312

Cities “charging ahead” with EVs, WSJ reports. “The electrification efforts aren't limited to the usual suspects—traditionally green cities like San Francisco and Seattle. Efforts are also under way in places like Orlando, Indianapolis and Memphis, Tenn., where the motor vehicle is the main mode of transportation—and where electric cars will likely meet their ultimate success or failure.” “If it can work in Houston, it can work anywhere,” says James Tillman, assistant director of the city of Houston's finance department. e.g. “Nissan Motor Co. is crafting alliances with municipalities and utilities in the 15 to 20 markets where it will initially launch the Leaf, a compact hatchback. As part of the effort, Electric Transportation Engineering Corp., a Nissan partner, will install more than 11,000 charging stations in Arizona, California, Oregon, Tennessee and Washington state, using a $100 million award from the U.S. Department of Energy. More than half will be public stations, and a few hundred of those will be "fast charging," able to charge a vehicle in minutes instead of hours.” Note: Cars charge twice as quickly from a 220-volt outlet as from a standard 110-volt outlet, which can take more than 12 hours for a full charge.313

IEA says solar could be generating 20-25% of world electricity (9,000 TWh pa) by 2050. They launch their solar PV and CSP roadmaps in Valencia today. “With effective policies in place, PV on residential and commercial buildings will achieve grid parity – i.e. with electricity grid retail prices – by 2020 in many regions. PV will become competitive at utility-scale in the sunniest regions by 2030 and provide 5% of global electricity.” PV would do 11% of global electricity by 2050, the IEA figures.314

12.5.10. IEA warns against US oil spill over-reaction. “A knee-jerk reaction by regulators, banning new offshore licensing altogether, as some are proposing, risks pushing companies to ever more precarious locations in search of hydrocarbons. The law of unintended consequences may apply,” the IEA says in its monthly market report released on Wednesday.315

Mark Jacobson of Stanford interviewed by FT.com on his 100% global renewable power modelling. The engineering professor, author with Mark Delucchi of a paper on the subject in Scientific American, says most of the response has been positive. Other views: “Why waste your time on biofuels, where the air pollution is the same or higher than fossil fuels — so people will stil die? It just seems a waste of effort. Internal combustion engines are only 15 - 20 per cent efficient, so it just makes sense to use electricification, plug-to-wheel efficiencies of electric vehicles are 75-86 per cent.” “There are two types of concentrated solar; one that uses water cooling and one that uses dry air cooling. The water-cooled, per Kwh, requires about the same amount of water as a nuclear plant or coal per Kwh, however the dry-air cooling requires hardly any water, except for cleaning — the cost of that is that you lose about 4 per cent of the energy generated.” “I’m optimistic it’s technically feasible, not so optimistic on people coming together and agreeing on things in a particular way, though we have seen some movement on that.” “Right now we don’t have a free market, we have a free-loading market where the fossil fuel companies pollute the air, and get subsidies from the government. Subsidies should be given for a benefit, not to allow people to damage other people’s health. But the fossil fuel companies are taking subsidies and at the same time damaging people’s health, including killing them. In the US, 50,000 to 100,000 people die each year [from fossil fuel pollution], and worldwide, it is 2.5 million people per year.”316

13.5.10. Eight Wall Street banks investigated over misleading mortgage securities. Subpoenas served by the New York Attorney General include Citigroup, Goldman Sachs, Merrill Lynch and Morgan Stanley. They stand accused of misleading ratings agencies. Banks’ practice of hired ratings agencies employees to package mortgage deals will be probed. The only criminal prosecution so far – of two Bear Stearns traders – say them acquitted.317

More and more reports are coming in about delays to oil drilling projects in the wake of the Deepwater Horizon accident. A temporary moratorium on new drilling permits is in place. Hearings on Virginia’s offshore development have been suspended. BP’s Tiber field and Shell’s Alaska plans could be affected.318 BP was aware of equipment problems aboard the Deepwater Horizon rig hours before the explosion, a congressional hearing finds. Documents suggest BP, Transocean, and Halliburtonignored tests that indicated faulty safety equipment. Henry Waxman, the chair of the energy and commerce committee demands to know why work was not stopped. FT: “The failures included a dead battery in the blowout preventer, suggestions of a breach in the well casing, and failure in the shear ram, a device of last resort that was supposed to cut through and seal the drill pipe in the event of a blowout.” 319

Climate bill unveiled in Senate is amended to give states veto power over projects in deep water (75 miles from their shores). The previous draft of the Kerry-Lieberman bill, unveiled yesterday, supported offshore drilling. (FT: “The bill aims for a 17% cut in emissions over 2005 levels, the same weak target enshrined

310 http://blogs.ft.com/energy-source/2010/05/11/bp-oil-spill-senate-hearings-live-blog/311 http://blogs.ft.com/energy-source/2010/05/11/the-blame-game-whos-saying-what-at-the-oil-spill-hearing/312 http://www.ft.com/cms/s/0/41f2f21e-5d18-11df-8373-00144feab49a.html313http://online.wsj.com/article/SB10001424052748703837004575013744046280672.html? mod=WSJ_hpp_MIDDLENexttoWhatsNewsThird314 http://www.iea.org/press/pressdetail.asp?PRESS_REL_ID=301315 http://www.ft.com/cms/s/0/a2646102-5db6-11df-b4fc-00144feab49a.html316 http://blogs.ft.com/energy-source/2010/05/12/qa-mark-jacobson-on-100-renewables/317 http://www.guardian.co.uk/business/2010/may/13/wall-street-banks-investigated-mortgages-ratings318 http://blogs.ft.com/energy-source/2010/05/13/shells-alaska-plans-bps-tiber-appraisal-delayed-by-spill/319 http://www.guardian.co.uk/environment/2010/may/12/deepwater-gulf-oil-spill-hearing

27

Triple Crunch Log

in a bill passed by the House in June last year. But the Senate version would apply to a smaller share of the US economy. Heavy industries would not be required to cut emissions until 2016. The bill would stop the Environmental Protection Agency regulating greenhouse gases and would scrap region cap and trade systems now underway in two dozen states and Canadian provinces”).320 The bill will need 60 votes to overcome any filibuster - the Democrats have 59. Also in the legislation: a cap-and-trade system for power plants, and for large industrial facilities at a later date, incentives for nuclear including $54bn in loan guarantees for new plants. It does not cover transport emissions.321

Obama drops the cap on BP’s liability for the oil spill. BP has shelled out $450m so far and the lawsuit total now stands at nearly 100.

14.5.10. Fears over Greek bailout send shares and euro tumbling. A Spanish newspaper didn’t help by claiming that Sarkhozy had threatened to pull out of the Euro unless Germany backs the bailout. But after a recent regional election, Merkel’s coalition is under pressure.322

Cameron says his coalition will be “the greenest government ever.” In DECC, flanked by Liberal Democrat, Chris Huhne, who will run the department, Cameron says that the environment was a top priority for him. “There is a fourth minister in this department who cares passionately about this agenda and that is me, the prime minister, right. I mean that from the bottom of my heart.” Cameron pledges to cut emissions from government 10% within a year.323

Hayward says the Gulf oil spill is “relatively tiny” compared with the “very big ocean .” “The Gulf of Mexico is a very big ocean. The amount of volume of oil and dispersant we are putting into it is tiny in relation to the total water volume,” says the BP CEO in an interview with the Guardian. Asked if he felt his job was already under threat, he replies: “I don't at the moment. That of course may change. I will be judged by the nature of the response.” Some analysts put BP's total bill for the clean-up and damages at $23bn. As for the future of deep-water drilling: “Apollo 13 did not stop the space programme. The Air France airplane that fell out of the sky off of Brazil did not stop the aviation industry.’’ 324

Debate over rate of oil leakage after BP releases video footage: three scientists say rate is much higher than the official 5,000 barrels a day. One says 70,000, another 20,000-100,000.325

Marine toxicologist Jacqueline Savitz says dispersants cause huge toll on wildlife out at sea. “You obviously can't count how many zooplankton are being impacted,” she says. The estimated 400,000 gallons of dispersant so far may will be damaging to fish, she says. “It certainly helps BP's public relations story if oil is not hitting the shore.”326

Credit rating agencies under investigation alongside Wall Street banks. The New York attorney-general’s office is now investigating whether the credit rating agencies allowed themselves to be co-opted by Wall Street Banks. Subpoenas ask for documents and e-mails between bankers and rating agency counterparts who ultimately approved the triple A designations. FT: “Analysts at credit rating agencies who earned between $100,000 and $200,000 per year could improve their salaries by a factor of five or more by moving to a Wall Street bank. Prosecutors are looking for instances where analysts who moved from a rating agency to an investment bank still held some pull over their old colleagues, or whether the lure of a potential move to Wall Street affected the judgment of the analysts who slapped triple-A ratings on highly correlated parcels of subprime securities.”327

NEF issues Better Banking Manifesto, with a ten-point charter. 1. Separate retail banking from speculation. 2. Break up banks that are ‘too big to fail’. 3. Create a National Post Bank based on the existing Post Office network. 4. Set up a Green Investment Bank. 5. Launch a competition enquiry into the banks, that looks also at the role played by ratings agencies and accountancy firms. 6. Introduce controls on bonuses. 7. Introduce a financial transaction (or ‘Robin Hood’) tax. 8. Demand better regulation. 9. Bailouts are not free: bring-in a taxpayer ‘quid pro quo’. 10. Introduce a Universal Banking Obligation328

15.5.10. EDF’s de Rivaz says the UK coalition is a boost for nuclear, but experts say the opposite, pointing to the stipulation that no state money can be contributed.329

16.5.10. New financial investment in clean energy worldwide totalled $27.bn in Q1 2010, up 31% on the same quarter last year. 2009 total was $162 bn down just 7% on the record year of 2008 ($173bn) in the teeth of recession. Only 9% $16.6bn) of stimulus funding for cleantech has been dispersed so far. Of the total $184bn, 66.6 is US, 46.9 China, 27.8 S Korea, 8.6 Japan, 4.2 Germany, 3.7 UK. $55bn will be dispersed in 2010, 55.2 in 2010, 33.1 in 2012.330

17.5.10. Concern is growing that vast dead zones are forming below the surface of the Gulf. BP has used 500,000 gallons of dispersants, which break the oil down into small particles, so far. The company is now collecting 1,000 barrels a day via 4 inch diameter pipe. But between 4,000 and 99,000 barrels are still escaping. The faulty blow-out preventer has been subpoenaed by US investigators.331

18.5.10. Tar balls reach Mexico and the no fishing zone now embraces 19% of the Gulf. The Obama administration admits it has underestimated the risks of offshore drilling.332

19.5.10. German regulator bans “naked short selling” as Merkel says Euro is in danger of collapse. Shares fall sharply across Europe. “Every one of us here can feel that the current crisis of the euro is the greatest challenge that Europe has faced for decades, since the signing of the Treaty of Rome,” Merkel says in a speech to the German Bundestag. “The euro is in danger ... If we don't deal with this danger, then the consequences for us in

320 http://www.guardian.co.uk/environment/2010/may/12/deepwater-gulf-oil-spill-hearing321 http://www.ft.com/cms/s/0/c218f6a0-5e26-11df-8153-00144feab49a.html322 http://www.guardian.co.uk/business/2010/may/14/nicolas-sarkozy-threatened-euro-withdrawal323 http://www.guardian.co.uk/environment/2010/may/14/cameron-wants-greenest-government-ever324 http://www.guardian.co.uk/business/2010/may/13/bp-boss-admits-mistakes-gulf-oil-spill325? http://blogs.ft.com/energy-source/2010/05/14/how-much-oil-is-there-leaking-from-bp-well/326 http://www.guardian.co.uk/business/2010/may/16/bp-gulf-of-mexico-oil-spill327 http://www.ft.com/cms/s/0/b3f59f8e-5ee8-11df-af86-00144feab49a.html328 “Better Banking: A manifestor to re-organise the UK banking stystem to serve and strengthen the Broitish economy through structural reform, New Economics Foundation. 329 http://www.telegraph.co.uk/finance/newsbysector/energy/7728799/Coalition-a-boost-to-nuclear-says-EDF-boss.html330 Ernst and Young at Resource Point, based on Bloomberg New Energy Finance. 331 http://www.guardian.co.uk/environment/2010/may/17/gulf-oil-spill-flow-stemmed332 http://www.guardian.co.uk/environment/2010/may/18/oil-spill-threatens-atlantic-coast

28

Triple Crunch Log

Europe are incalculable.” The German clampdown covers sovereign bonds issued by eurozone countries, CDSs on those bonds, and the shares of 10 of Germany’s biggest financial institutions including Deutsche Bank and Commerzbank. The ban will run until 31 March 2011. City experts were broadly united in attacking the proposal as badly thought out, and potentially counter-productive, arguing that if investors cannot hedge their exposure to Europe by short-selling of bonds and CDS contracts, then they may simply sell the Euro instead. The Euro has fallen to $1.2146 against the dollar, the lowest since April 2006. But analysts also believe other European countries could follow Germany's move.333

Tony Hayward tries to soothe his employees’ turmoil over the oil spill concerns with an email. In it, he felt he needed to reassure his staff members that their jobs and pensions were safe and that the  BP could afford the massive response it has launched in the wake of the Deepwater Horizon explosion. “We can afford to do the right thing.” He also promises not to “get distrected” by Congressional hearings.334

Obama’s handling of the gulf oil spill has been disappointing, writes Thomas Freidman in the NYT. “It’s his 9/11 — and it is disappointing to see him making the same mistake George W. Bush made with his 9/11. Sept. 11, 2001, was one of those rare seismic events that create the possibility to energize the country to do something really important and lasting that is too hard to do in normal times. President Bush’s greatest failure was not Iraq, Afghanistan or Katrina. It was his failure of imagination after 9/11 to mobilize the country to get behind a really big initiative for nation-building in America.” “So far, the Obama policy is: “Think small and carry a big stick.” He is rightly hammering the oil company executives. But he is offering no big strategy to end our oil addiction.” “Why is Obama playing defense? Just how much oil has to spill into the gulf, how much wildlife has to die, how many radical mosques need to be built with our gasoline purchases to produce more Times Square bombers, before it becomes politically “safe” for the president to say he is going to end our oil addiction?”335

Britain could become the "Saudi Arabia of the renewables world" by using North Sea wind and wave resources, according to a study carried out by the Offshore Valuation Group, a government-and-industry group. By 2050, so the OVG estimates, the UK could generate the equivalent in electricity to the 1bn barrels of oil and gas being produced annually offshore. The Boston Consulting Group carried out the study, which suggests that Britain could both keep the lights on and export electricity via subsea cables. Even the most conservative scenario – 13% resource utilisation, producing 78 gigawatts of power at a capital cost of £170bn – would provide half of the UK's electricity demand. A more ambitious scenario, using 29% of resources would see 169GW installed at a cost of nearly £433bn and would make Britain a net exporter of electricity.336

20.5.10. BP sent a vital Schlumberger crew home without final checks on well 11 hours before the disaster. Hired to test the strength of cement linings on the well, a Schlumberger crew was flown off the rig 11 hours before the explosion “without performing a final check that a top cementing company executive called 'the only test that can really determine the actual effectiveness' of the well's seal.” So the New Orleans Times-Picayune reports. A worker has told “60 Minutes” that BP ordered Transocean to ignore a critical safety measure during the sealing of the well. By failing to use drilling mud to seal the well, BP saved money but may have caused the explosion.337 Survivors had to spend 40 hours in isolation after the Deepwater Horizon explosion – barred from phoning their families – while lawyers believe Transocean readied its legal defences. “This will be one of the biggest torts probably in the history of the US”, says Anthony Buzbee, a Houston lawyer who is representing survivors who are seeking $5.5m (£3.7m) each in damages from Transocean and other firms. Lawyers say Transocean deliberately isolated the men, trying to wear them down so they would sign statements denying that they had been hurt or that they had witnessed the explosion that destroyed the rig. Buzbee: “These men are told they have to sign these statements or they can't go home. I think it's pretty callous, but I'm not surprised by it.”338

Deepwater wells may not be as productive as had been thought, says the PostCarbon Institute BP's Thunderhorse started producing in 2008, after years of delay, and was supposed to produce a billion barrels of oil at the rate of 250,000 barrels a day (b/d). Production reached 172,000 b/d in January of 2009, but then fell rapidly to a low of 61,000 b/d last December. BP watchers are growing increasingly skeptical that the platform will ever produce the planned billion barrels. “At least 25 other deepwater projects are said to be facing problems of falling production, raising the question of just how much oil these very expensive deepwater projects will ever produce.”339

UK coalition in danger of backing off zero-carbon by 2016 target, Green Building Council fears. “We will require continuous improvements to th energy efficiency of new housing,” the new manifesto says. “Without urgent clarification, this one line risks a wave of uncertainty sweeping throughout the construction and property sector,” says the GBC’s John Alker. “To pull the rug out from under the feet of all those companies who have been investing and innovating and preparing for 2016 would be disastrous.” On the positive side, there is a commitment to “encourage home energy efficiency improvements paid for by savings from energy bills.”340

National Grid says its new investment in greener infrastructure will cost £4 a year on energy bills . It will seek £3.2bn in a rights issue next month as it steps up spending on electricity and gas infrastructure to £22bn over the next five years, from £14bn in the past five. Three-quarters of the total will be spent in the UK. The measures announced include an offshore electricity grid to support a “new generation of offshore wind power” and promoting gas from waste through anaerobic digestion.341

China mines 90% of the rare earths vital for clean energy technology. Professor Rex Harris of Birmingham University puts it like this: “We worry about peak oil, we should worry about peak magnets as well.” Most came form the United States in the 1960s but tightening environmental regulations and a price war closed the last Californian mine, handing China a virtual monopoly. But last year the Chinese said that as part of their latest 5 year plan they would continue to reduce the export of these materials to the West and that they

333 http://www.guardian.co.uk/business/2010/may/19/debt-crisis-markets-fall-germany-naked-short-selling334 http://blogs.ft.com/energy-source/2010/05/19/bps-hayward-tries-to-soothe-his-employees-oil-spill-concerns-in-an-email/335 http://www.nytimes.com/2010/05/19/opinion/19friedman.html336 http://www.guardian.co.uk/business/2010/may/19/wind-wave-power-north-sea 337 http://www.huffingtonpost.com/2010/05/20/bp-smoking-gun-oil-giant_n_583590.html338 http://www.guardian.co.uk/environment/2010/may/20/survivor-deepwater-horizon-gulf-oil-explosion339 http://www.postcarbon.org/article/101140-the-peak-oil-crisis-the-deepwater340http://www.guardian.co.uk/environment/cif-green/2010/may/20/zero-carbon-buildings-coalition-agreeement 341 http://www.guardian.co.uk/business/2010/may/20/national-grid-rights-issue

29

Triple Crunch Log

were considering stopping the export of certain of them. They want both Western users to do their manufacturing in China and supplies for their own wind energy programme. In the search for alternative sources of rare earths, mines are planned for California, Australia, Arctic Canada and even Greenland. But there are environmental concerns. The mines at Baotou in Chinese Inner Mongolia involve enormous open-cast mines with refineries leaking vast quantities of polluted water into the landscape. Professor Animesh Jha at Leeds University proposes a cleaner alternative, having discovered that purification of Titanium dioxide, commonly used in paints, leaves a residue of rare earths. Titanium oxide deposits are found in many places, including Norway, India, Brazil, US.342

Martin Wolf in FT: “The challenge of halting the financial doomsday machine.” “Can we afford our financial system? The answer is no. Understanding why this is so is a necessary condition for evaluating ideas for reform. The more aware of the risks one is, the more obvious it becomes that radicalism is the safer option.” “People pay too much attention to the direct cost of bail-outs. As Andrew Haldane of the Bank of England has noted, these costs may be around 1 per cent of gross domestic product in the US and UK. The costs that matter, however, are those of the recession and the huge jump in public debt. If only a quarter of the world’s loss of output during the recession were to prove permanent, the present value of these losses could be as much as 90 per cent of annual world product. How did this happen? Quite simply, the financial sector has become bigger and riskier. “….The combination of state insurance (which protects creditors) with limited liability (which protects shareholders) creates a financial doomsday machine. What happens is best thought of as “rational carelessness”. Its most dangerous effect comes via the extremes of the credit cycle. Most perilous of all is the compulsion upon the authorities to blow another set of credit bubbles, to forestall the devastating impact of the implosion of the last ones. In the end, what happens to finance is not what matters most but what finance does to the wider economy.”343

Nearly a year after the recession likely ended, the US housing market looks “as sick as ever.” Wall Street Journal: “At the end of March, borrowers on 10.06% of residential mortgages had missed at least one payment, up from 9.47% at the end of 2009, according to the Mortgage Bankers Association. ….Since the end of 2007, outstanding household mortgage debt has remained at about $10 trillion, sustained in part by huge government mortgage purchases, loan-modification programs and superlow interest rates. Yet those haven't stopped house prices sliding 20%.344

21.5.10. Oil hits Louisiana wetlands as concern focuses on impacts of dispersants. Robert J Gordon, an attorney epresenting 500 commercial fishermen suing BP: “We are concerned that the cure may be as bad as the injury.” The EPA has required BP to identify and use a less toxic and more effective dispersant from the list of EPA authorized dispersants.345

Biggest Wall Street shake-up since Great Depression: Senate backs Obama’s banking reform bill. The bill gives the US government the power to seize control of a failing bank to avoid a collapse that could threaten the financial sector. Derivatives trading will have to take place through a central clearing house, rather than directly between trading teams, and banks will also have to post collateral to cover potential losses, pushing up the cost of dealing in derivatives. There will be a British-style “say on pay” vote on boardroom bonuses. A consumer financial protection bureau will be created to police the sale of products such as mortgages and credit cards. Obama: “Taxpayers will never again be asked to foot the bill for Wall Street's mistakes. There will be no more taxpayer-funded bailouts. Period.” However, some measures were dropped from the bill – including stringent conflict-of-interest rules and tighter controls on proprietary trading – after Republicans prevented these topics being voted on. And it remains unclear whether US deposit-taking banks will also be banned from engaging in proprietary trading (i.e. whether the Volcker Rule will apply, and if so in what precise shape). This element will be covered in an amendment yet to be voted upon, as will a tougher proposal forcing banks to spin off desks trading in credit swaps. The Senate bill must now be merged with a version approved in December by the US House of Representatives. Then it goes to the president to be signed into law, possibly in July. Jim Hardesty, president of Hardesty Capital Management: “The lobbyists are firmly in control of Washington, and the reform efforts are likely to be modest.” He fears Wall Street firms might simply “reinvent themselves.”346

23.5.10. Europe markets set for more turmoil as rifts over how to deal with mounting deficits widen. Spanish Prime minister José Luis Rodríguez Zapatero says his government will not revise its €15bn austerity plan, despite pressure from unions. Meanwhile, the Spanish government has been forced to rescue a regional mortgage lender. £6bn of cuts mapped out by the new UK coalition government came under attack. David Blanchflower who said revised figures for last year – showing the UK spent less than expected – allows the government to delay cuts. He says the economy needs to recover before the government cuts spending or it could slip back into recession.347

Climate change concern declines in poll: only 62% of Britons interested in subject, down from 80% in 2006, according to YouGov survey. The poll also suggests resistance to building new nuclear power stations is decreasing. The number of climate change agnostics – those unsure whether human activity is warming the planet – has risen from 25% in 2007 to 33% now.348

US safety regulators to energy companies: “Your workers are dying on the job, and it has to stop.’’ Jordan Barab, of the federal Occupational Safety and Health Administration (Osha): “Something is desperately wrong. The status quo isn’t working.’’349 In the last 3 months, 58 workers have died in explosions, fires and collapses at refineries, coal mines, an oil drilling rig and the construction site of a gas-fired power station. Of particular concern is a spate of recent incidents at oil refineries that have scalded, burned or killed workers.350

BP accounts for 97 per cent of all wilful violations found in the refining industry by regulators over the past three years. So says a recent report by the Washington-based Center for Public Integrity. In 2005, Osha

342 http://news.bbc.co.uk/1/hi/sci/tech/8689547.stm343 http://www.ft.com/cms/s/0/f2e4dbb0-4caa-11df-9977-00144feab49a.html344 http://online.wsj.com/article_email/SB10001424052748703691804575254860399350420-lMyQjAxMTAwMDIwMDEyNDAyWj.html345 http://blogs.ft.com/energy-source/2010/05/21/oil-hits-louisiana-wetlands-confirming-worst-fears-of-locals/346 http://www.guardian.co.uk/business/2010/may/21/wall-street-reform-obama-banking-shakeup347 http://www.guardian.co.uk/business/2010/may/23/european-markets-expect-further-turmoil348 http://www.guardian.co.uk/environment/2010/may/23/climate-change-interest-yougov-survey349 http://www.ft.com/cms/s/0/c7458506-668e-11df-aeb1-00144feab49a.html350 http://www.ft.com/cms/s/0/c7458506-668e-11df-aeb1-00144feab49a.html

30

Triple Crunch Log

found more than 300 “egregious, wilful violations” in Texas City, where 15 died. FT: “Yet three more fatalities have happened at the Texas plant since the blast – one of which is under investigation by the US Chemical Safety Board. Last August, Osha notified BP of continued lapses there and issued $87.4m in proposed penalties – the largest fine in the agency's history.” 351

25.5.10. BP Chairman hits back at critics saying the company is “big and important” to the US economy, and that the CEO is doing a “great job.”352

Commentators increasingly point to high deep-water production costs as incentive to cut corners. e.g. Treehugger.com: The leasing of a deep water rig has to be hugely expensive. Thousands of dollars per minute possibly. Such high costs explain the pressure engineers are under to get on with the job of producing oil once all the equipment and people are in position to tap the leased reserves.353

26.5.10. BP tells US lawmakers that there were “several new warning signs of problems” in the hours before the Deepwater Horizon explosion, and that a “fundamental mistake” may have been made in the face of abnormal pressures by the rig crew. When the pump was shut down, 41 minutes before the explosion, the well continued to flow instead of stopping. Drill pipe pressure increased unexpectedly. BP also identified ‘several concerns’ relating to the cementing process. Some mechanisms used in the process did not initially operate as intended and required nine attempts before functioning properly.354

Transocean, the rig owner, says BP directed the operation. “A well is constructed and completed the same way a house is built — at the direction of the owner and the architect. And in this case, that’s BP.”355

27.5.10. BP begins its “top kill” operation to plug the Macondo well by pumping heavy mud in to reverse the oil flow. In two days the world will supposedly know if it has worked, or whether – as some oil drilling experts are saying is possible – the spill has been made worse by damage to the parts of the blow-out preventer that might be working.356

At Congressional hearings, rig staff accuse BO of taking “short cuts” in run up to spill. BP’s share price has fallen by 28% now, a reduction in market value of $84bn. (Profits in 2009 were $13.9bn).357

The spill is becoming Obama’s problem. 51% tell CNN that they disapprove of his handling of the crisis. The Republican ggovernor of Lousiana, Bobby Jindal, is becoming a persistent thorn in his side.Obama finally links the oilspill to the “dangers of fossil fuels.” This he does while touring a solar panel plant in California: “we’re not going to be able to sustain this kind of fossil fuel use,” he says.358

Deep-water oil accounts for 23.5% of US GoM production (EIA): the delay or loss will be serious. In 2008, 14.9% of US reserves were in the deep-water GoM (EIA). Both figures are based on defining deepwater as 1,000 feet plus. But deep water oil is often classified as anything deeper than 500 feet. Over 5,000 feet is ultra-deep water. 33 wells have been suspended for 6 months in the GoM. Production underway is not affected: 591 oil and gas production wells are still producing in deep water (as are 4,515 in shallow water).359

US oil imports were scheduled to drop, in large part due to expanding deep-water production. Current consumption is 51% imported and the EIA was forecasting that to drop by a third, from more than 12 mbd in 2007 to about 8 mbd in 2030, assuming consumption remains roughly flat. Domestic production is around 5 mbd, 30% of which is in the Gulf of Mexico, around 70% of it in deep water (i.e. 1.1 mbd+), a proportion that is growing fast. The GoM is more than 90% of all offshore US production. The EIA aniticpates “a vast majority” of projected increases in U.S. production in the near term will come from Gulf deepwater fields. (Lots more useful info in this CFR article).360Globally, deep water production accounts for around 7 mbd in 2010 (under 10%). Energy Files shows deep water production rising a peak at just to just under 12 mbd by around 2020.361

The EU says it might tighten oil company operating rules once it has reviewed the safety implications of the Deepwater Horizon incident.The European Commission shies away from toughening its carbon target even though its own most recent study shows it would be cheaper than expected: €81bn a year to cut to 30% by 2020, as opposed to €45bn a year to get to 20% (down from the €70bn estimated when the target was set two years ago). Germany and the new UK government support a move to 30%, in the UK’s case unilaterally, to show leadership. The analysis goes to an EU environment ministers meeting in June.362

EDF say they have enough assurances from new UK government to press ahead with UK nuclear. CEO De Rivaz is particularly pleased there will be a floor price for carbon. He quotes from a report published by Parsons Brinckerhoff Power.363 “Their data shows that with typical generation costs in the range of £55-£86 per megawatt hour [MWh], new nuclear is well placed in helping keep low carbon energy affordable in the long term. That compares particularly favourably to other low carbon technologies. Offshore wind represents a generating cost of up to £204 per MWh and carbon capture and storage technology up to £154 per MWh.”364

28.5.10. BP says it may need as much as 48 more hours to see if the Top Kill process can work. The costs of the cleanup approach $1bn. BP shares fall further.365

New official estimates for the BP spill are 12,000-19,000 bd for 37 days, making c 444-703 barrels in all: the worst environmental disaster in US history, twice the size of Exxon Valdez, and the biggest spoill since 1972. The Top Ten league table is: 1. First Gulf War, 1991, Persian Gulf, 7m barrels. 2. Ixtoc 1, 1979, Bahia de Campeche, 6m barrels. 3. Nowruz Oil Filed, 1983, Persian Gulf, 2m barrels. 4. Atlantic Express, 1979, Little Tobago, 2m barrels. 5. ABT Summer, 1991, Angola, 1.85m barrels. 6. Castillo de Bellver, 1983, Cape Town, 1.8m barrels. 7. Amoco Cadiz, 1978, Brittany, 1.6m barrels. 8. M/T Haven, 1991, Genoa, 1m barrels. 9. Odyssey, 1988, Nova Scotia, 1,000 barrels. 10. Sea Star, 1972, Gulf of Oman, 0.85m barrels. The Deepwater Horizon is 0.4 – 0.7m barrels and the Exxon Valdez was 0.26m barrels.366 Obama puts a 6 month moratorim on all new deep water drilling in the Gulf of Mexico. The American Petroleum Institute calls it “a moratorium on economic growth and job creation.”367 Obama admits he did not do enough in the early days of the spill, especially in forcing BP to share information.368

MSS director resigns as Obama criticises the regulator of having a “sometimes corrupt” relationship with the oil industry.

29.5.10. Community Interest Companies growing as an alternative form of investment for renewables in the UK. This new type of limited company is designed for those wishing to operate for the benefit of the community rather than owners or individuals. Water Power Enterprises (h2oPE) is the latest, seeking investors for its ground-breaking renewable hydroelectricity schemes. Its is launching a £1m social share offer to finance its next two schemes, offering a return of around 3% per annum after the first two years, rising to 5% per annum in later years. Investors can claim back 20% of their initial investment against their income tax. Given how low interest rates are on deposit accounts, it adds up to an attractive package. Ideally, the organisers say, investors should be prepared to lock their money away for at least 10 years – and preferably longer: investors should

31

Triple Crunch Log

perhaps see it as a social rather than financial investment.369

30.5.10. Top Kill and Junk shot fail in the Gulf. Obama calls the situation "heartbreaking" and Carol Browner says the spill may go on until August now. BP is deploying American Bob Dudley on TV. He is confronted with a New York Times report that BP engineers were concerned almost a year ago that the metal casing around the well would buckle under the pressure 5,000ft below sea level. He smoothly plays these down without rejecting them. “The casing designs that are used in the Gulf of Mexico: we’ve used those in other places,” he tells ABC’s This Week.370

Louisiana residents have taken to calling Tony Hayward Mr Wayward, and invective heaped on him in local media includes his “toffee-nosed voice.” Congressman Ed Markey to CNN: “I think it’s pretty clear that BP, from the very beginning, has been making it up. They really did not have a plan in place to deal with a catastrophe of this size.” ATimes-Picayune reader on the paper's website: “Has anyone Googled ‘Tony Hayward spill minor’ to see what the CEO of BP is saying to the European press? Very different press releases ... Look at the May 19 report ‘environmental impact will be very, very modest’.”371 Markey has also said that BP is “either lying…or incompetent.”372

Bob Dudley calls’ BP’s effort “the equivalent of doing heart surgery on TV.” The next attempt with be to cut the pipe in two places, one immediately above the blow-out preventer, and try and siphon oil in a cap (or the use the tech term, a lower marine riser package) to a tanker at the surface. BP admits this next gambit can’t hope to collect all oil. And press articles mention the hurricane season, which starts 1 June, with increasing frequency. The tanker collecting from a successful cappint operation above a new break in the pipe could not stay on station in severe weather.373

The Deepwater Horizon was registered in the Marshall Islands, under a flag of convenience , it emerges in Congress. Further fury is toked at this discovery.374

“Malia for President:” Tom Friedman op-ed title in the New York Times. Obama had said in a press conference: “When I woke this morning and I’m shaving and Malia knocks on my bathroom door and she peeks in her head and she says, ‘Did you plug the hole yet, Daddy?’” Friedman: “His most important job is one he has yet to take on: shaping the long-term public reaction to the spill so that we can use it to generate the political will to break our addiction to oil. In that job, the most important thing Mr. Obama can do is react to this spill as a child would — because it is precisely that simple gut reaction, repeated over and over, speech after speech, that could change our national conversation on energy. ….Kids get it. They ask: Why would we want to stay dependent on an energy source that could destroy so many birds, fish, beaches and ecosystems before the next generation has a chance to enjoy them? Why aren’t we doing more to create clean power and energy efficiency when so many others, even China, are doing so? And, Daddy, why can’t you even mention the words “carbon tax,” when the carbon we spill into the atmosphere every day is just as dangerous to our future as the crude oil that has been spilling into the gulf?” …..That is what a child would want to know if he or she could vote. That is the well of aspiration for a game-change on energy that Mr. Obama can tap into. And he could even rip off BP for his moon shot motto: Let’s get America “Beyond Petroleum.” As you would say, Mr. President, this is your time, this is your moment. Seize it. A disaster is an inexcusable thing to waste.”375

More oil has been spilled in the Niger delta than has been lost in the Macombo spill. So say two major independent studies over the last two years (necessary because government and industry keep the figures secret). “We are faced with incessant oil spills from rusty pipes, some of which are 40 years old,” says Bonny Otavie, a Nigerian MP. Writer Ben Ikari, a member of the Ogoni people: “If this Gulf accident had happened in Nigeria, neither the government nor the company would have paid much attention. This kind of spill happens all the time in the delta. The oil companies just ignore it. The lawmakers do not care and people must live with pollution daily. The situation is now worse than it was 30 years ago.” The Niger delta and its 600+ oilfields supply 40% of all the crude the United States imports. Amnesty has calculated that the equivalent of at least 9m barrels of oil was has been spilled.376

Do brewing sovereign debt crises mean we are about to slide into Global Meltdown part II? Most economists say no. But sceptics “warn that shares will plummet as investors take stock of the unprecedented scale of a swathe of sovereign debt crises. They see confidence-shattering debt defaults, a eurozone in a perpetual identity crisis and years of financial pain as households ultimately foot the bill for the bailouts ushered through in Meltdown part I.”377

31.5.10. BP has asked for $700m from Transocean’s insurers. This has gone down badly: insurers claim they convered the rigg, not the subsea leakage. Meanwhile BP faces a “blizzard” of claims against them.378

Hayward makes another gaffe: “There's no one who wants this over more than I do. I’d like my life back,” he says on camera. Invective flies on the websites, some pointing out he should be spending a piece – or the rest – of it in jail.379 The public relations strategy for dealing with a disaster such as the Gulf of Mexico spill, now officially the worst in US history, was always going to be about damage limitation.Scottish government bullish about renewables job prospects. The Offshore Valuation Group recently forecast that renewables could create 145,000 new jobs and make Britain a net exporter of electricity by 2050. They estimate that if wind and wave power use only a third of the available resource they could generate electricity equivalent to the current level of North Sea oil and gas production. The group also forecasts renewables could create 145,000 new jobs and make Britain a net exporter of electricity by 2050. Some 5,000 people are employed directly in the UK’s large-scale onshore and offshore wind industries, according to Renewables UK,and up to 60,000 new recruits will be needed in the next 11 years. The Scottish government estimates that renewable energy could create 26,000 jobs in Scotland during the next decades and provide up to £15bn ($22bn) of investment opportunities.380 Presence of world leaders in Copenhagen “paralysed” process, according to UN’s top climate official. A leaked letter from Yvo de Boer, UN climate chief, “suggests the Copenhagen climate summit failed because the presence of 130 world leaders paralysed decision-making and the Danish presidency backed the US and other western nations over the interests of the poor.381

UK ministers order review of looming commodities shortages: from fish and timber through food and water to precious metals, as concerns grow that that the problem could hit every sector of the economy. The Department for Food, Environment and Rural Affairs will lead the initiative.382

1.6.10. Obama administration incensed that BP waited a day and half to alert them of Top Kill’s failure. 383

Meanwhile:BP shares, already down about 25% since the leak began in April, fall a further 15.4% to 418.9p, their worst level since March 2009. The company’s market capitalisation of just over $90bn is now $20bn below Shell’s. At the end of 2009 it was $181 bn, i.e it has more than halved. 384

32

Triple Crunch Log

Arbuthnot analyst says BP survival is at stake.385 “BP has spent $1bn to date and the future costs will be significant. Adding in the inevitable litigation costs, this will have a major financial impact on the company which realistically cannot be quantified in the short term. What worries us the most is the emotive language coming from the Obama administration and the reputational damage done so far. It is difficult to see how the company can recover and it remains unclear what punitive measures will be put in place in terms of its operations in the Gulf of Mexico.”386

BP has lost nearly 25%, or $46bn, from its market value since mid-April. FT: “the oil giant is beginning to look cheap — and vulnerable.” Lex in the FT: “BP must now give investors guidance on “its own best estimate of the scale of its potential liabilities.” Credit Suisse estimates total liabilities could be $17.6bn including claims and clean-up. BP had net cash from operations of $7.7bn in Q1. Lex: “investors should bear in mind that, ultimately, the costs to BP might include not just Tony Hayward’s job as chief executive but the company’s independence”. BP’s market cap is now half of Exxon’s, and they and Shell must be running the numbers. But how will they know how big the liabilities might be?387

BP disputes existence of underwater plumes of oil. Its simple, says Tony Hayward: oil has a specific gravity half that of water, therefore all the oil is on the surface. The universities of Florida, Georgia and Mississippi all say they have detected huge plumes of underwater oil, and they must be wrong.388

Parallels with Ixtoc 1 oilspill of June 1979 are striking, with one big exception. The uncontrolled well 600 miles of Houston gushed oil and gas for nine months and 22 days, spilling about 3.3m barrels of crude through many attempts to seal the leak, until it was finally capped by two relief wells in March 1980. But that well lay under just 150ft of water, not 5,000ft.389

Last year’s Montara leak, in the Timor Sea, was eventually stopped by a relief well operation after more than 10 weeks. It was at 75m depth, leaking only slowly compared to Macondo, but, in the FT’s words, “it provides plenty of examples of just how difficult relief well operations can be even today.”BP has warned that the relief wells risk a similar blowout to the original well. This in a regulatory filing with the Department of the Interior. But Tony Hayward has elsewhere discounted the chances of that happening: “The relief wells will be successful,” he told reporters in Houston. Drilling two wells will “assure ultimate success.” 390

8 hurricanes forecast for 2010 season, out of an unusually high figure of 15 named storms. A Florida State University estimates that a hurricane or tropical storm could push oil up to 12 miles into the grassy marshes that cover much of the Gulf shoreline and act as breeding grounds for fish and birds.391

Peak demand debunked: “It is not that mature economies do not want or need oil. Quite the contrary, the advanced countries desperately need low cost fuel to facilitate recovery of their economies. Decision makers need to recognise this reality. Pretending that oil has somehow become unfashionable or unnecessary will just make matter worse.” So Steven Kopits, Managing Director of Douglas-Westwood writes in Petroleum Review. The US economy, for example, has shed consumption when crude oil expenditures exceed 4% of GDP: equating to $82 a barrel today. This means the US is about to be priced out of the market.392 (L)UK faces a £4bn black hole in unavoidable nuclear decommissioning and waste costs in next 4 years, new energy secretary Chris Huhne says. Is department’s entire budget this year is £3bn. Huhne tells the Guardian: “As you can imagine, this is a fairly existential problem. The costs are such that my department is not so much the department of energy and climate change, as the department of nuclear legacy and bits of other things.” The black hole is equivalent to wiping out one-sixth of the overall cuts in public spending identified by the Treasury with last week.393

Lloyd’s and Chatham House publish a report warning about energy crisis coming. “Businesses which prepare for and take advantage of the new energy reality will prosper - failure to do so could be catastrophic. Market dynamics and environmental factors mean business can no longer rely on low cost traditional energy sources. China and growing Asian economies will play an increasingly important role in global energy security. We are heading towards a global oil supply crunch and price spike. Energy infrastructure will become increasingly vulnerable as a result of climate change and operations in harsher environments Lack of global regulation on climate change is creating an environment of uncertainty for business, which is damaging investment plans. To manage increasing energy costs and carbon exposure businesses must reduce fossil fuel consumption. Business must address energy-related risks to supply chains and the increasing vulnerability of 'just-in-time' models. Investment in renewable energy and 'intelligent' infrastructure is booming. This revolution presents huge opportunities for new business partnerships.”394 (L)

2.6.10.1. BP future now in jeopardy as US government launches criminal investigation. “We will closely examine the actions of those involved in the spill,” says the Attorney General. “If we find evidence of illegal behaviour, we will be extremely forceful in our response.” So far BP has lost around a third of its market value – some £40bn – since the Deepwater Horizon rig exploded and sank on 20 April.395

Hayward admits BP was not fully prepared to fight the Deepwater Horizon leak, as pressure mounts on the company not to pay its annual dividend to shareholders. “What is undoubtedly true is that we did not have the tools you would want in your toolkit,” he tells the FT. Democratic senators write to tell him it would be wrong for BP to pay investors a dividend until it knows the full cost of the disaster. 396

BP has turned down James Cameron’s offer to help. Cameron, who has experience of undnerwater filming via “Titanic”, now says: “Over the last few weeks I've watched, as we all have, with growing horror and heartache, watching what's happening in the Gulf and thinking those morons don't know what they're doing.”397

Hayward says BP is looking for new ways to manage “low-probability, high-impact” risks such as the Deepwater Horizon oil rig accident. His company is using equipment not much different from the time of Ixtoc spill. The gas blowout was a “one in a million” hit, Hayward professes.398

BP’s reputation has “fallen off a cliff” to an all-time low. So says Covalence, an organisation that tracks the ethical reputation of large companies. BP a grade E, its lowest, in a ranking used by some ethical investors, and not just because of the spill. Working conditions have fallen.399 BP has gone from 7th place to 26th place among the 31 energy sector peers in Covalence rankings. It is now 558th of 581 across all the companies ranked. Another five companies still come out lower, amongst BP’s sector. Worst is Halliburton, at 580th out of 581 companies, across all sectors.400

Fitch downgrades BP from AA to AA+ assaw gets stuck in latest effort to contain the spill. 401 BP's survival is now openly discussed in the City. It has lost a third of its value (equating to £44bn) since the Deepwater Horizon explosion. 402

US firmly rebuffs proposal by Matt Simmons, Russians and others of a nuclear blast in the Gulf to stop the spill. Decades ago, the Soviet Union reportedly used nuclear blasts to successfully seal off runaway gas

33

Triple Crunch Log

wells. “It’s crazy,” an anonymous senior government official says. A senior Los Alamos scientist, also anonymous: “It’s not going to happen. Technically, it would be exploring new ground in the midst of a disaster — and you might make it worse.”403

A boycott BP campaign is creating a buzz on the internet, with more than a quarter of a million sign-ups on Facebook. BP forecourt logos are being smeared with mud. And 40% of BP’s business is in the US. The US interior secretary, Ken Salazar, has warns that BP's “life is very much on the line.” John Kilduff, an energy analyst turned hedge-fund manager at Round Earth Capital, tells CNBC television: “It's questionable whether they can continue to do business in the United States.” The company's market value has dropped from $122bn to barely $80bn. Dan McGinn, a communications expert at TMG Strategies, says corporates can cover from PR disasters. The worst sin, he says, is not necessarily the accident itself but a sense of gross incompetence, a perception of cruelty or veneer of sheer arrogance. “If it comes across that you not only don't understand but don't care about the consequences of your actions, that's unforgivable to Americans.”404

EDF lobbying watered down last government’s effort to make nuclear industry pay for waste. The Brown government originally planned to charge the industry a high, fixed, disposal levy tied to the amount of nuclear waste it produced. The government envisaged responsibility for the waste transferring to the state only once the waste had been disposed of, at least 110 years from the start of a reactor's operations. In March, the Labour government published revised proposals that made significant concessions on both issues, and documents now released under the Freedom of Information Act show that EDF lobbied hard for this on the grounds that investment prospects would be impaired.405

EC to probe the acrimonious nuclear power joint venture between Areva and Siemens after the German company revealed previously undisclosed “non-compete” clauses. At the time it signed up to the JV in 2000 Siemens didn’t think a nuclear renaissance would happen, but now it does, and wants to work with the Russians, not the French.406

3.6.10. BP elects to go ahead with $10bn shareholder payout, despite US senators’ requests not to. Hayward will hope to appease City investors by promising in a conference call with analysts to stick with BP's dividend policy, saying he is confident the company can pay for liabilities resulting from the Deepwater Horizon rig explosion – up to $60bn according to latest analysts’ estimates – as well as rewarding investors. BP's dividend is vital for the pensions of millions who depend on payouts from profitable companies to boost their retirement funds. Shell and BP accounted for 25% of the total dividends of £50bn paid in the UK market last year.407

Paying the dividend would be a mistake, Nils Partley argues in the Guardian . “The problem is not that BP cannot afford its dividend ….it would be bone-headed for BP to parade its financial armoury while oil is still belching from the seabed. That is so even when you consider that the bulk of the final bill will be payable only after the lawyers have done their work, which could be several years from now. ….at a moment of crisis, one calculation overrides others: don't make more enemies if you don't have to. BP shareholders' long-term interests would be best served by making a short-term dividend sacrifice.”408

Obama vows to rescind “billions of dollars” in 'Big Oil' tax breaks by the end of the year. The White House’s cosy relationship with the oil industry is over, he pledges.409

EIA cuts its prognosis for global oil supply: just 92 mbd by 2020 . In 2007 it forecast 118 million b/d by 2030. The forecast has fallen every year since, to 2010’s 104 million b/d by 2030. Supply increases about 0.6% a year from 86 million b/d in 2011 to about 92 million b/d in 2020, which is a bit over 500,000 b/d per year, or essentially flat (for all liquids, not just crude oil).410 Steven Kopits of Douglas Westwood notes that EIA has gone “hardcore” on peak oil. Through 2020, even though China would be expected to hit its stride for increased oil demand, the EIA sees no year in which liquids production will increase by even 1%.411

Climate talks resume in Bonn with “barely a whimper.” “Little has changed since Copenhagen, says the FT. On Climategate: “The furore was overblown, according to the investigations that have thus far reported into the matter, and the central science of climate change remains unchanged, experts say. But the public perception of climate change science has certainly been damaged.” “The oil spill - the worst environmental disaster to hit America, according to President Barack Obama - could yet be the most important thing to happen to the public discourse on climate change.”412

Vince Cable admits U-turn on early public spending cuts, and falls into line with Tories on UK budget deficit. Early spending cuts will be offset by support for economic growth, such as pressure on banks to increase lending to small firms, the creation of new apprenticeship schemes and an overhaul of regulations to make life easier for businesses, he says. For banks, he sees three priorities – separating retail and investment banking, resolving the question of a levy on the banks to reflect the fact the taxpayer is providing insurance, and ensuring that banks' lending agreements are being honoured.Regulators appalled as JP Morgan found to have mixed its own money and its clients’ money. This failure to keep segregated accounts – among many other ills – would actually restrict clients' access to their cash in times of financial disaster. The FSA fines JPM £33m, the biggest it has ever imposed by the Financial Services Authority. JP Morgan's failure went undetected by external audiros for seven years from 2002 to 2009. Guardian: “At this point, you have to wonder whether external auditors can be trusted to do their jobs properly. Shouldn't the FSA simply check compliance with client-money rules itself and send a bill to the bank?”413

Britain risks default on debt unless government cuts public sector pensions. Edmund Conway, Economist corrspodent at the Daily Telegraph: “I suspect that inflating away Britain’s debt will be far more difficult than some people think – because so many of Britain’s debts are index-linked – in a way that they weren’t before. If you include index-linked gilts (which weren’t around before the 70s), public sector and state pensions and PFI and local government debt, some four fifths of UK debt is linked to inflation. ….This implies that inflation may not be the escape valve Britain hopes it will be. It would erode away the nominal section of the national debt, but would do nothing to reduce the other bits and pieces. They could only be slashed if the Government takes a knife to the state’s pension bill.”414

4.6.10. Cap placed on Macondo wellhead. We will need to wait up to 24 hours to see if it stable. Even if so, BP does not expect to trap all the escaping oil. Obama postpones trip to Australia and Indonesia to visit the stricken region and presents a preliminary bill for $69m to BP and “other responsible parties.”415

Oil could spread as far as North Carolina, says the National Center for Atmospheric Research. NCAR scientist Synte Peacock: “I’ve had a lot of people ask me, ‘Will the oil reach Florida?’ Actually, our best knowledge says the scope of this environmental disaster is likely to reach far beyond Florida, with impacts that have yet to be understood.”416

BP hives off 'toxic' Gulf spill operation to an American in an effort dilute anti-British feeling in US.

34

Triple Crunch Log

Bob Dudley steps into the hot seat. Hayward meanwhile makes another gaffe. “They've thrown some words at me, but I'm a Brit. Sticks and stones may break my bones but words will never hurt me.” Chairman Carl-Henric Svanberg has been accused of keeping himself out of the line of fire.417

BP has developed a new, more hurricane-resistant oil collection system, which will be working by mid July. It is based on a “submersible riser” which will offer “very rapid connect and disconnect capabilities.”418

MMS document shows how dependent the oil industry is becoming on deep water in the GOM. The Minerals Management Service document Deepwater Gulf of Mexico 2009: Interim Report of 2008 Highlights defines deepwater as anything in a depth greater than 1,000 feet. In February 1997, there were 17 producing deepwater projects in the GOM, up from only 6 at the end of 1992. At the end of 2008, there were 141 producing projects. There are some 7,310 active leases in the GOM, 58 percent of which are in deep water. In 1992 there were around 5,600 active GOM leases, only 27 percent of which were in deep water. Deepwater oil production rose about 786 percent and deepwater gas production increased about 1,067 percent from 1992 to 2007. Production from seven deepwater fields began in 2008, including Thunder Horse, the largest daily producer in the GOM. The deepest is 356 ft (2,852 m) below the water surface in Shell’s Silvertip project.419

China and America are the most attractive locations for renewables, E&Y concludes in its annual index on national renewables prospects. China invested $34.6 billion on clean-energy projects last year, almost double the investments by the US. China has vowed to cut carbon emissions per unit of gross domestic product by as much as 45 percent of 2005 levels by 2020.420

G20 finance ministers dash hopes for early implementation of Basel III anti-speculation rules for banks. They will be phased in over several years. Ferocious lobbying from the global finance industry was the reason. Germany, France and Japan argued that forcing banks to hold more capital to guard against a future financial meltdown would starve companies and individuals of finance and risk plunging the global economy into a double-dip recession.421

The $2.6 trillion mystery of who owns Europe’s loans. That’s the amount that foreign financial institutions have lent to public and private institutions in Greece, Spain and Portugal. But nobody knows exactly which banks are sitting on the biggest rotting loans in those countries. Jörg Rocholl, a professor at the European School of Management and Technology in Berlin. “Banks continue to not trust each other. They know other banks are sick, but they don’t know which ones.”422

5.6.10. G20 drops support for fiscal stimulus and global bank levy. Finance ministers from the world’s leading economies, meeting in South Korea, drop their support for fiscal stimulus, professing that financial market concerns over sovereign debt had forced a much greater focus on deficit reduction. Their communiqué posits that expansionary fiscal policy is no longer sustainable or effective in fostering an economic recovery because of “market realities”: investors no longer being confident about some countries’ public finances. “The recent events highlight the importance of sustainable public finances and the need for our countries to put in place credible, growth-friendly measures, to deliver fiscal sustainability.” The G20’s previous communiqué, in April, called for fiscal support to “be maintained until the recovery is firmly driven by the private sector and becomes more entrenched.” George Osborne, British chancellor, claimed credit for the change. The US is the country most concerned about the new austerity drive and most fearful for the momentum for global growth. The G20 found no consensus for a global levy on banks. The decision to allow countries to pursue their own domestic agendas on new taxes on banks was particularly pleasing for Canada, which has long opposed the idea.423

Americans are signing up for telephone courses in post peak-oil living as Transition US reaches 68 official chapters, up from just two in 2008.424 The Transition Network worldwide, just four years old, has nearly 300 member districts.425

6.6.10. BP claims first progress against Gulf spill as the the cap collects about 10,500 barrels of oil. The estimated flow from the well is put at 12,000-19,000 barrels per day. Meanwhile the spill has disaggregated into hundreds, maybe thousands of smaller pieces of oil.426

BP told by independent expert to cut overtime at US refineries, and raise other safety levels. Duane Wilson, a retired ConocoPhillips expert appointed in 2007, in his third annual report: “Overtime for some individuals at all refineries remained at a level that may compromise the performance of workers.” Operators had worked 29 or more consecutive 12-hours shifts prior to the 2005 Texas City disaster and were likely fatigued when the accident occurred.427

BP threatened with legal case over safety of all its oil rigs. Action group Food and Water files for an injunction in a Houston court halting drilling on a Gulf platform, arguing that their case raises questions about the way the company's rigs are operated throughout the world. Guardian; “Ken Abbott, a former offshore worker subcontracted to BP, will tell a press conference in London that 6,000 out of 7,000 documents supposed to be in place regarding the Atlantis platform were missing, and that his attempts to raise his concerns with the oil company were not taken seriously.” 428

Rival oil company bosses have expressed their belief that blowout could not have happened to them, professing their procedures are tighter. There has been criticism of BP only using one casing on the well that blew out, with some companies saying they use two.429

Demonstrations in 29 US cities will call on Obama to seize BP. The Answer Coalition, a campaign group that grew out of opposition to the Iraq war, is organising a week of demonstrations in 29 cities calling for seizure of BP. Robert Reich: “This is a national emergency. It's simply untenable for a for-profit company with responsibility to its shareholders to be in charge of handling one of the worst environmental disasters in American history. At the moment, the president has no direct ability to instruct BP to do anything.” He cites the precedent of AIG, where the US government had few qualms.430

$550bn spent each year by big developing countries on oil, gas and coal energy subsidies, about 75 per cent more than previously thought ($c300bn), according to the first exhaustive study of fossil fuel subsidies. The IEA included 37 large developing countries in the study. Phasing out subsidies over the medium term, as agreed last year by the G20, would trigger vast savings: energy consumption could be reduced by 850m tonnes equivalent of oil by 2020, or the combined current consumption of Japan, South Korea, Australia and New Zealand. The consumption cut would save the equivalent of the current carbon dioxide emissions of Germany, France, the UK, Italy and Spain. Iran, Russia, Saudi Arabia, India and China top the ranking of subsidy givers. Fatih Birol, chief economist at the IEA: “I see fossil fuel subsidies as the appendicitis of the global energy system which needs to be removed for a healthy, sustainable development future.”431 Getting rid of fossil-fuel subsidies would raise GDP in most countries. FT Energy Source: “Many countries are reluctant to abandon subsidies. The American Petroleum Institute opposed the US signing the G20 agreement, and India says it needs subsidies to encourage development and fight inflation. Their opposition

35

Triple Crunch Log

might be misguided, however. The IEA’s modelling in 2008 showed that removing subsidies are actually raiseper-capita GDP “in most countries concerned”.432

7.6.10. BP seeks to increase capture of leaking oil: Hayward says the aim is “the vast majority.” But at the moment only around half is being collected. FT: “The only proven way the leak can be stopped is with one of the two relief wells now being drilled. The challenge is formidable. The drillers need to intersect the original well, about eight inches across, through a mile of water and more than two miles of rock. The method is proven, but it takes time.433

Obama turns fire on Hayward. He says that if he were in charge of BP, the chief executive “wouldn’t be working for me after any of those statements ”. “The fact of the matter is there is going to be a thorough review, and I don’t want to prejudge it, but the initial reports indicate there may be situations in which not only human error was involved, but you also saw some corner cutting in terms of safety.”434 Goldman accused by FSA of hindering probe into financial crisis. The FSA speaks of an “abysmal” response to requests for information: an attempt to “stonewall” and “obfuscate” over months of “mischief making.” It says it has issued a subpoena to compel the bank to provide documents and executives for interviews as other banks have done.435

IPSOS-MORI survey shows responsible businesses outperform rivals in both good and hard times. Business in the Community CEO Steve Howard: “The analysis revealed that those companies managing and measuring their corporate responsibility issues through the CR Index continued to outperform their FTSE 350 peers on Total Shareholder Return (TSR) in seven out of the eight years from 2002 to 2009. Furthermore, their TSR recovered more quickly in 2009. The business case is clear, therefore, for investors and shareholders, as well as the business. This research demonstrates that our assertion that responsible business is just good business is valid.”436

8.6.10. “Fossil fuels have plenty of form in staring down disasters.” FT Energy Source: “Look at coal, for example: cheap, geographically well-distributed and ever more popular in recent years. The industry’s history is littered with accidents and fatalities, and just this year we have seen tragic mine accidents in the US (in which 29 people died) and Russia (at least 66 died) . There were also major coal accidents in China, but they need to be seen in the context of 2,631 deaths in coal accident deaths in the country last year alone. And few have raised the prospect that coal mining will be reduced.”437

Norway bans deepwater oil drilling until the investigation into the Gulf disaster is complete, Terje Riis-Johansen energy minister, has said. “It is not appropriate for me to allow drilling in any new licences in deepwater areas until we have good knowledge of what has happened with the Deepwater Horizon and what this means for our regulations.” 438

More than $40 trillion needs to be spent on infrastructure – the stuff that makes economies turn - in the next 25 years, in developed and developing worlds, for replacement as well as projected growth. In the UK, the Treasury estimates £40-50bn a year ($59-73bn) all the way to 2030. But banks are less willing to lend, pension fund money is less attracted to infrastructure, equity is in shorter supply ….and governments are intent on deficit reduction. (L: special FT issue).439

$787bn US stimulus gets mixed reviews as airports are built for small towns etc. Around $126bn of it went on infrastructure, and of that some $50bn went on transportation, mostly highways. Shovel ready projects were favoured and the expenditure was neither at the scale of the New Deal nor designed to provide lasting legacy. The Recovery Accountability and Transparency Board had received 1,771 complaints by late January.440

China’s stimulus spending seems to have been greener than the US’s. About half went on infrastructure, with the biggest emphasis on rail. The airlines watch this anxiously.441 South Korea has allocated 80% of its $38bn stimulus package to broadly green projects (energy efficiency in buildings, railways, water and waste management). Africa, meanwhile, needs $93bn a year in infrastructure investment if it is to halve poverty, accoridn to a 2009 World Bank report. Nothings else would have such an impact.Corruption has been and still is a huge problem in the infrastructure industry, part of an unholy trio including arms and energy industries. Recent fines and legal costs: Siemens - $1.6bn ref $1.6bn of suspect payments; Halliburton and its subsidiary KBR - $579m for bribery in Nigeria (a $130m fund to win a $5bn gas liquefaction project, 4% of the contract size, and a former KBR CEO serving 7 years; BAE Systems - $400 payments without admitting bribery; Amec and Balfour Beatty – £5m+ in penalities without admitting bribery; Most countries have now signed the UN’s Convention Against Corruption, and slowly a clampdown takes shape, with growing significance attached to brand damage.442

Mike Haywood, an analyst who predicted much correct about the financial crisis, links it to peak oil . In an e-mail to his readers: “I started my Peak Oil digests in June 2006, (during the economic boom) in order to highlight the effect that peak oil and rising energy costs would have on the global economy. For an excellent summary, Gail Tvberg, editor of The Oil Drum links the financial crisis to peak oil and I agree with her arguments443. As the banking crisis unfolded, I replaced the Peak oil digest with the Banking Crisis digest in August 2009. Over the last 4 years my predictions have been pretty well spot on; with the exception of the UK housing market which I thought would fall more heavily.  Here is what I predicted would happen: The Global banking system would continue to be in crisis, due to the unknown and potentially unlimited losses of the banks; Stimulus and bailout packages would have no impact as most of the intervention money is borrowed, sucking capital from private economy and transferring the debt to the taxpayer; Continued unwinding of debt and deflation of all asset values would lead to more stock market falls; Huge falls in tax revenues; Pension schemes and retirement plans severely underfunded; Contraction of the public sector; Global Civil unrest; Severe global banking crisis; High probability of Financial collapse like the one we were within hours of in October 2008.444 We are now in the final stages of this slow motion car crash. The global financial system is inherently weak because of its interconnectivity.”

9.6.10. Oil company bosses must make personal safety pledges before they can drill from now on. New government rules mean oil company bosses will be required personally to certify that their operations are in compliance with regulations in order to obtain licences to work on the outer continental shelf of the US, both in shallow and deep water. Third-party consultants will also have to sign off on key safety kit, such as blow-out preventers. 445 Scientists report layers of degraded oil lurking deep beneath the surface of the Gulf. Ernst Peebles, a biological oceanographer at the University of South Florida, has identified layers of degraded oil, in some cases 30m thick, suspended at depths of 400m or more. BP has contested the presence of “plumes” of subsea oil. Further research is underway.446

36

Triple Crunch Log

Barack Obama: BP chief would be fired if he was working for me, because he downplayed the catastrophe in the Gulf of Mexico. Obama also lifts restrictions on offshore oil and gas exploration in shallow waters.447

BP faces bill for lost drilling wages including paying any workers hit by the government’s moratorium on offshore drilling imposed on 33 deep-water rigs while safety reviews take place.448

Cameron to discuss BP crisis with Obama as shares plunge. At today's lowest point, BP had lost 47% of its value since the Gulf of Mexico disaster struck, wiping around £58bn off the market capitalisation of one of Britain's biggest companies. 449

Numerous errors in BP's contingency plan to handle an oil spill included naming a deceased scientist as a recommended expert.450

Tony Hayward’s wife and children are under police protection following threats. Anger in the US now extends far and wide. Matt Simmons has told many TV audiences that the oil spill was "entirely BP's fault" and that the company will be bust within months. In the UK, pressure emerges on Cameron to fight back for because the “Britain bashing” has gone too far. Only 8 workers on the rig were BP employees. Transocean was asked this week to explain to a congressional committee the apparent poor staffing on the rig on the night of the gulf disaster: 18 employees on shift, the lowest number in a fortnight of records, with no engineers, electricians, mechanics or subsea supervisors. BP shed its “British Petroleum” name a decade ago. It employs 80,300 people, 29,000 of them in the US. Some 40% of its shares are held in the UK, while 39% are held in the US. 451

Also, a quarter of its production is in the US, according to ING. 452

EIA’s oil production optimism peaks. So says Steven Kopits of energy consultants Douglas-Westwood. In 2030, the EIA still sees oil production at an optimistic 103.9m barrels per day in its reference case (the IEA, for comparison, is 103m). But the EIA’s forecasts to 2020 — 92.1m barrels a day — are now lower than almost anyone’s. Question: Will the BP Statistical Review of World Energy reflect peak oil risk? JL: “On June 2, the day BP found itself facing a criminal investigation into its deepwater-production risk management, Tony Hayward, the company’s chief executive, admitted it had to find entirely new ways of handling “low-probability, high-impact” risks. Today, as it publishes its review of energy statistics, the question is: will BP find entirely new ways of handling the high-impact risk that is peak oil?”453

Answer: Quite the reverse. BP chief economist says “reseves remain sufficient to meet demand” and “supply will never peak”, professing to feel “very safe” in that risk assessment.454

BP Statistical Review shows importance of Gulf of Mexico. American crude production rose faster last year than anywhere else in the world, and the 7% increase to 7.2m barrels a day is largely attributed to Gulf of Mexico. Global oil consumption declined by 1.2m barrels a day, or 1.7%, the largest fall since 1982. OECD consumption fell by 2m barrels a day – a fourth consecutive annual decline.455

Hayward doesn’t mention peak oil, or “47 years of supply” in his introduction to the BP SRWE . He did mention the rise in energy intensity of energy activity last year, because of “many energy-intensive fiscual stimulus programmes.”456

Chinese regulators order a freeze on some renewable energy initial public share offerings, amid fears that overcapacity will weigh on the rapidly growing industry. “The Chinese government hasn't said so publicly, but certain sectors including polysilicon and wind are forbidden from hitting the primary IPO market," says a well placed Reuters source. “They're holding approval for certain IPOs because of overcapacity concerns.” China Securities Regulatory Committee officials could not be reached for comment.457

10.6.10. Head of US government-appointed experts group says flow rate could have been up to 40,000 bd. Marcia McNutt, director of the US Geological Survey, said the average flow from macondo pre-cap was probably 25,000 -30,000 barrels a day.458

160 class action suits have now been filed against BP. FT: “One is on behalf of holders of BP’s American Depository Receipts, which have fallen to 14-year lows. The suit states that BP had previously said its gulf operations were one of its main economic drivers and that it had asserted that it had the technology to safely conduct the operations. This means BP violated the Securities Exchange Act by issuing false and misleading statements about safety, technology, inspections and precautions at its offshore oil facilities, the action states.” The share price is 40% down, meaning $73bn (£50bn) less market capitalisation since the accident.459

Investors are beginning to fear the claims against BP could have no limit, constrained only by the US government. FT: “As estimates of the cost to BP escalate, however, the financial strain it could impose on the company begins to look significant. Analysts at Citigroup forecast that BP will have free cash flow after its dividend of only about $1.2bn (€1bn, £827m) this year, after paying the same dividend as last year, at a cost of $10.5bn. The cost of tackling the spill has already exceeded that figure, BP has said, which means that the cost of the clean-up will have to be funded by higher borrowings.”460 UK Funds sweat on BP dividend news. The company is still undecided. FT: “UK shareholders were anxiously awaiting a statement on the oil company’s plans for its dividend on Thursday. The oil major is a big income generator for UK fund managers, accounting for 12 per cent of dividend Income fund managers have bought into the company as a result. BP is the top holding in just under half of the UK’s 86 equity income funds. Some hold as much as a 10th of their funds in the oil stock. Fund managers admitted that if BP were to suspend its dividend, they would struggle to maintain their own dividend payments to investors. One said that if the dividend were suspended for a year, it would cause a 10 per cent hit on the yields paid by his funds.”UK industry alarmed over White House attack on BP. FT: “The references to "British Petroleum" - which has not been the company's name since 1998 - by senior US politicians have fuelled fears of a backlash against UK groups in the US.” Richard Lambert, director-general of the CBI: the presidential attack is "obviously a matter of concern - politicians getting heavily involved in business in this way always is."461

Oil spill “probably not a supply side changer”, FT Energy Source concludes. The IEA estimates only 300k bd will be locked in by 2015 as a result of regulatory changes. Over 100 new maintenance and safety procedures were implemented after the Piper Alpha disaster in 1988, and the regulation of field licensing and operational safety were separated (as the US is now belatedly copying). Scores of new oilfields were developed after that though. 462

Tom Bower, author of Oil: Money, Politics, and Power in the 21st Century calls peakists “charlatans” in Newsweek. “In slashing costs, (John Browne) disregarded safety and maintenance. He fired hundreds of engineers, instead opting for cheaper subcontractors. That led to three major incidents: the il spill in Alaska, the explosion at Texas City, and the tilting of the Thunder Horse oil platform in the Gulf of Mexico. All three were the results of bad engineering, which went directly to John Browne’s leadership.” On Beyond

37

Triple Crunch Log

Petroleum: “In the end, Exxon was right; oil corporations should stick with the business they know, which is finding oil. Browne eventually had to retreat, because he just couldn’t make money off it without government subsidies.” “There’s no such thing as the end of oil. This idea that we’re reaching “peak oil” is nonsense. They’re charlatans, the people who talk about peak oil. There’s ample oil.”463

Right wing blogger James Delingpole on the peak oil “scare story” as featured by gullible Newsnight.“Peak Oil is a scare story  talked up by greenie catastrophists on every possible occasion to justify higher taxation, greater government intervention, global rule by people like the Hon Sir Jonathon Porritt and Al Gore and massive bonanzas for anyone involved in the wind farming or solar power industry. Somehow, Newsnight had managed to twist the arm of Jeremy Leggett – who runs Britain’s largest solar power company – to come on the programme and crossly, passionately declare that Peak Oil represents a real threat. (Wot? Even bigger a threat than the one we’d suffer if we all relied for our energy on solar power in a country like Britain not known for its sun? Pull the other one, Jezza!)” … “PO Theorists fail — or more precisely refuse — to grasp that the best method of dealing with any form of commercial scarcity is market-based ingenuity.”464

11.6.10. Lend Lease bans its subsidiary Bovis from nuclear work because it is “unethical”. Bovis Lend Lease has had to pull out of a nuclear deal with EDF energy at the eleventh-hour after parent company Lend Lease objected to working in the sector.465

13.6.10. Spill may not be over before Christmas, says ex-Aramco drilling expert. Nansen Saleri, chief executive of the consultancy group Quantum Reservoir Impact, dealt personally with four blowouts. “I know it is a frightening assessment but everyone should be prepared for a worst-case scenario, and that could mean a Christmas timeframe.” The technological challenges “are enormous.” Other experts have also said that no one can rule out another blowout. BP warned in a regulatory filing that a blowout on one of the relief wells could release a further 240,000 barrels of oil a day, but Tony Hayward subsequently discounted the chances of this, saying “The relief wells ultimately will be successful.”466

Britain should back down over BP, writes Clive Crook in the FT. “The question of whether even this company’s mighty resources are adequate to meet these demands cannot be dismissed. In such circumstances, I cannot see why BP has hesitated to suspend its dividend. The idea that it can take this calamity in its stride and proceed on the basis of business as usual is absurd, and politically foolish too, since it is a provocation to critics intent on vengeance.”467

We must end oil dependency “before it is too late”, says David King, former UK chief scientific advisor. “The bottom line is that demand for liquid fuels is virtually certain to outstrip production by a considerable margin over the next two decades, regardless of how much oil remains in the ground.” … “Today, the rest of the world pours more than $2 trillion a year into the Gulf states, which is $6m per day. This money would surely be better spent developing energy resources that are much closer to home?468

While the spotlight is on on oil, “the banks have won.” Ruth Sutherland in the Observer: “Tomorrow Channel 4 airs a Dispatches programme, narrated by my colleague Will Hutton, entitled How The Banks Won. It is a timely reminder of how the banks are quietly going back to business as usual, while customers and taxpayers suffer. Despite their disgrace, the banks' well-oiled propaganda machines continue to spin their lines that the finance sector services the productive economy, is the major contributor of tax revenues to the Treasury, and that it is a significant engine of job creation. But the Centre for Research on Socio-Cultural Change (Cresc) at the University of Manchester, which contributed to the programme, challenges each of these assertions. Between 1997 and 2009, almost a third of lending was between banks. Half went to individuals, mainly on mortgages that fuelled the housing bubble; manufacturing received just 3% of the pie; other business loans accounted for only 17%. Since the crash, net lending to business has fallen by £40bn. The Cresc research also shows that even in a finance-led boom the sector created no net new jobs. Direct employment in finance hovered around the 1 million mark, less than half that in a weakenedmanufacturing sector – and most of the jobs it does produce are concentrated in London and the south-east. Neither can the finance sector credibly claim to be the major source of tax revenue in the UK. It contributed just 6.8% of tax revenues between 2002 and 2008, just over half the amount paid by manufacturers; the reason traditional industry generates more is because it is labour-intensive. On a worst-case scenario, using Bank of England figures, Cresc reckons it could take the finance sector 25 years to repay the £1 trillion costs of bailing it out.”469

“Time to tame the boardroom titans”, who are ruining environment, pensions and more. Ruth Sutherland in the Observer: “Deepwater has also exposed another dangerous dependency in which we are all complicit: our blind reliance on Tony Hayward, Sir Fred Goodwin and other corporate titans to provide for our welfare in old age. The environment is fragile, and so are our pensions. BP accounts for £1 in every £7 of British pension funds' dividend income, and 40% of its dividend payments go to US investors, including state pension funds for teachers and other public servants. Its innocent victims are not just fishermen in Louisiana, but grandmothers from Texas to Torbay.” We need to awaken shareholder – “a sleeping giant” – to turn the system away from its ruinous short-termism towards long-term ownership.470

Banks are back to business as usual, Will Hutton rues. After a trillion pounds of tax-payer support and a trillion pounds of lost output, “our banking system is as disconnected from real wealth generation as ever. The return to business as usual – bonuses, trading in derivatives, the organising of banking as an exercise in which money is made from money – is breathtaking and depressing. And so, given the recent buoyant profit figures reported by our banks, is the easy money.” Banks still keep only £1 in equity for every £50 lent. “Without substantial and far-reaching reform a second crisis is almost inevitable within 10-25 years.” Multitrillion dollar trading in derivatives – essentially bets on the future prices of financial assets – continues: “an invitation to speculate.” “Progress on financial reform – nationally and internationally – is glacial.” “British banks shamefully neglect enterprise, entrepreneurship, investment and innovation. Only 3% of cumulative net lending in the decade up to the crash went to manufacturing; three quarters went to commercial real estate and residential mortgages.” “The result – devastated industries and sky-high property prices.”471

38

Triple Crunch Log

14.6.10. US senators demand BP puts $20bn in an escrow account. They say it does not infer a limit on BP’s liability. Investors are now talking about a fire sale of BP’s US assets as a route to the company’s survival.472

History shows that cuts now would be a massive ruinous mistake: Larry Elliot in the Guardian. “As things stand, a second Great Depression has been averted, but growth has ranged from the weak in Europe to the unspectacular in the United States. Banks are not lending. Unemployment is running at near double-digit levels in the US and the eurozone. The determination to cut budget deficits in these circumstances does not show that policymakers of probity and integrity have replaced the irresponsible spendthrifts of 2008 and 2009. It shows that the lunatics are back in charge of the asylum.” The danger is not seeing the parallels with 1937, he argues. The budget for 1937 was slashed and the US economy promptly went back into recession. Falling tax revenues meant the budget deficit rose. …. “Just as in 1937, private demand in most advanced countries is too weak to sustain the recovery. Budget deficits are a reflection of high unemployment and low levels of private investment. They are also a reflection of the big financial surpluses that have been amassed in the private sector. Animal spirits, in Keynes's phrase, are low. Consumers are worried about losing their jobs and are having their incomes squeezed. That makes businesses anxious about investing.” …. “So why are they doing it? Is it, for all Nick Clegg's guff about "progressive cuts", that the real agenda is to complete the demolition job on welfare states that was started in the 1980s? Or is simply that the deficit hawks are simply crackers? Either way, we now have the bizarre spectacle of China, Japan, the eurozone and Britain all set on reducing budget deficits while simultaneously pursuing export-led growth. This is a logical absurdity because somebody, somewhere has to be importing all the exports. If the rest of the world assumes that the US is once again going to become the world's spender of last resort it is seriously mistaken.”473

15.6.10. Obama uses an Oval Office TV address to call for “national mission” on clean energy. This is his first. Presidents usually only use them in times of great stress, e.g Kennedy during the Cuban Missile Crisis, Bush when invading Iraq. Apart from the expected pledges on further action in the Gulf, and BP’s requirement to pay, he says: “For decades, we have known the days of cheap and easily accessible oil were numbered. For decades, we have talked and talked about the need to end America’s century-long addiction to fossil fuels. And for decades, we have failed to act with the sense of urgency that this challenge requires” ...The consequences of our inaction are now in plain sight”. …“We cannot consign our children to this future. The tragedy unfolding on our coast is the most painful and powerful reminder yet that the time to embrace a clean energy future is now. Now is the moment for this generation to embark on a national mission to unleash American innovation and seize control of our own destiny.” But there is no mention of a timeframe for the stalled clean energy bill, or other specifics. There is a lot of criticism of the speech in commentariat around “nothing new.” John Boehner, the Republican leader in the House: “President Obama should not exploit this crisis to impose a job-killing national energy tax on struggling families and small businesses.”474

Obama administration lifts estimate of spill size to 60,000 barrels a day: an Exxon Valdez every four days.House Energy & Commerce Committee lists 5 big questions for BP in a letter published ahead of congressional hearings today. FT Energy Source:“Well Design. On April 19, one day before the blowout, BP installed the final section of steel tubing in the well. BP had a choice of two primary options: it could lower a full string of “casing” from the top of the wellhead to the bottom of the well, or it could hang a “liner” from the lower end of the casing already in the well and install a “tieback” on top of the liner. The liner-tieback option would have taken extra time and was more expensive, but it would have been safer because it provided more barriers to the flow of gas up the annular space surrounding these steel tubes. A BP plan review prepared in mid-April reconunended against the full string of casing because it would create “an open annulus to the wellhead” and make the seal assembly at the wellhead the “only barrier” to gas flow if the cement job failed. Despite this and other warnings, BP chose the more risky casing option, apparently because the liner option would have cost $7 to $10 million more and taken longer.Centralizers. When the final string of casing was installed, one key challenge was making sure the casing ran down the center of the well bore. As the American Petroleum Institute’s recommended practices explain, if the casing is not centered, “it is difficult, if not impossible, to displace mud effectively from the narrow side of the annulus,” resulting in a failed cement job. Halliburton, the contractor hired by BP to cement the well, warned BP that the well could have a “SEVERE gas flow problem” if BP lowered the final string of casing with only six centralizers instead of the 21 recommended by Halliburton. BP rejected Halliburton’s advice to use additional centralizers. In an e-mail on April 16, a BP official involved in the decision explained: “it will take 10 hours to install them . … I do not like this.” Later that day, another official recognized the risks of proceeding with insufficient centralizers but commented: “who cares, it’s done, end of story, will probably be fine.”Cement Bond Log. BP’s mid-April plan review predicted cement failure, stating “Cement simulations indicate it is unlikely to be a successful cement job due to formation breakdown.” Despite this warning and Halliburton’s prediction of severe gas flow problems, BP did not run a 9- to 12-hour procedure called a cement bond log to assess the integrity of the cement seal. BP had a crew from Schlumberger on the rig on the morning of April 20 for the purpose of running a cement bond log, but they departed after BP told them their services were not needed. An independent expert consulted by the Committee called this decision “horribly negligent. ”Mud Circulation. In exploratory operations like the Macondo well, wells are generally filled with weighted mud during the drilling process. The American Petroleum Institute (API) recommends that oil companies fully circulate the drilling mud in the well from the bottom to the top before commencing the cementing process. Circulating the mud in the Macondo well could have taken as long as 12 hours, but it would have allowed workers on the rig to test the mud for gas influxes, to safely remove any pockets of gas, and to eliminate debris and condition the mud so as to prevent contamination of the cement. BP decided to forego this safety step and conduct only a partial circulation of the drilling mud before the cement job.Lockdown Sleeve. Because BP elected to use just a single string of casing, the Macondo well had just two barriers to gas flow up the annular space around the final string of casing: the cement at the bottom of the well and the seal at the wellhead on the sea floor. The decision to use insufficient centralizers created a significant risk that the cement job would channel and fail, while the decision not to run a cement bond log denied BP the opportunity to assess the status of the cement job. These decisions would appear to make it crucial to ensure the integrity of the seal assembly that was the remaining barrier against an influx of hydrocarbons. Yet, BP did

472 http://www.ft.com/cms/s/0/19e96c64-7805-11df-a6b4-00144feabdc0.html473 http://www.guardian.co.uk/business/2010/jun/14/lunatics-economy-cuts-frankin-roosevelt474 http://www.ft.com/cms/s/0/735700fc-78de-11df-a312-00144feabdc0.html

39

Triple Crunch Log

not deploy the casing hanger lockdown sleeve that would have prevented the seal from being blown out from below.”475

Oil company bosses testify that they could not have contained spill any better then BP – but Exxon, Chevron, ConocoPhillips and Shell all tell the house energy and commerce committee that they operate to a higher safety standard than BP. Rex Tillerson, chairman and chief executive of Exxon: “When these things happen we are not very well equipped to handle them. There is no response capability that will guarantee you will never have an impact. It does not exist.” He and others say they would have stopped drilling when confronted with the problems in well control. “This incident represents a dramatic departure from industry norms in deepwater drilling. We do not proceed with operations if we cannot do so safely.” Like BP in its so-called disaster plan, the companies listed the phone number of a long-dead marine scientist and raised concerns about protecting walruses – not found in the gulf for the past 3 million years. Ed Markey, chairman of the subcommittee on global warming: “The only technology you seem to be relying upon is a Xerox machine to put together your response plans.”476

16.6.10. BP agrees to suspend dividend and back $20bn spill fund afer meeting with Obama. “This is not a cap,” Obama says. The account is an escrow over 4 years with the first $5bn to be paid this year.477

Congressman suggests drilling relief wells at the same time as exploration wells . Rex Tillerson, Exxon CEO, says that would just be doubling risk. And cost of course. “This is an exploration well so it means you’re drilling in an area that’s not previously been drilled before. If you look at the history of well control problems and blowouts, most of them have occurred on the way down to the objective, not once they reach their objective. They’re caused by shallow gas hazards, they’re caused by unknown pore pressures on the way down to the objective, so if you have two wells going down at the same time it means you have just increase your risk of having a problem on the way down to them.” FT Energy Source: “So what does this mean for relief wells, then? And about risk management of deepwater drilling more generally?”478

George Osborn abolishes the FSA and hands the regulatory keys to the Bank of England. Mervyn King describes his new role, beyond the Bank’s normal monetary policy, as being to “turn down the music when the dancing gets a little too wild”. The transition will take two years. He also sets up and Independent Banking Commission to report by September 2011.479

E&Y to be investigated for its role in approval of Lehman’s hiding of debt. UK accountancy regulator how it could have allowed the bank to hide $50bn off its books. One industry expert describes the development as the “tip of the iceberg”, to be followed by a potential flood of legal claims against E&Y. Just like the ratings agencies, the paying of audit firms for an opinion seems to be fatally flawed, when clients can always move to a firm with a more favourable view.480 Nils Pratley: “Perhaps we can proceed to the wider debate about how auditors are paid. At the moment, auditors are paid by the company – the people they are meant to be policing. That seems a straightforward conflict of interest. Plenty of alternative models have been suggested. It's time they were properly examined.”481

17.6.10. Tony Hayward inflames Congress by emulating Ronald Reagan in not recalling . He uses multiple versions of “I don’t recall,” and “I wasn’t involved in the decisionmaking”, insisting that all verdicts have to await the outcome of BP’s own enquiry. He is told he should quit, mocked for his $6bn salary, and asked to consider whether a firm with a safety record like BP's should be banned from America. “With respect sir, we drill hundreds of wells around the world,” he says along the way. “That's what's scaring me now,” replies Michael Burgess, a Texas Republican. Members read out emails from BP engineers pointing to a disaster waiting to unfold, and others over-riding concerns, including one scarcely-credible message: “Who cares, it's done, end of story, will probably be fine.” Waxman: “It appears to me BP knowingly risked well failure to save a few million dollars.” Joe Barton, a Texas Republican, says he is ashamed BP was compelled to agree to pay $20bn into an independently managed fund for victims of the spill. “I apologise. I do not want to live in a country where every time a corporation does something wrong, it's subject to a political process that amounts to a shakedown.” (He also said “slush fund”). After a storm of criticism from Democrats and Republicans alike (to some of which I listened on C-Span) Barton later apologised for this apology.482 Throughout the hearing Hayward maintains steady eye contact with his enraged critics. “But his nerves were betrayed by his fingers, which appeared to be busily crocheting a pair of invisible socks.”483

Kuwait parliament to debate power cuts amid record heat. Kuwait's parliament will hold an emergency session at the weekend. Power consumption has almost reached the maximum production capacity, and there have been repeated power cuts in dozens of residential areas. The temperature soared to 51 degrees Celsius (123.8 Fahrenheit) in Kuwait City, early for this time of year. No new power plants have been built since 1988.484

18.6.10. Macondo oilfield contains enough oil for an out of control well to go on spewing for 2 to 4 years, says an oilfield expert: Philip Johnson, professor of petroleum engineering at the University of Alabama. This is based on Hyward’s testimonty that there is still 50 million barrels of recoverable oil in the field, and the US government’s estimate of 60,000 barrels a day escaping485 Bank Matt Simmons founded distances itself from his opinions on Macondo spill. Matt Simmons has for several weeks been voicing the view that the Macondo well casing itself is damaged (if correct, a horrific escalation of the problem). He has also advocated the use of a nuclear explosion to stop the spill.486

Energy and Capital in an e-mail to its readers: it’s bound to get much worse. Aluding to emerging testimony from scientists that there is more than one leak: “Exxon fought tooth and nail for its shareholders; it appealed court rulings for 19 years. Union Carbide wasn't settled for 25 years. BP is rolling over like a simpering dog. Why? The only reason I can think of is that the company knows — better if not as well as the Obama administration does — that it will get worse. Much worse.”Government’s cancellation of £80m loan to Sheffield Forgemasters means no EDF reactor by 2017 . Chris Goodall: “The only other company currently making forgings of sufficient size for an international market, Japan Steel Works, has recently tripled its capacity to make 10 pressure vessels a year. But last year 11 new nuclear power stations were begun around the world and the pace is accelerating. 55 reactors were in full planning at the end of 2009 and in the US over 30 licence applications are under active discussion. Without the new investment by Sheffield Forgemasters, the waiting list for pressure vessels means that EDF's plan to build at least one nuclear power plant in the UK by 2017 will be unattainable.”487

19.6.10. Tony Hayward spotted on his yacht on the Isle of Wight, inflaming Obama officials and no doubt ordinary Americans in the process.

20.6.10. BP accused of lying to Congress by Ed Markey. He says an internal document shows BP’s assessment of the size of the spill was 20 times its public estimate (up to 100,000 barrels a day as opposed to 5,000). “This document raises very troubling questions about what BP knew and when they knew it. It is clear that, from the

40

Triple Crunch Log

beginning, BP has not been straightforward with the government or the American people about the true size of this spill.”488

Hayward must travel to Moscow to reassure Medvedev that BP is not on the verge of collapse and continue to be a reliable partner in Russian oil production. Talk of asset sales is unsettling the Russians. BP produces one in every four of its barrels there.489

Oil companies are keeping rigs on reserve in the Gulf, having been told that the moratorium could end early. Obama officials have told the non-BP companies behind closed doors that they can’t live with the economic downsides of the ban, given 10% US unemployment etc. There are 32 deep-water rigs inactive in the Gulf that the companies had been threatening to send elsewhere.490

Anger grows across the world at the cost of “frontier oil.” The Gulf of Mexico tops a long list of arenas where NGOs accuse the oil industry of destroying land and livelihoods..491

21.6.10. Anadarko turns on BP. The CEO of the company owning 25% of the Macondo well says he is shocked by the revelations about BP’s “reckless” operation of the well, which “likely represent gross negligence or wilfull misconduct.” In using this language the company is trying to invoke a clause in the joint operating agreement that would get if off the hook on a share of costs. BP issues a furious rebuttal.492

22.6.10. Rig worker spotted oil leak on the blowout preventer “weeks before blast” and informed BP. They switched off the faulty part – a control pod – rather than repair it. So Tyrone Benton tells Panorama.493 Belarus turns off flow of Russian gas to Europe. This after Russia cut the flow of gas to Belarus by 15% yesterday in the latest dispute over unpaid bills. Gazprom says Belarus owes for consumption. Belarus says Gazprom owes for transit fees. President Medvedev: “Gazprom can't accept anything but cash - neither pies, nor butter, nor cheese, nor pancakes.” President Lukashenko: “When they are trying to insult us with meat chops, sausage, butter or pancakes we consider it as an insult for the Belarussian people.” Russia supplies 25% of Europe’s gas, 20% of which crosses Belarus.494

23.6.10. Oil industry persuades a Louisiana judge to overturn Obama’s ban on deepwater drilling. Lawyers representing the companies argue that “a whole ecosystem of business” is at threat. 495 Judge is found to have shares in Halliburton, Transocean and other offshore companies. The administration will appeal.496

Analysts warn that only Shell, Chevron, and ExxonMobil will have the ability to drill the Gulf if the liability cap is hiked from $75m to the billions, or even effectively removed. Other smaller companies are likely to be driven away by the risk.497 Does BP’s debt threaten other companies outside the oil sector? FT: “Alphaville reports that Moody’s, the rating agency, has listed several synthetic collateralised debt obligations (CDOs) that contain relatively high exposure to the debt default insurance of BP and other companies involved in the ill-fated Deepwater Horizon/Macondo project, such as Transocean and Anadarko. This has led to some slightly fuzzy fears that even companies completely unassociated with the oil and gas industry, whose debt default insurance happens to be in the same structured finance products as BP et al’s, will be affected. The logic being: if the costs of the Deepwater Horizon disaster were sufficient to trigger some kind of a credit/default event on one of the associated oil firms, that could lead to the synthetic CDOs in which they feature being liquidated, dragging the other referenced companies’ credit with them.”498

China set to become largest importer of thermal coal, only three years after becoming an importer. The IEA says it should overtake Japan this year. Greg Boyce, chief executive of Peabody Energy, told investors recently that the world economy was at “the early stages of a long-term supercycle for coal”. The IEA expects China to add 500 GW of coal capacity between now and 2020.499

24.6.10. BP reinstalls the cap on the Macondo well, after a robot accidentally dislodged it yesterday. Meanwhile Obama’s job performance rating is at an all time low of 45%, and thick pools of oil have begun washing up on the Florida coast.500

Tony Hayward tells staff that BP is in “intensive care” but the worst is over. This in a series of town hall meetings in the UK.Oil majors rethink willingness to partner with BP on fields where they are main operator. An exec at one company professes “shock” at the design of the Macondo well.501

Chris Huhne announces “green deal” and says renewables can protect UK from oil and gas crises. Speaking at the Economist energy summit, the new UK energy minister says new legislation (by November) will allow energy companies and others to spend up to £6.5bn on a massive energy efficiency overhaul of homes. Up to £200bn will need to be spent on upgrading the UK’s energy infrastructure in the next ten years and a lot of it must be renewables. In yesterday’s UK budget his DECC budget – already half allocated to nuclear decommissioning, is to be cut by 25%.502

Chavez nationalises 11 US oil rigs in Venezuela as his drive for socialism amid recession grows . They belong(ed) to Helmerich and Payne.503 Basle committee thins down proposals for reform after intense bank lobbying. The recommendations included the need to set aside billions in extra capital.504 “The debt-financed model has reached its limit”, an Economist special issue argues. Japan owes the most as a percentage of GDP, including all financial –business debt, all non-financial-business debt, all household and all government debt: >450%. UK is second, almost at 400%. Economist: “The answer to all problems seemed to be more debt. Depressed? Use your credit card for a shopping spree “because you’re worth it”. Want to get rich quick? Work for a private-equity or hedge-fund firm, using borrowed money to enhance returns. Looking for faster growth for your company? Borrow money and make an acquisition. And if the economy is in recession, let the government go into deficit to bolster spending. When the European Union countries met in May to deal with the Greek crisis, they proposed a €750 billion ($900 billion) rescue programme largely consisting of even more borrowed money.” “….From early 2007 onwards there were signs that economies were reaching the limit of their ability to absorb more borrowing.” “….Rising government debt is a Ponzi scheme that requires an ever-growing population to assume the burden—unless some deus ex machina, such as a technological breakthrough, can boost growth.” “…..The problem with debt, though, is the need to repay it. Not for nothing does the word credit have its roots in the Latin word credere, to believe. If creditors lose faith in their borrowers, they will demand the repayment of existing debt or refuse to renew old loans. If the debt is secured against assets, then the borrower may be forced to sell. A lot of forced sales will cause asset prices to fall and make creditors even less willing to extend loans. If the asset price falls below the value of the loan, then both creditors and borrowers will lose money. This is particularly troublesome if the economy slips into deflation, as happened globally in the 1930s and in Japan in the 1990s. Debt levels are fixed in nominal terms whereas asset prices can go up or down. So falling prices create a spiral in which assets are sold off to

41

Triple Crunch Log

repay debts, triggering further price falls and further sales. Irving Fisher, an economist who worked in the first half of the 20th century, called this the debt deflation trap.” “….This special report will argue that, for the developed world, the debt-financed model has reached its limit. Most of the options for dealing with the debt overhang are unpalatable. As has already been seen in Greece and Ireland, each government will have to find its own way of reducing the burden. The battle between borrowers and creditors may be the defining struggle of the next generation.”505

26.6.10. New Australian oil company Peak Oil and Gas plans a $55m IPO next quarter. The Perth based entity plans to use the funds for restarting an offshore oilfield in the Philippines, shutdown in 1992.506

27.6.10. Delays feared as BP relief hole nears Macondo well 6,060m below the sea surface and 4,500m below the seabed. The target is a 25cm-wide steel cased hole, itself encased in cement, and experts fear the unprecedented effort may not work first time. Each attempt takes days to weeks. Relief wells have always worked in the past, but often after several attempts. And they have never been tried at this depth.507

Krugman fears that G20 belt-tightening will mean a third global depression. “This third depression will be primarily a failure of policy. Around the world – most recently at the weekend's deeply discouraging G20 meeting – governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending…. It's almost as if the financial markets understand what policymakers seemingly don't: that while long-term fiscal responsibility is important, slashing spending in the midst of a depression, which deepens that depression and paves the way for deflation, is actually self-defeating. ….So I don't think this is really about Greece, or indeed about any realistic appreciation of the trade-offs between deficits and jobs. It is, instead, the victory of an orthodoxy that has little to do with rational analysis, whose main tenet is that imposing suffering on other people is how you show leadership in tough times. And who will pay the price for this triumph of orthodoxy? The answer is, tens of millions of unemployed workers, many of whom will go jobless for years, and some of whom will never work again.”508

28.6.10. G20 Summit shows it will take another crisis to bring global economic reform, Larry Elliot concludes. “The communique from the weekend's meeting is easily summed up: do your own thing. The Americans cannot persuade the Europeans to hold off from fiscal tightening until the recovery is assured; the Germans and the British think the risks of a sovereign debt crisis are far more serious than the possibility of a double-dip recession.”509

Central bankers insist that governments must force banks to bolster capital, as anger spreads over G20 failure to take a harder line. Theis in the Bank for International Settlements annual report, which also argues for a rise in historically low interest rates around the world.510

BP is now spending $100m a day, and the total cost of the spill so far is $2.65bn. BP hopes to seal the well by mid July now, given progress with the relief wells.511

BP “staked future on expanding offshore drilling”, released company strategy document shows. A strategy paper shows this was to be its number one area for long-term growth.512

More BP bonds being borrowed for shorting than shares. The average for the corporate sector is 1% of bonds, but one BP bond has 24% on loan. The sentiment is very negative, to say the least.513

Energy from renewables falls in the UK: down 7.5% in the first quarter of 2010 compared to 2009, from 6.7% to 6.2% of total electricity supply.514

29.6.10. High concentrations of methane gas identified around the BP oil spill, raising fears of a dead zone. Some concentrations are up to 1m times the normal concentration of 1-2ppm. The concern is that the methane, which is around 40% of the leak, will be a nutrient for algal blooms resulting in an oxygen-depleted zone where marine life cannot survive. Texas A&M University has found the high methane in an area 6 miles square round the leak. There is already a 17,000 sq km dead zone off the Mississippi, caused by alagal growth resulting from nutrients in runoff.515

Anadarko approved many of the controversial suspected cost-cutting decisions BP made. “What we knew was that the design, the long string and the use of centralisers all met industry standards if executed correctly. The problems were caused by BP’s execution of each of these,” Anadarko says. (A long string is a cheaper way of lining a well but one that gives less protection against gas leaks than using multiple layers, including liners and casings. Centralisers stabilise a well before it is cemented). The two partners remain in conflict over the details wioth respect to responsibility. For Anadarko, already holding junk-rated bond status, the outcome could easily be a life or death issue. Mitsui is a third partner on the well.516

Obama’s effort to leverage Senate support on climate change from the Gulf spill falls flat. He fails to rally a group of Democratic and Republican senators around an energy and climate change law. Guardian: “The standoff suggests the Senate would formally give up on climate change law, and recast energy reform as a Gulf oil spill response, that would roll in far more limited proposals such as a green investment bank, or a measure to limit greenhouse gas emissions that would apply only to electricity companies.517

FSA says auditors were insufficiently sceptical in run up to credit crisis. The Guardian understands that the FSA has already referred some of the practices it has found to the Accountancy & Actuarial Disciplne Board, which investigates accountants and has the power to take action if it finds wrongdoing( (unlike the FSA), and the to the Financial Reporting Council, which oversees corporate accounting.”518

Martin Wolf likens the financial crisis to simulataneous games of pass the parcel, set to end badly. His cites four of these games: “The first is played within the financial sector: the aim of each player is to ensure that bad loans end up somewhere else, while collecting a fee for each sheet unwrapped along the way. The second game is played between finance and the rest of the private sector, the aim being to sell the latter as much service as possible, while ensuring that the losses end up with the customers. The third game is played between the financial sector and the state: its aim is to ensure that, if all else fails, the state ends up with these losses. Then, when the state has bailed it out, finance can win by shorting the states it has bankrupted. The fourth game is played among states. The aim is to ensure that other countries end up with any excess supply. Surplus countries win by serially bankrupting the private and then public sectors of trading partners. It might be called: “beggaring your neighbours, while feeling moral about it”. It is the game Germany is playing so well in the eurozone. What have these four games to do with the G20 summit? In a word, everything. The first game scattered toxic assets across the financial system. The second left the non-bank private sector with a debt overhang and deleveraging. The third duly damaged the finances of states. The fourth helped cause the crisis and is now an obstacle to recovery. Above all, these games are all linked to one another and so have to be changed together. The G20 does understand this, but only up to a point.”519

Naomi Klein urges people to “take no orders to slash and burn from this G20 club .” “My city feels like a crime scene, and the criminals are all melting into the night, fleeing the scene. No, I'm not talking about the

42

Triple Crunch Log

kids in black who smashed windows and burned cop cars on Saturday. I'm talking about the heads of state who, on Sunday night, smashed social safety nets and burned good jobs in the middle of a recession. Faced with the effects of a crisis created by the world's wealthiest and most privileged strata, they decided to stick the poorest and most vulnerable people in their countries with the bill.”520

30.6.10. First hurricane of the season expected to disrupt BP’s oil-spill effort for days to come. Waves as high as 3.6 metres will delay additions to the oil-capture system system, but not relief well drilling.521

Abuse heaped on BP petrol station franchisees in US. Apart from vanadalism and “hate” incidents, including gunshots through windows at one Mississippi station, business has dropped 10-20%.522

BP shares surge 9% on suggestions that the company’s days in the US are numbered. A Cazenove note suggesting either Exxon or Shell could take BP over starts investors piling in.523

UK government subsidises deep-water drilling without transparency on drilling risk . Guardian: “The British government is subsidising one of the world's largest and riskiest oil-drilling projects in the Atlantic Ocean and would be liable for tens of millions of pounds if a major accident took place. Documents seen by the Guardian show that UK trade ministers underwrote loans taken out by the Brazilian state-run energy company Petrobras in 2005 in order that Rolls Royce and other companies could contribute to the building of the giant P-52 platform. The platform is now operating 125km off the coast of Brazil in 1,798 metres (5,900 feet) of water - deeper than BP's Deepwater rig that exploded in April and led to the disastrous oil spill in the Gulf of Mexico. But the 14-page environment report prepared by the UK’s Export Credits Guarantee Department (ECGD) and obtained under freedom of information rules by watchdog group Corner House, makes no mention of blowouts or the equipment needed to prevent them. Ministers have edited out all ECDG's comments assessing the risks involved in deep-sea drilling in the Atlantic.”524

UK Climate Change Committee: urgent government action needed if UK is to hit emissions targets . The committee’s second annual report says that action is needed within a year, beyond the “light touch” interventions to date, in electricity (efficiency), renewables, electric cars, and action to cut the footprint of farms. The 8.6% reduction in emissions last year was almost entirely the result of recession.525

Banks repay €442bn to the ECB, easing fears, lifting euro and shares. More than 1,000 banks borrowed this huge sum a year ago, with repayment due today.526

1.7.10. BP aims to raise $9bn from sale of South American assets to Chinese as Russians also eye assets: CNOOC is interested in the 60% BP stake in PanAmerican energy and TNK-BP wants to buy BP assets.527

The 95 islanders of Eigg win the top Ashden award for their 90% renewable electricity use, near halving of energy efficiency, and plans to do more. Using hydro, wind and solar, they cap electricity use at 5 kW for homes and 10 kW for businesses, using e-mail alerts to notify people of low supply.528

Solar roofs could generate up to 40% of the EU’s electricity demand by 2010, the Building Integrated Photovoltaics conference of the European Photovoltaics Industry Association concludes. Some 40% of EU roofs and 15% of facades are suitable, and 1,500 GW could installed on them, generating around 1,400 TWh annually. The European Performance of Buildings Directive could help the EU get on this general road, when it comes into force in 2012. The EPBD requires all new buildings to be zero carbon by 2020, and PV must inevitably play a key role in that.529

95% of global electricity consumption could come from renewables by 2050, the European Renewable Energy Council concludes in a study with Greenpeace. Updating their 2007 study, they lift the renewable contribution from 70%. The study foresees solar PV providing 33% of global electricity by 2050, making it the number one energy source. The study assumes all countries use german-style feed-in tariffs, played out over 20 years. Solar PV electricity costs by 2025 would then be 5-10 cents per kWh.530

PV depresses electricity prices and so “threatens” traditional utilities in Germany, a study from the Arrhenius Institute in Hamburg argues. The reason is that utilities reap their best profits at times of peak demand, when pricing is based on the most expensive electricity being produced at that time. This is how they raise capital for further power-plant investments. But at these times – midday and in the afternoon – PV is performing best. The study proposes a radical solution: that either the rules are changed, or PV is capped at 500MW to 3 GW per year in Germany.531 Photon 2010 global PV forecast: 23 GW supply, 19 GW modules shipped and 19 GW of installations. Solar cell manufacturers sharply expand capacity as PV industry continues bullish expansion. Generally low stock prices, and stagnant profitability, do not seem to be denting overall confidence. Photon now predicts 23 GW of supply, 19 GW of modules shipments and 19 GW in installations in 2010.Ex Intel CEO Andy Grove argues for US protectionism in a long essay in Bloomberg magazine. “Bay Area unemployment is even higher than the 9.7 percent national average. Clearly, the great Silicon Valley innovation machine hasn’t been creating many jobs of late -- unless you are counting Asia, where American technology companies have been adding jobs like mad for years. The underlying problem isn’t simply lower Asian costs. It’s our own misplaced faith in the power of startups to create U.S. jobs.” It’s the scale-up phase where the jobs are created. When Intel and others exploded into the digital revolution, that could be done in the States. That was before China opened for serious business. Now? “What kind of a society are we going to have if it consists of highly paid people doing high-value-added work -- and masses of unemployed?” “….Our fundamental economic beliefs, which we have elevated from a conviction based on observation to an unquestioned truism, is that the free market is the best economic system -- the freer, the better. Our generation has seen the decisive victory of free-market principles over planned economies. So we stick with this belief, largely oblivious to emerging evidence that while free markets beat planned economies, there may be room for a modification that is even better.” “…Unemployment is corrosive. If what I’m suggesting sounds protectionist, so be it.”532

2.7.10. “BP braces for shake-up at the top”: FT front page headline. “Investors are braced for a clear-out of BP’s leadership once its leaking oil well in the Gulf of Mexico is capped, which could come in the next few weeks, according to several leading shareholders and people close to the group.” Tope ten investors have objections to the performance of the chairman, and think the CEO’s departire is essential.533

BP brushes off call by Co-op to keep away from ecologically sensitive areas. “When the leak is plugged and we return to normal we will be carrying out an assessment of where the new BP goes from here. We will – like the rest of the industry – be working out how we can do things differently in terms of safety but not where we do them,” says a BP spokesman in London. “The position is the same now as it was at the strategy update earlier in the year. We are committed to three core areas of deep water oil, unconventional gas and enhanced recovery on super-sized fields. The world needs oil to meet growing demand and total risk aversion would just drive up prices.”534

43

Triple Crunch Log

Shell drags the FSTE 100 down to a 10 month low on talk that analysts are cutting their forecasts based on the Gulf drilling moratorium, maintenance issues in Canada, and problems in Nigeria.535

EDF faces “expropriation” and inquest on “ballooning” costs of keep nuclear plants open . Bloomberg: “Electricite de France SA, Europe’s biggest power generator, is facing demands to justify ballooning cost estimates for extending the lives of French nuclear reactors as the government opens the market to competitors. ….EDF will have to spend about 600 million euros ($750 million) on each of its 58 reactors to keep them in service for more than four decades, according to Chief Executive Officer Henri Proglio. That’s 50 percent more than an estimate given earlier this year. The utility will have to fork out almost 35 billion euros to keep aging plants in working order, the CEO has said.” A draft law under scrutiny in the Senate would require EDF to sell about a quarter of its power to GDF and others. Proglio calls it “expropriation.”536

3.7.10. To replace US offshore oil with renewables, 195 Californias or 74 Texases would be needed. Chris Nelder: “Federal offshore Gulf of Mexico has been our last great hope for domestic oil production against a four-decade declining trend. Offshore oil now accounts for 1.7 million barrels per day (mbpd), or over 30%, of our domestic production of 5.5 mbpd. What would it take to substitute wind for offshore oil? At 5.8 MBtu heat value in a barrel of oil and 3412 BTU in a kWh, 1.7 mbpd is equivalent to 2.9 billion kWh per day, or 1,059 billion kWh a year. By comparison, total 2008 wind generation was 14.23 billion kWh in Texas, and 5.42 billion kWh in California. Therefore, to replace our offshore oil with wind, you’d need 195 Californias, or 74 Texases of wind, and probably 20 years to build it. Then there are some not-so-simple facts. ….Our only defense against the crushing weight of these forces will be to aggressively improve efficiency.”537

4.7.10. Saudi Arabia's King Abdullah orders a halt to oil exploration operations in the Kingdom . So the official Saudi Press Agency, or SPA, reported yesterday. “I was heading a cabinet meeting and told them to pray to God the Almighty to give it a long life," King Abdullah tells Saudi scholars studying in Washington. “ I told them that I have ordered a halt to all oil explorations so part of this wealth is left for our sons and successors God willing.” A senior oil ministry official, who declined to be named, tells Zawya Dow Jones the king's order isn't an outright ban but rather means future exploration activities should be carried out wisely.538

Macondo relief well is only a few days from the pipe, and “one shot” moment of truth. Wayne Pennington, chair of geophysical engineering at Michigan Tech University: “They pretty much have one shot. Once they hit it and they try to kill it they really just have that one chance.” Guardian: “One wrong move as engineers break through the cement and steel pipe of the Macondo well could increase the torrent of oil into the Gulf. In the worst case scenario, it could even trigger a blow-out in the relief well.”539

Pension funds are failing people as stewards of their cash. Ruth Sutherland argues that the credit crunch and the oil spill should together be a line in the sand. “The Green Investment Bank Commission estimates that up to £1 trillion is needed by 2030 to upgrade and decarbonise Britain's infrastructure – investment on a scale not seen since reconstruction after the second world war. Pension funds have £1.5tn of assets under their control and are meant to be long-term investors, so they should be ideal candidates to put up some of the capital. But there is no guarantee they will do it.” One option is to enfranchise pension fund members, she says, so they - the end owners - can cut through the layers of advisers, brokers, analysts, and money managers to reach and influence the boards of the companies causing the problems. 540

Obama gives nearly $2bn to two solar companies to create up to 5,000 jobs. Abengoa will get $1.45bn to build a huge solar thermal plant in Arizona. Abound Solar will get $400m in loan guarantees to build a solar panel manufacturing plant in Colorado.541

5.7.10. Saudi oil pronouncement is in context of 4.4 mbd spare capacity, and 11% of oil diverted to gas. FT: “Saudi oil minister Ali al-Naimi said in June that the country wouldn’t need to increase its oil production capacity until 2020. The country now reports it has 4.4m b/d of spare capacity - more than double the ‘cushion’ that it officially targets. Upstream reported in May that Saudi Arabia is exploring for hydrocarbons in the Red Sea, and has recorded 22,000km of seismic data there, among challenging geography including 2km-plus water depths, high temperatures and a layer of salt. It has also commissioned exploration around the Manifa oil field in the Persian Gulf. But the overall focus is on gas, not oil, because of the Kingdom’s domestic electricity supply problem. It heavily subsidises both fuel and electricity use, and consequently consumption is growing too fast for domestic gas supply to keep up with. Platts reported last month that Saudi Arabia diverts about 877,000 b/d - or 11 per cent of its current oil output - to its own domestic electricity supplies.”542

As Gulf spill cost passes $3bn, BP hands a $400m bill to Anadarka and Mitsui , its partners on the Macondo well. Around 44,500 personnel, more than 6,500 vessels and 113 aircraft are involved in the clean up. Two caps are now in place, and together have trapped over half a million barrels to date. A floating riser system, designed for rapid connection and disconnection appropriate for the hurricane system, should be in place within a week.543

China and India offset the developed world’s recession-induced fall in CO2 emissions last year. FT: “The Netherlands Environmental Assessment Agency (PBL), a national policy institute, estimates that total CO2 emissions from fossil fuels and cement in the OECD and Russia collectively fell by 7 per cent last year.   China and India’s emissions rose by 9 per cent and 6 per cent, respectively. The result was that total world emissions growth was flat between 2008 and 2009 …the first time since 1992 that CO2 emissions haven’t increased.”544 Indian opposition calls for nationwide strikes over lifting of fuel subsidies. CNN: “India is moving to roll back fuel subsidies. The government recently lifted state controls on gasoline and is determined to market-link diesel prices as well. But India's bold plans to reform the decades-old regulations are meeting stiff resistance. Opposition parties have called for a nationwide strike for Monday over fuel-price rises that threaten to stoke India's double-digit inflation further.” …. “Singh's government, now in the second year of its second term in office, remains firm. "(O)ur people are wise enough to understand that excessive populism should not be allowed to derail the progress our country is making, and for which it is winning kudos internationally as well," the prime minister told reporters last week as criticism at home mounted over cutting fuel subsidies.”545

“Public speculation rather public profligacy is the real villain of Labour years,” Philip Inman argues in the Guardian. “Borrowing in 2009 reached £159.2bn, which was equivalent to 11.4% of national income. Added to all the other borrowing down the years the UK's accumulated mortgage was £950.4bn, equivalent to 68.1% of national income. Borrowing projections (without Osborne's extra spending cull) showed the debt graph heading for 90% of national income. It all sounds like the nation is drowning under the weight of debt. And for some doomsayers it is.” “….Consumer spending grew as property wealth sustained confidence. With property values in decline from the autumn of 2007, consumption dived. Alistair Darling borrowed to fill the gap, not to fund welfare or departmental budgets – they had risen, but not uncontrollably.” “….It is in the consumption and asset price numbers that politicians should look for the roots of the crisis. It is in the over-spending by private

44

Triple Crunch Log

households that we find the causes of the crisis much more than in the overspending of governments.” “….Vince Cable, when Liberal Democrat treasury spokesman, was one of the most vociferous critics of Labour's laissez-faire policies regarding private consumption. From 2003 onwards he called for higher taxes and a limit on lending to curtail ballooning property prices. Yet now in his role as secretary of state for business innovation and skills, he must nod while George Osborne blames spending by the previous Labour government for the country's ills rather than the British obsession with property. A glance at the budget projections shows that Cable and Osborne expect the property boom to be back within a couple of years and providing even more tax receipts than before. In 2015/16 stamp duty taxes will fill the exchequer with £17.7bn, with the majority from duty on property sales. A £10bn net boost to the exchequer will mark a return to a consumption-led boom and a return to all the same old problems.”546

6.7.10. Deepwater oil discoveries are increasingly important to the global and U.S. reserve base, according to research compiled by IHS CERA. The volume of new oil reserves coming from deepwater has been rising since the 1990s, and accelerating in recent years. The figures show that from 2006 to 2009, annual world deepwater discoveries in over 600 feet of water accounted for 42 percent to 54 percent of all discoveries onshore and offshore. In 2008, deepwater discoveries added 13.7 billion BOE to global reserves. Global deepwater production capacity in 2,000 feet (610 m) of water or greater has more than tripled since 2000, rising from 1.5 million b/d in 2000 to more than 5 million b/d in 2009, i.e. global deepwater production also exceeds that of any country except Saudi Arabia, Russia and the U.S. Pre-Macondo projections showed deepwater production capacity had the potential to rise to 10 million b/d by 2015. Crucially, the average size of deepwater discoveries significantly exceeds new onshore discoveries: about 150 million BOE for 660 feet+ wells in 2009, compared with the onshore average of just 25 million barrels. U.S. Gulf production accounting for 30 percent of U.S. crude oil production in 2009, or 1.6 million b/d out of 5.3 million b/d. This 2.6 million b/d of Gulf supply was the result of a 33 percent, or 399,000 b/d, increase in output from 2008, which has contributed to a drop in U.S oil imports.547

Spain wants to double its subsidies for domestic coal-fired power. The EU is giving it trouble in doing so, under competition rules. Umpeloyment is running at 20% and PM Zapatero is from the coal-mining district, Leon. The FT observes that governments everwhere are doing this kind of thing. Under pressure, domestic jobs come before the environment, or targets set.548

UK nuclear waste store plan will be dependent on no government cuts, the Nuclear Decommissioning Authority syas. Alun Ellis, repository project director at the NDA: “It would mean going into hibernation – keeping our core capabilities but not delivering anything.” Ft: “The NDA hopes that the construction of deep underground caverns can be started in 2025, with the first consignments of waste to be buried there in 2040. But a site for the facility, which will need to store about 400,000 to 500,000 cubic metres of waste – enough to fill the Albert Hall five times – has yet to be found. The only area to have expressed an interest is west Cumbria.” The waste from a new generation of nuclear power plants would add about 10 per cent to the existing waste pile, the NDA says.549

7.7.10. BP’s relief well is only 300 feet from its target, having traversed 17,710 feet of water and rock. FT: “If the relief wells fail, the company may be doomed.” The target well is only 7 inches across: a salad plate under and mile of water and 2.5 miles of rock. Peter Clark of the University of Alabama: “While hitting the well with the relief well is difficult, they have more than one chance. Technology is available to accurately locate the position bit, so the chances of success are high.”550

AP investigation shows Gulf is packed with abandoned oil wells: “an environmental minefield” ignored for decades, along with environmental safety. Of the 27,000 abandoned wells, more than 600 belonged to BP. A particularly worrying category involved 3,500 classified as “temporarily abandoned”, for which the shut-off rules are no as strict as for completely abandoned wells. More than 1,000 have remained unfinished for more than a decade, despite a requirement to reuse or permanently plug such wells within a year. State officials estimate tens of thousands are badly sealed, and there is very little investigation of the sites. Guardian : “ The Bureau of Ocean Energy Management, Regulation and Enforcement (formerly the US Minerals Management Service), which is charged with keeping an eye on offshore drilling, has little power to deal with abandoned wells. It merely requests paperwork to prove that a well has been capped and, unlike regulators in states such as California, it does not typically inspect the job.”551

Third review of UEA “climategate” scientists concludes their “rigour and honesty” are not in doubt and the IPCC conclusions are not impacted. This one is led by Sir Muir Wood, a senior civil servant. They could have been more open about the work, the report also concludes.552

100% of German electricity from renewables possible by 2050, German Environment Agency says. “A complete conversion to renewable energy by 2050 is possible from a technical and ecological point of view,” says Jochen Flasbarth, president of the Federal Environment Agency. “It's a very realistic target based on technology that already exists – it's not a pie-in-the-sky prediction.”553

EMU break-up risks global deflation shock that would dwarf credit crunch, warns ING. The Dutch bank warns in a new report, "Quantifying the Unthinkable", that a full-fledged disintegration of the eurozone would trigger the worst economic crisis in modern history, devastate every country in Europe including Germany, and inflict a deflationary shock on the US. “Governments would find themselves having to bail out banks again, worsening already fragile government finances. The risk of at least a temporary break-down in payments systems would be enormous,” says the report by Mark Cliffe, Maarten Leen, and Peter Vanden Houte. “Initial trauma is sufficiently grave to give pause for thought to those who blithely propose EMU exit as a policy option,” it said, a rebuke to those German politicians and economists who have talked openly of shaking out weaker members. Telegraph: “The report said break-up talk is "no longer just a figment of fevered Anglo-Saxon imaginations". It has spread into top policy-making circles in the eurozone and must now be analysed as a serious tail-risk. A survey of 440 heads of global banks and companies by RBC Capital Markets found that 50pc expect at least one country to leave EMU by 2013, and a quarter expect a complete collapse.”554

8.7.10. Obama says 700,000 jobs to be created in energy in the next few years. NYT: “Mr. Obama spent Thursday morning touring Smith Electric Vehicles, a maker of battery-powered trucks. The company received a $32 million grant under the recovery act, and is using the money to sell its vehicles at a steep discount to some of the country’s best-known companies, like AT&T, Coca-Cola and Frito-Lay, with the hope of generating long-term business. Standing on the factory floor, with the trucks arrayed around him, Mr. Obama declared that he expected energy investments to generate 700,000 jobs over the next few years.” There is no detail in the article of how of where the jobs will come.555

10.7.10. Work begins on new cap for the Macondo well. The current cap collects only a fraction of the 35,000 – 60,000 barrels spewing every day. The new well, which will take up to ten days to fit – during some of which

45

Triple Crunch Log

time the oil will escape with full force - could collect “far more.”556

Lloyd’s of London warns of “catastrophic” consequences if companies fail to prepare for peak oil. In a report with the Royal Institution for International Affairs, the insurance institution says Britain needs to be ready for "peak oil" and disrupted energy supplies at a time of soaring fuel demand in China and India, constraints on production caused by the oil spill in the Gulf of Mexico, and political moves to cut CO2 to halt global warming. “Companies which are able to take advantage of this new energy reality will increase both their resilience and competitiveness. Failure to do so could lead to expensive and potentially catastrophic consequences”… “Even before we reach peak oil, we could witness an oil supply crunch because of increased Asian demand. Major new investment in energy takes 10-15 years from the initial investment to first production, and to date we have not seen the amount of new projects that would supply the projected increase in demand.”557 558

RWE CEO says nuclear needs subsidies so it can be on a level playing field with renewables . Volker Beckers says he wants UK market mechanisms that incentivise investments in renewable energy in onshore and offshore wind and biomass to be extended to all low-carbon energy, including nuclear. “We have different market mechanisms that need renovation to ensure that there is a level playing field between all the various technologies. I want to ensure that nuclear investments take place but because of the current situation, investments either go into only gas-fired power stations or the renewable sector. Only if you have a level playing field do you leave it with the market powers to make the right investment decision. Otherwise, if you have a stimulus for certain technologies, all the investments go into one specific technology and that would ultimately lead to a cluster risk.”559

12.7.10. S&P keeps UK of downgrade watch despite George Osborne’s projected budget cuts. The rating agency does not believe the growth story and says there is a one in three chance of a downgrading.560

UK budget deficit will be hit by BP tax drop: the company will pay an estimated $10bn less in tax over the next four years, as a result of offsets against clean up costs. If the well is capped by August, total costs to BP could be around $30bn, analysts estimate: $10bn in cleanup and $20bn in compensation. BP paid $8.4bn in taxes worldwide last year. 561

With BP’s troubles, Britain’s post-imperial “delusions of grandeur have been cruelly exposed.” So argues Madeleine Bunting in the Guardian. “In many areas of the world, BP was British foreign policy by another route, extending influence much as the East India Company had done in an earlier era. Browne himself admitted in an interview that while the government believed the flag leads and trade follows, in BP's case it was usually the other way round. When BP arrived in Azerbaijan, the first British government representative borrowed office space from them.”562

Expert in shale gas expresses mixed feelings about safety and profitability in an interview in the FT Terry Engelder, professor of geosciences at Pennsylvania State University: “It’s very clear that the industry should make every effort to protect these [fracking] fluids getting into surface waters or ground waters. A policy of zero tolerance is very important when it comes to the mixing of these chemicals, or at least the fluids with the biosphere. At the same time, this industry is one that’s very complex, there are a lot of risks, and the work toward zero tolerance is very important, [but] I don’t think it will ever be achieved.” … “There’s one school that claims these wells reach a state of linear decline, they decrease production more rapidly than industry expects. I haven’t seen any evidence of that… A lot of the capital markets people would be very disappointed if it is linear.” …. “The silver lining of the Gulf accident is that each of the operators is looking at that and thinking, gosh that could be us. Industry was moving carelessly in the GOM; the same thing could be happening in the gas shale. You might call that self-regulation. Self-regulation is important in itself but it is not adequate.” 563

13.7.10. BP places a new capping stack over its leaking riser ready for a well integrity test tomorrow. The valves have not yet been closed. BP’s Doug Suttles: “…the purposes of the integrity test is to determine if we believe we have the flow contained within the casing of the well. So in this particular case, if we see high pressures it’s a good sign. It actually means that the flow and the oil is fully contained in the existing well.” And if not? “If we see low pressures, then that would indicate that potentially oil is escaping out of the casing at some point. So in this particular test what we’re hoping to see is full shut in pressures. Which would indicate that the casing’s intact.”564

US Senators are looking for other avenues to target BP, including links with Libya. The Senate foreign relations committee is about to consider a request from Frank Lautenberg, a Democratic senator from New Jersey, for an investigation of accusations that BP helped secure the early release of Abdel Basset al-Megrahi, the man convicted of the Lockerbie bomb atrocity, freed by Scottish authorities last year. BP says a “matter of public record” it had discussed with the UK government its concern at the slow progress in releasing Mr Megrahi. Andrew Gowers, a BP spokesman: “Like many others we were aware that a delay might have negative consequences for UK commercial interests, including ratification of BP’s exploration agreement.”565

Obama renews ban on deepwater drilling, with only a slight change to get round the court ruling overturning the ban: the terms could allow some drilling to resume. All drilling below 500 feet is affected and it now applies to any deepwater floating facility. The initial ban suspended drilling at 33 exploratory wells. Drilling can resume of companies can prove they can shut down a leaking well immediately. The ban lasts until 30 November. The Republicans call it a “job-killing moratorium”, and the US Chamber of Commerce agrees.566

IEA forecasts oil demand will slow in 2011. FT: “The International Energy Agency, in its latest oil market report, predicts that the increase in oil demand will slow next year to a 1.3m barrel/day increase, from a 1.8m b/d rise in 2010. The agency, which warned several times last year of a “supply crunch” due to falling investment in upstream production, is much more sanguine these days on the supply-demand balance. Its new report notes some supply concerns, particularly around Iran, but says that investment in upstream production seems to be stable. “Whisper it quietly, but we might, just might, be in for some market stability for a while longer,” it says of its 2011 forecasts. This decreasing rate of demand between 2009-10 and 2010-11 comes despite forecast on a rising rate of GDP growth; from 4.1 per cent in 2010 to 4.3 per cent in 2011.” Anticipated slowing of Chinese growth is the main reason.567

Oil well drilled off the Falklands comes in dry. Shares of the small company drilling it, Falkland Oil and Gas, fall off a cliff. But the company reminds the city that six wells were drilled in the North Sea before oil was found.568

European energy and industrial groups spent £800m on carbon credits from the developing world in 2009. That makes them the most important buyers in the world. Vattenfall was the biggest, covering about 7.4% of its emissions. The UN CDM scheme is often cheaper than the EUETS. The biggest source is projects to destroy industrial gases, an increasingly controversial area. FT: “Some of these factories – which are mainly

46

Triple Crunch Log

situated in China – are making more money from selling credits to destroy the byproduct than they make from their refrigeration production. This gives factory owners an incentive, say critics, to keep the plants running when in other circumstances they might have closed down.”569

14.7.10. US Energy Secretary and USGS stop Macondo integrity test pending “further analysis.” Incident commander Admiral Thad Allen: “Today I met with Secretary Chu, Marcia McNutt and other scientists and geologists as well as officials from BP and other industry representatives as we continue to prepare and review protocols for the well integrity test - including the seismic mapping run that was made around the well site this morning. As a result of these discussions, we decided that the process may benefit from additional analysis that will be performed tonight and tomorrow.” FT: “Perhaps the fear from the administration it is that shutting the valves off completely, even for a test of several hours, would actually threaten the well casing.”570

Experts fear shutting the valves and even testing the well could rupture the casing. George Hirasaki, a former Shell engineer now at Rice University in Houston, warned: “If the casing is damaged and the flow is restricted at the sea floor, then oil and gas will flow behind the casing and charge up shallow formations with oil and gas.” FT: “The oil and gas in those shallow formations could seep up to the seabed and escape into the water, creating leaks that would be impossible to contain, unlike the manageable flow now coming up the well.”571

US lawmakers take first steps to bar BP from US drilling leases. FT: “BP faced more problems on Capitol Hill on Wednesday when lawmakers pushed ahead with a plan that would bar the UK oil group from obtaining new offshore oil leases because of its poor safety record. The amendment, added to a broader oil rig safety bill that was expected to pass through the House natural resources committee this morning, underscored the threat to BP’s long-term future in the US. However, the proposal faces several hurdles before it becomes law.”572

Investment in clean energy holds steady in second quarter at $33.9bn globally, according to Bloomberg New Energy Finance. This is just 1.5 per cent from the first quarter of 2010, and 3 per cent down on same period last year: good going, given the Greek and Eurozone crises, the continuing tightness of credit, and the sluggish US economic recovery. Investments in European projects fell, while China continued its build-up. China installed 14 GW of new wind turbine capacity in 2009. Europe came nowhere near. China attracted $40.3bn of asset finance for clean energy in the past year, compared with $29.3bn in Europe. Project financing in Europe has fallen in each of the last four quarters. Three major IPOs also failed to materialise - Solyndra and First Wind in the US, and Enel Green Power in Europe. Tesla Motors managed a $202m IPO in June. 573 Analysts expect $200bn to be invested in clean energy this year: higher than the global revenues from luxury goods, and annual sales of mobile phones.574

Renewable energy contributed 10.3% of energy consumption in the EU27 in 2008, compared with 9.7% in 2007 and 8.8% in 2006. These figures are taken from a report issued by Eurostat, the statistical office of the European Union. Highest share of renewables in Sweden (44.4%), Finland (30.5%), Latvia (29.9%), Austria (28.5%) and Portugal (23.2%). The lowest is in Malta (0.2%), Luxembourg (2.1%), the United Kingdom (2.2%), the Netherlands (3.2%) and Belgium (3.3%). Between 2006 and 2008, nearly all Member States increased their share of renewable energy in total consumption. The largest increases were recorded in Austria (from 24.8% in 2006 to 28.5% in 2008), Estonia (from 16.1% to 19.1%), Romania (from 17.5% to 20.4%), Portugal (from 20.5% to 23.2%) and Slovakia (from 6.2% to 8.4%).575

Rich countries set to pay Indian and Chinese energy giants to build new coal-fired power plants. Gdn: “The UN's Clean Development Mechanism to use European carbon offset credits to subsidise 20 'efficient' coal plants in India and China on the basis that they are “efficient” because they will emit less carbon than older models.” If the applications from 12 Chinese and Indan power companies are approved, the UN’s body for cutting emissions will become one of the biggest funders of coal burning.576

Dallas actor Lerry Hagman stars in an ad advocating solar power for Solarworld US. “I’m still in the energy business,” he says, looking at his solar roof. He reportedly agreed the do the ad out of anger at the Gulf oil spill. “With all that oil gushing away in the Gulf I figured it was time to call for a new direction in where we're getting our energy," he told the New York Times. "Since Sarah Palin is saying 'Drill, baby, drill' I'm saying 'Shine, baby, shine'. It's a lot cheaper and cleaner.”577

15.7.10. Matt Simmons accuses BP of a huge lie about the Macondo spill: that only a nuclear blast can stop it, that the cameras are recording a condensate leak at the end of the riser, that the relief well can never work because the casing has been blown out of the hole, and that the major leak is miles away – unrecorded - at the well head. He does this during an interview on KPFK radio, the NPR station in Los Angeles, with radio host Ian Masters. “The dimensions of this lie are beyond belief,” says Simmons. “In about a month or two people will realize that this actually was the biggest con job we've ever seen. "What the (NOAA) researchers now believe is that basically is that between 4000 and 4500 below the ocean floor lies an oil lake that's somewhere between 100 and 120 miles wide and it's about 4500 feet deep. It's this toxic waste and crude and it's releasing methane gases that are absolutely lethal which is why all the fish and dolphins and sharks and whales are dying. And workers too, which is why so many have gotten sick, or maybe really sick.” …. “The health problems are so serious," Simmons said. "When you inhale methane you just die.”578

Citigroup analysis of BP safety and alternative-energy record. “Our detailed examination of BP's health and safety performance over the past 10 years indicates that: Overall fatalities and injuries have fallen, employee fatalities are now rare; …Safety performance is a sector-wide, rather than a company-specific, concern. ….Beyond Petroleum - The 10-year campaign to rebrand BP as a cleaner energy company has still not delivered an alternative energy business of value to shareholders. We compare the growth of IBR and SolarWorld over the same period as an indication of what could have been achieved. Looking for sustainable alternatives - There is no clear proxy for BP in attempting to avoid the safety and environmental risks of the oil sector.”579 (L)New renewable power capacity topped fossil fuels and nuclear again in US and Europe during 2009. Global investments in renewables also exceeded non-renewables for 2nd year. Clean energy investments are showing resilience in recession. So say twin reports launched today by UNEP and the Renewable Energy Policy Network for the 21st Century (REN21). “Renewables accounted for 60 per cent of newly installed capacity in Europe and more than 50 per cent in the USA in 2009. This year or next, experts predict, the world as a whole will add more capacity to the electricity supply from renewable than non-renewable sources. ….Investment in core clean energy (new renewables, biofuels and energy efficiency) decreased by 7% in 2009, to $162 billion. Many sub-sectors declined significantly in money invested, including large (utility) scale solar power and biofuels. However, there was record investment in wind power. If spending on solar water heaters, as well as

47

Triple Crunch Log

total installation costs for rooftop solar PV, were included, total investment actually increased in 2009, bucking the economic trend. New private and public sector investments in core clean energy leapt 53 per cent in China in 2009. China added 37 gigawatts (GW) of renewable power capacity, more than any other country. Globally, nearly 80 GW of renewable power capacity was added in 2009, including 31 GW of hydro and 48 GW of non-hydro capacity. This combined renewables figure is now closing in on the 83GW of fossil-fuel, thermal capacity installed in the same year. If the trend continues, then 2010 or 2011 could be the first year that new capacity added in low carbon power exceeds that in fossil-fuel stations. Investment in renewable energy power capacity (excluding large hydro) in 2009 was comparable to that in fossil-fuel generation, at around $100 billion each. If the estimated $39 billion of investment in large hydro is included, then total investment in renewables exceeded that in fossil-fuel generation for the second successive year. China surpassed the US in 2009 as the country with the greatest investment in clean energy. China’s wind farm development was the strongest investment feature of the year by far, although there were other areas of strength worldwide in 2009, notably North Sea offshore wind investment and the financing of power storage and electric vehicle technology companies. Wind power and solar PV additions reached a record high of 38 GW and 7 GW, respectively. Investment totals in utility-scale solar PV declined relative to 2008, partly a result of large drops in the costs of solar PV. However, this decline was offset by record investment in small-scale (rooftop) solar PV projects. The reports also show that countries with policies encouraging renewable energy have roughly doubled from 55 in 2005 to more than 100 today – half of them in the developing world – and have played a critically important role in the sector’s rapid growth. ….In 2009 renewable sources represented: 25 per cent of global power (electricity) capacity (1,230 gigawatts (GW) out of 4,800 GW total all sources, including coal, gas, nuclear); 18 per cent of global power production; 60 per cent of newly installed power capacity in Europe and more than 50 per cent in the US; the world as a whole should reach 50 per cent or more in newly-installed power capacity from renewables in 2010 or 2011. …Major economies in 2009 began to spend some of the estimated $188 billion in global “green stimulus” programs announced in September 2008. However, at the end of 2009, only 9 percent of the money had been spent, with larger proportions expected to flow in 2010 and 2011.”580

Investment in renewables totalled $162 billion in 2009: the second highest annual figure ever (after 2008) and nearly quadruple the sum invested in 2004. After a weak first quarter attributed to the banking crisis, sustainable energy investments rebounded in the final three quarters of last year. This added some 50 gigawatts (GW) of renewable energy generation capacity worldwide (not including hydro-electric) up from 40GW added in 2008. “The green power sector survived the economic downturn better than many expected, with share prices rising almost 40% in 2009, reversing roughly one third of losses experienced in 2008. Clean energy share prices under-performed wider stock markets by around 10 percent in the first four months of 2010. Although oil prices were buoyant, prices of electricity and natural gas stayed low, cramping returns for project developers. Nevertheless, new clean energy investments in the first quarter of 2010 (often the most subdued quarter of the year) were up more than 50 percent on the same three months of 2009. ….From 2005 to 2009 inclusive, the annual average rate of growth in wind power capacity was 27 percent; solar hot water 21 percent rate; ethanol production 20 percent and biodiesel production 51 percent. The use of biomass and geothermal for power and heat also grew strongly.”581

Wind was even more dominant as a destination for investment in 2009 than 2008. “In 2008, it accounted for $59 billion or 45 percent of all financial investment in sustainable energy; in 2009, it accounted for $67 billion and its share rose to 56 percent. Wind power additions reached a record high of 38 GW, 13.8 GW of which was installed in China, 10 GW in the US, and 2.5 GW in Spain. Wind power existed in just a handful of countries in the 1990s, but now exists in over 82 countries.”582 Total global investment in solar PV reached a record $40 billion in 2009. “Grid-connected solar power has grown by an average of 60 percent every year for the past decade, from 0.2 GW at the start of 2000 to 21 GW at the end of 2009. The year 2009 was very different for large-scale (utility-scale) solar however, suffering a 27 percent fall in financial investment in the year, to $24 billion. The sharp decline links to several factors, including falling prices, a sudden over-supply of photo-voltaic products, new caution on the part of investors towards equity in young solar companies, a shortage of bank financing for projects in Europe and North America and a temporary freeze on permits for new capacity in Spain, the most active solar market in 2008. Solar PV additions nevertheless reached a record high of 7 GW in 2009. Germany was the top market, with 3.8 GW added, or more than half the global market. Other large markets were Italy, Japan, the United States, the Czech Republic, and Belgium. Spain, the world leader in 2008, saw installations plunge to a low level in 2009 after a policy cap was exceeded. In 2009, China produced 40 percent of the world’s solar PV supply, 25 percent of the world’s wind turbines (up from 10 percent in 2007), and 77 percent of the world’s solar hot water collectors. Power produced by solar PV dropped in price some 50 to 60 percent by some estimates – from highs of $3.50 per watt in mid-2008, to lows approaching $2 per watt. An estimated 70 million households worldwide now employ solar hot water heating.”583 Investment in biofuels was $7bn in 2009, and biomass and waste-to energy $11bn. “Biofuels, which ranked third after wind and solar in 2008 with $18 billion of financial investment, ended up fourth last year with just $7 billion. Biomass and waste-to-energy, which was fourth in 2008 with $9 billion, moved up to third in 2009 with $11 billion. Biofuels displaced the energy equivalent of 8 percent of global gasoline consumption. Latin America is seeing many new biofuels producers in countries like Argentina, Brazil, Colombia, Ecuador, and Peru, as well as expansion in many other renewable technologies. Investment in new biofuels plants also declined from 2008 rates, as corn ethanol production capacity was not fully utilized in the United States and several firms went bankrupt. The Brazilian sugar ethanol industry likewise faced economic troubles, with no growth despite ongoing expansion plans. Europe faced similar softening in biodiesel, with production capacity only half utilized.”584

Investment in energy efficiency technologies in 2009 totalled $4bn. “Energy-smart technologies such as power storage and efficiency saw a 34 percent rise in investment, to $4 billion. For the first time, energy-smart technologies attracted more venture capital and private equity investment than any other clean energy sector.”585 Pro-renewables policymaking is now to be found in more than 100 nations. “A significant milestone was reached in early 2010 – more than 100 countries had enacted some type of policy target and/or promotion policy related to renewable energy, up from 55 countries in early 2005. Many new targets enacted in the past three years call for shares of energy or electricity from renewables in the 15–25 percent range by 2020. Most countries have adopted more than one promotion policy, and there is a huge diversity of policies in place at national, state/provincial, and local levels. Manufacturing leadership is shifting from Europe to Asia, as countries

48

Triple Crunch Log

like China, India, and South Korea continue to increase their commitments to renewable energy. As a group, developing countries have more than half of global renewable power capacity. Developing countries now make up nearly half of all countries with policy targets (38 out of 80 countries) and also make up half of all countries with some type of renewable energy promotion policy (41 out of 81 countries). Markets for renewables are growing at rapid rates in countries such as Argentina, Costa Rica, Egypt, Indonesia, Kenya, Tanzania, Thailand, Tunisia, and Uruguay, to name a few. At least 20 countries in the Middle East, North Africa, and sub-Saharan Africa have active renewable energy markets. Outside of Europe and the United States, other developed countries like Australia, Canada, and Japan are seeing recent gains and broader technology diversification. Globally, renewable energy industries employ an estimated 3 million people, about half of them in the biofuel industry. There are many more indirect jobs involved in renewables value chains.586 Development assistance flows for renewables jumped to more than $5bn in 2009, up from around $2 billion in 2008. The largest providers are the World Bank Group, Germany’s KfW, the Inter-American Development Bank, and the Asian Development Bank. Dozens of other development agencies provide growing amounts of loans, grants, and technical assistance.587 UK Banks pledge to investigate why credit has failed to flow to small businesses in the downturn . In a meeting, Cable and Osborn demanded assurance that credit will start to flow again. They need the private sector to expand, as the public sector contracts in the face of cuts.588

JP Morgan Chase sets aside $5.8bn to pay investment bankers for six months . Its bonus pool is down 3% on the same period last year, although revenues fell 7%.589

Goldman Sachs settles with SEC to the tune of $550m. This fine allows it to continue neither admitting or denying that it misled investors in a $1bn mortgage-backed security. This is the biggest fine ever imposed on a Wall Street bank, but it amounts to around a week’s worth of trading revenues for Goldman.590

FT Energy Source on why the tech revolution isn’t a template for an energy revolution. “The idea that the great leaps made by IT and networking technologies in the past decade can be easily transferred to the looming energy challenge is shallow and misleading. As Vaclav Smil, a prominent energy writer and professor at the University of Manitoba, wrote: I have named this delusion Moore’s curse because (unlike the crowding of transistors on a microchip) it is fundamentally (that is thermodynamically) impossible for the machines and processes that now constitute the complex infrastructure of global energy extraction, conversion, transportation and transmission to double their capacity or performance, microchip-like, every 18-24 months. There are several reasons: Coming up with new energy systems doesn’t offer fun or lucrative new services. ….. Energy is more important …..Energy transitions are hindered by the built environment Information technology is not only beguiling, it can increase productivity exponentially.”z591

Wall St is not ignoring peak oil, FT Energy Source argues. “Google ‘peak oil funds’ to see how many investment managers are basing their strategy around this. Oil market traders can’t ignore the question of peaking oil production either, because the supply/demand balance is intrinsically bound up with oil prices.”  …. “Sceptics of this argument will point out that information about global reserves is opaque, particularly from Saudi Arabia and other Opec nations. That is a very good point. But market participants know this. Their jobs involve poring over reports such as the IEA’s 2008 oil field survey, which made clear that its decline rates were estimates based on a sample of fields. Markets price that uncertainty in. Look at prices: crude oil has remained well above $70 for much of the past 12 months, a price point that baffled many commentators. Why should oil prices reach what are historically high prices at a time when emergence from global recession was far from assured?” … “None of this is to say that increasingly scarce and difficult to obtain oil won’t affect markets and the wider economy. And large parts of the analyst community have missed other looming problems, like the 2007-08 subprime crisis. But the likelihood of Wall Street being completely blindsided by oil supply problems seems remote.”592

“The future is gas and unconventionals,” FT Energy Source observes. Shell has almost arrived at its stated goal of gas accounting for half upstream production by 2012, according to the latest Wood Mackenzie research.593

Business leaders (but not at Kingfisher) hit at tougher CO2 target. FT: Business groups across the European Union react to the suggestion in the FT by German, French and British ministers to raise the targets for carbon emissions cuts to 30% by 2020. They choose words like  “absurd”, “alarming” and “naïve.” But Ian Cheshire, group chief executive of Kingfisher, says: “The move to a 30 per cent target is a welcome one and may prove to be a very positive step towards achieving a global deal [on climate change] in Cancun this December.” He says there is “a strong appetite among the public to reduce” their emissions.594

16.7.10. BP closes valves on the new cap, stopping the leak from Macondo well for the first time since April. BP says pressure has been rising steadily inside the well, offering hope there were no leaks below the sea bed that would allow oil to escape, but is still too low to remove uncertainty about the condition of the well. Tests continue. FT: “Once the well has been shut off, the remaining visible oil on the surface could take two months to clean up, the US Coast Guard has suggested.” …. “Even if no more oil now flows into the Gulf, more than 4m barrels may have been spilt, making this by far the largest such incident ever in US waters.” …. “The cap is equipped with a blow-out preventer, which BP has used to shut the well completely. If the blow-out preventer fails to keep the leak in check during the test to shut the well, the containment system is big enough to collect all the oil leaking and direct it through tubes to containment vessels.” … “By shutting off all the leaking oil, BP risked causing another leak elsewhere. such as around the well head. For this reason, it will move slowly, stopping every six hours to test for any sign of leaks. It also will suspend drilling two relief wells, designed to permanently block the well, as a precaution during this period.” … “The first of two relief wells designed to permanently block the well is expected to be finished early next month. The new cap will probably be reopened in the meantime, but BP aims to capture all the oil that would subsequently begin to flow again.595

EC Energy Commisioner pressures UK government to put a moratorium on drilling in the North Sea until Macondo’s lessons are learned. DECC says this is unnecessary.596

Senate version of US climate bill falls short of Obama’s Copenhagen promise. They want cap and trade, on the power sector only, rather than a green new deal across the entire economy, as approved by the House of Representatives last year. A cap on utlity emissions (a third of the US total) could cut only 12-14% from 2005 levels, not the 17% signed up to in Copenhagen. (And note most other countries use 1990 as baseline. Against that baseline, 17% = 4%).597

18.7.10. Pressure in the Macondo well is not high enough, suggesting additional leakage. Observer: “Thad Allen, the retired Coast Guard admiral overseeing the response effort, said that pressure of about 7,500 pounds per square inch would show the well was intact, while pressure that lingered below 6,000 psi would indicate it

49

Triple Crunch Log

had been damaged and could be leaking. The pressure on Friday night remained at about 6,700 psi and was rising only fractionally. Allen has told BP to step up monitoring for any seabed breaches and gather additional seismological data to detect any pockets of oil in the layers of rock and sediment around the well.”598

BP ordered the owner of the Deepwater Horizon rig to overhaul crucial safety equipment in China, the Observer reports: a part of the blow-out preventer that subsequently failed to activate and is at the centre of investigations into what caused the disaster. Experts report that this saves money and is common in the industry. Observer: “It is understood that lawyers for Cameron International, the manufacturer of the BOP, will argue the device was so significantly modified in China that it no longer resembled the original component, and that Cameron should therefore not be held liable. Transocean, the owner of the Deepwater Horizon, which bought the BOP from Cameron, has already told congressional hearings into the disaster that the modifications were carried out at BP's request and "under its direction" as the lessee of the rig.”599 More trouble for BP as employees and contractors speak out. Ken Abbott, a whistleblower from BP's giant deepwater Atlantis platform in the Gulf of Mexico, alleges that operations there are “like a Wild Wild West show …. The big concern and primary driver was cost. I felt there was a whole lot of pressure on contractors to come up with the least cost. Everyone knew that the quickest way to get run off [the job] was not to find the cheapest way.” Abbott was run off the job, he believes because he pushed for better engineering documentation. Also, BP was the only company unofficially blacklisted by one Houston insurer because it pushed its contracters so hard. Observer: “Steve Arendt, a Houston-based oil industry safety specialist who investigated BP's refineries after the deadly Texas City explosion, says he found BP staff resistant to change. ….When Osha inspected 55 refineries between June 2007 and February this year, 97% of the serious violations it cited were against two of BP's plants.” …. “BP is the biggest employer in Houston, the home of close-knit Big Oil in the US, and uses dozens of contractors. It is not surprising that Abbott's employer apparently took BP's side over his and why contractors may be reluctant to hold BP to account.”600

KPMG says nuclear power “won't happen” without government subsidy. Britain's new generation of nuclear power stations will not be built if the Government refuses them any more support, a KPMG report commissioned by RWE npower will say this week. It is still uneconomic for utility companies to invest billions of pounds in nuclear power, the report concludes. The report will say a carbon "floor price" is not enough for the big utilities to commit large capital investments to the nuclear sector, and recommend that the Government ought to introduce a variable premium tariff for all low-carbon technologies – from nuclear to renewables. EDF and Centrica are planning to build the first new British nuclear plant by 2017. A consortium of RWE and E.ON intend to follow with their first by 2020.601

19.7.10. US government detects a fresh leakage, and BP shares fall once again. Admiral Allen writes to Bob Dudley: “Given the current observations observations from the test, including the detected seep a distance from the well and undetermined anomalies at the well head, monitoring of the seabed is of paramount importance during the test period. When seeps are detected, you are directed to marshal resources, quickly investigate, and report findings to the government in no more than four hours.” News of those concerns prompted BP’s shares to drop back as much as 5 per cent, having risen when the new cap was fitted. Dave Stegemeier, senior consultant at PFC Energy, says he is “alarmed” by some of the leaks. “This can’t be what they hoped to be seeing,”’ he says.602

UK lagging behind competitors on energy investment, says Climate Change Committee. This risks setting back the creation of “green jobs”, according to a government advisory body. The UK spent 0.01 per cent of GDP on energy in 2007, the latest year for which comparative figures are available. That compared to 0.03 per cent in the US, 0.05 per cent in France and 0.09 per cent in Japan. About £550m of public money was spent on low-carbon technologies in 2009, about £260m of it on energy. The Committee calls on the government to concentrate support on six areas: offshore wind; wave and tidal power; carbon capture and storage; smart grids and meters; electric vehicles; and aviation.603

China became the world’s biggest energy user in 2009, IEA reports. And the US uses more per capita, than China does. As recently as 2000, the US consumed twice as much energy as China.604

“Today’s Keynesians have learnt nothing,” Niall Ferguson writes in the FT. “It was the war that saw the US (and all the other combatants) embark on fiscal expansions of the sort we have seen since 2007. So what we are witnessing today has less to do with the 1930s than with the 1940s: it is world war finance without the war.” …. “Those economists, like New York Times columnist Paul Krugman, who liken confidence to an imaginary “fairy” have failed to learn from decades of economic research on expectations. They also seem not to have noticed that the big academic winners of this crisis have been the proponents of behavioural finance, in which the ups and downs of human psychology are the key. The evidence is very clear from surveys on both sides of the Atlantic. People are nervous of world war-sized deficits when there isn’t a war to justify them. According to a recent poll published in the FT, 45 per cent of Americans “think it likely that their government will be unable to meet its financial commitments within 10 years”. Surveys of business and consumer confidence paint a similar picture of mounting anxiety. The remedy for such fears must be the kind of policy regime-change Prof Sargent identified 30 years ago, and which the Thatcher and Reagan governments successfully implemented. Then, as today, the choice was not between stimulus and austerity. It was between policies that boost private-sector confidence and those that kill it.”605

20.7.10. Former Dow Jones reporter writes on Nasdaq.com that Saudi King’s view means peak oil is here. Brendan Coffey, a doubter of peak oil until 2006, now with Cabot Wealth Advisory: “The departure from the successful script OPEC has followed is a remarkable signal of change to me, one that to my mind indicates peak oil is here - there is only so much oil left, and the Saudis want to sell it when the oil crunch becomes apparent again.” …. “About 10 years ago, OPEC sources indicated Saudi Arabia needed to sell a barrel of oil at $18 to break even. Two years ago, data from ratings agency Fitch (which cares because it evaluates sovereign debt) estimated Saudi Arabia's breakeven had risen to $26. In January, Fitch pegged breakeven for the country at $68 a barrel. If it costs more to produce oil, it clearly is harder to get. And Saudi Arabia is the primary low-cost oil producer on the planet.” 606  Investment recommendation by former Dow Jones reporter worried about peak oil: solar PV. Avoid oil companies, because their share price will involve forward pricing, not just the high oil prices of the day. “I f you follow the market closely, you likely recall the fantastic year solar stocks had in 2007: Nearly every solar-related stock posted triple-digit gains that year, with the best performers, First Solar ( FSLR ) and Ascent Solar ( ASTI ), posting eye-popping 750% gains. The downside is the whole sector has suffered from a significant hangover since then as profit taking and then the 2008 financial crisis forced shares lower.  Even industry leaders have plunged, like silicon wafer provider MEMC Electronic Materials, which has fallen to around $10 from

50

Triple Crunch Log

a 2007 high of $90, and First Solar, which held up well through much of 2008 until it too succumbed to the bear market. It has fallen 50% from 2008's peak. But as we see in nearly every market and sector sell-down, the bears have overdone it. Solar are now priced at bargain-basement value-stock levels, in some cases their companies valued like businesses in decline rather than great growth companies of the future. A simple screen of the leading solar panel and wafer stocks trading on US exchanges shows solar stocks are trading at the lowest multiples they ever have. The price to current fiscal year earnings for the 12 leading solar stocks is 11. Right now the S&P 500 is trading at a price-to-earnings of 20. In fact, the basket of leading solar stocks is trading at a lower valuation than the utilities sector (which has a P/E of 13), conglomerates (18), basic materials (20) and every other sector of the market through financials (P/E of 99).” 607

21.7.10. Obama finally able to sign the bill overhauling Wall Street, 2 years after the Lehman Brothers debacle. Obama says the Dodd-Frank Wall Street Reform bill will deliver “the strongest consumer financial protections in history”. A new consumer protection agency will shield borrowers from abusive practices from mortgage lenders, credit card companies and others. “Reform will put a stop to a lot of the bad loans that fuelled a debt-based bubble.” FT: “The (2,300 page) bill has taken months to pass because of the opposition of Republicans and some centrist Democrats and has become a proxy for the larger issue of whether to enact new stimulus in the face of rising deficits. It finally passed on Wednesday night by 59-39. The delays underscored the bitter political climate in the build-up to congressional elections in November, in which polls predict the Democrats could lose control of the lower chamber.” The latest poll forecasts that Obama would lose against a generic Republican in the 2012 election, but beat Sarah Palin narrowly.608

Chinese rating agency condemns western rivals for causing the credit crisis, and says the world’s largest creditor nation should have a much bigger say in how governments and their debt are rated. Guan Jianzhong, head of Dagong Global Credit Rating: “The US is insolvent and faces bankruptcy as a pure debtor nation but the rating agencies still give it higher rankings. Actually, the huge military expenditure of the US is not created by themselves but comes from borrowed money, which is not sustainable.”609

Drilling moratorium forces oil rigs to head out of Gulf for new waters. A Moody’s Analytics study estimates $1.2bn - $7.4 bn in lost output and between 17,000 and up to 100,000 job losses.610

Shell, ExxonMobil, Chevron and ConocoPhillips form a $1bn oil spill response unit … .excluding BP. They will own 25% each. This is seen as a move to pressure the Obama administration to lift the moratorium.611

Google buys 114 MW of wind in a 20 years PPA. It will sell the electricity on the regional spot market and use the funds to buy RECS to offset its emissions. benefits Google claims, apart from the offsetting, are the ability to help a green power provider with funds to build more projects, and a hedge against traditional power pirce inflation.612

Insurgents bomb a Russian hydroelectric plant leaving two dead. The plant is owned by RusHydro, the world’s second largest hydroelectric power producer.There is no difference between bribery and a dirty deal like the one done for BP in Libya, writes John Gapper in the FT. “There is no evidence that the oil company directly lobbied the British government for the release of Abdel Basset al-Megrahi, the Lockerbie bomber, but it admits to backing a prisoner transfer deal with Libya in 2007. Two years later, Mr Megrahi was home and BP had its offshore drilling rights. Crude oil indeed. Had BP bribed Libyan officials with hard cash, it would have been in trouble under the US Foreign Corrupt Practices Act, but commercial realpolitik is not illegal. This makes no moral sense. ….What difference is there between a company paying a bribe and a government striking a dirty political deal on its behalf? Surely none.”613

22.7.10. Oil shock ‘very likely’ within the decade, warns Huhne. Interview with FT: “It will be a world where we will have very substantial oil price spikes, which have an enormous capacity to provide shocks to the domestic economy and to the world economy, exactly as they did in the 1970s and 80s.” … “What worries me ... is that we’re moving from a world where the UK is dependent on imported energy for only 27 per cent of our needs, to a world where it’s going to be anything from 46 per cent to 58 per cent within 10 years.” FT: “Mr Huhne promised to encourage take-up of energy efficiency measures and low-carbon technology through “a system of incentives, triggers and nudges”.”614

Gulf storm puts BP spill efforts on hold. Tropical Storm Bonnie is gathering strength and vessels and rigs will need to move out of the system’s path. Admiral Thad Allen says the bad weather could delay the “static kill” of the well by up to two weeks. BP will also have to wait out the storm before the task of drilling the final 100ft of the relief well.615

US lawmakers attack Macondo well partners. Senator John McCain on Anadarko Petroleum and a unit of Japan’s Mitsui: “I strongly recommend you set aside funds and you start paying some bills so people will know you are a responsible organisation. It would be in the best interest of the people of this country and your image.”616

Matt Simmons on Bloomberg: “We’ve now killed the Gulf of Mexico.” He restates his concern that while the leak has been stopped from coming out of the riser, five to ten miles away there is a more important leak caused by the explosion of the blow-out preventer. On whether the well pressure should be a concern: “No, it’s a total diversion - that’s the gas condensation that was trapped in the drilling riser which blew off the wellhead on April 20th.” …. “What we don’t know anything about is the open hole which is caused by the drill bit when it tossed the blow-out preventer way out of the hole…and 120,000 minimum of toxic poison has now covered the floor of the Gulf of Mexico. So what they’re talking about is the biggest environmental cover-up ever. And they knew that that well, that riser, would finally deplete. And then they could say it’s over. And unfortunately, we now have killed the Gulf of Mexico.” …. “Some 5-10 miles away is what the NOIA research vessels have now proved is a deep oil lake that is growing by the day and it’s very toxic oil and its gases are very lethal. Basically if we have a hurricane now, we would have to evacuate the Gulf Coast.” Mr Simmons on why he is shorting BP stock: “You bet I did. Because I thought BP was going to go under. I’ve been saying that for months and months and when I read that 20 of the 24 Wall Street analysts had a ‘buys,’ I said ‘ That’s ridiculous, I’m going to short them.’ I’ve never shorted a stock in my life before.”617

China battles its largest reported oil spill in recent memory. A 430 sq km slick, doubling in size this week. It is at Dalian refinery, one of the largest in the country, where two pipelines exploded as high-sulphur crude was being unloaded from an oil tanker. It is less than 1 per cent of the volume of oil spilt from the Deepwater Horizon well.618

Democrats scale back climate proposals. FT: “At a meeting with fellow Democrats on Thursday, Harry Reid, Senate majority leader, acknowledged the lack of support for a more far-reaching bill, but said efforts would continue to “lay the foundations for a safer and stronger future”. Without describing the new slimmed-down

51

Triple Crunch Log

proposal in detail, Mr Reid said it would have four aims: to hold BP “accountable”; to “create clean energy jobs”; to lessen US dependence on foreign oil; and to invest in the manufacturing of natural gas vehicles. …. If Republicans make large gains in the November elections, as is predicted by many pollsters, comprehensive climate change legislation could be shelved.619

The world's first CSP power plant using molten salt for both storage and heating opens in Sicily . The 5MW Archimede demonstration solar plant in Sicily becomes the first plant in the world to use molten salts not just to store heat but also to collect it from the sun in the first place. The plant can work 24 hours a day for several days in the absence of sun or during rainy days. Molten salts reach higher temperatures than the oil of older CSP plants permitting the use of steam turbines at the standard pressure/temperature parameters as used in most common gas-cycle fossil power plants.620

Message from Delhi: don’t cut too soon. Montek Singh, deputy chairman of the Indian government’s planning commission, in the FT: “Our anxiety about an austerity drive in industrialised countries is clear. Manmohan Singh, prime minister, warned in Toronto that while concerns about debt sustainability normally suggested a need for fiscal contraction, “circumstances are not normal”. The recovery is still fragile. Contractionary policies, if followed by many industrialised countries, could provoke a double-dip recession with “very negative effects on developing countries”. He went on to say the situation calls for careful co-ordination among the G20 countries.”621

BP acquits itself of sole blame for gulf spill after internal inquiry. FT: The company has found no evidence of gross negligence and does not expect any to come to light in the future. It will robustly defend itself against such claims.622

23.7.10. Jonathan Porritt accuses UK government of wanting to avoid scrutiny on sustainable development , in the wake of their disbanding of the Sustainable Development Commission.623

24.7.10. An army of ecologists” is descending on the “accidental laboratory” that is now the Gulf of Mexico , New Scientist reports. Their aim: to assess the impact of up to 700 million litres of oil and 7 million litres of dispersant. Many already have good data for baselines. Among the concerns, “a deadlier dead zone. …Even before the spill, this summer’s dead zone was forecast to be the fifth largest since systematic studies began there in 1985. … “The concern is that as well as being toxic to plankton and fish, oil could extend the anoxic dead zone: bacteria that feast on oil can further deplete oxygen levels, and slicks on the surface may block the uptake of oxygen from the atmosphere.”624

25.7.10. Seven more US banks collapse into federal receivership on day of Europe's banking stress tests. The number of US failures, with more than 100 so far, now expected to exceed last year's total. Seven European banks fail a financial health check today, 5 in Spain, 1 in Greece and 1 in Germany. Barclays, HSBC and the bailed-out Royal Bank of Scotland and Lloyds Banking Group comfortably pass the tests.625

Global banking regulators reach a breakthrough agreement in Basel to tighten capital requirements and impose new worldwide liquidity and leverage standards. But they soften some of their proposals and delay others to at least 2018. The Basel Committee on Banking Supervision says all but one of the 27 member countries have signed up to the new principles, which limit what banks can count as so-called tier-one capital – the only kind that can be counted on to absorb losses: a move that could could constrain lending.626

BP will fire Tony Hayward tomorrow. The Board evidently reportedly either Hayward or Svanberg would have to go first. As the New York Daily News has put it, Hayward has become “the most hated and clueless man in America,” so it must have been an easy choice. He will depart with a £1m pay-off and a £10m pension pot.Bob Dudley to be appointed CEO, and Tony Hayward will be offered job on board of TNK-BP Russia. Hayward is expected to stand down as chief executive in October, but remain a board director until November. Analysts say the expected offer of a directorship at TNK-BP would be well received in Moscow.627

Blackpool hopes to become the new Houston as the first drilling for UK shale gas starts. Lord Browne of Madingley is one of the backers of Cuadrilla Resources, which will start operations on the Bowland Shale, a geological formation that stretches from Pendle Hill to the Lancashire coast near Blackpool. Says CEO Chris Cornelius: “It could help offset imports into Europe by a certain percentage, about 5% or 10%, if we're successful.”628

UK engineers enter race to design world's biggest offshore wind turbines. The revolutionary 10MW Aerogenerator X, a new type of offshore wind turbine in development by British firm Arup, mimics a spinning sycamore leaf. It would stretch nearly 275m from blade tip to tip. The first machines could be built in 2013-14 following two years of testing. There is in stiff competition with other groups in the US and Norwat to get the economies of scale that can come from 10MW scale. 629

Every penny we give in aid to Africa must be made to count in growing local economies , argues Larry Elliot in the Guardian. “The critics of aid ….argue that too much aid is pocketed by corrupt elites. They argue that a good chunk of western financial assistance is wasted even when it doesn't find its way into numbered Swiss bank accounts. Above all, they argue that aid encourages a dependency culture. On all three counts, there is a case to answer.”… “Labour enshrined in law a commitment to raise UK aid spending to 0.7% of GDP by 2013, a pledge that would involve the budget of the Department for International Development (DfID) increasing by more than 10% a year. Cameron, in opposition, said he would stick by the 0.7% target, making international development one of only two areas of spending ringfenced against cuts. That makes Andrew Mitchell, the current development secretary, both a lucky and a marked man.”…. “A third of Africans have mobile phones; Vodafone has identified Africa as one of its three priority areas alongside Europe and India; undersea cables are being laid along Africa's coasts to drive the expansion of broadband. Aid flows alone will be insufficient to meet the enormous cost of such investment, but the hope is that smart use of development assistance could help to leverage money from the private sector.”630

26.8.10. Safety fears raised at Flamanville Reactor. A French anti-nuclear NGO is arguing that changes to the initially proposed cladding design would present “a serious safety problem.” FT: “Areva’s plant operating partner, the French energy group EDF, is preparing a safety report on Flamanville, to be filed with the A.S.N. by the end of this year, that will be key to the regulator’s decision on whether to allow the French reactor to start working. EDF hopes to start it up in October next year.”631

Nuclear energy loses its cost advantage compared to solar PV. “Solar photovoltaics have joined the ranks of lower-cost alternatives to new nuclear plants,” says John O. Blackburn, a professor of economics at Duke University. This crossover occurred at 16 cents per kilowatt hour, has occurred at 16 cents a kWh, he says. Estimates of nuclear construction costs — about $3 billion per reactor in 2002 — have ballooned to to an average of about $10 billion per reactor. NYT: “In 1985, Forbes magazine dubbed the construction of the first generation of U.S. nuclear plants “the largest managerial disaster in business history.” The first round of plants

52

Triple Crunch Log

resulted in write-offs through bankruptcies and “stranded costs” — investments in existing power plants made uncompetitive by deregulation — which essentially transferred nearly $100 billion in liabilities to electricity users, said Doug Koplow, an economist and founder of Earth Track, based in Cambridge, Massachusetts, which campaigns against subsidies it considers environmentally harmful. “Although the industry frequently points to its low operating costs as evidence of its market competitiveness, this economic structure is an artifact of large subsidies to capital, historical write-offs of capital, and ongoing subsidies to operating costs,” Mr. Koplow said.632

27.7.10. Domestic energy bills should rise by only £13 by 2020 because of carbon-cutting measures , UK government says in its first annual energy statement to parliament. Businesses face much steeper increases. The government publishes 32 measures, mostly previous commitments by the Labour government or the from the Coalition agreement. Targets remain greenhouse gas emissions reductions from fossil fuel use by 34% by 2020 and 80% by the middle of the century. Gdn: “By the end of the decade, average households bills for both gas and electricity would be £1,239 a year, just £13 higher than estimated bills without the policies, though nearly £200 a year higher than current combined bills. ….Energy prices would rise much more steeply, but most of the increases for households would be offset by improvements to insulation and grants to encourage more home generation of renewable energy such as solar and wind power, some of which can also be sold to the National Grid.”633 634

“The lights are not going to go out on my watch”, says Chris Huhne. In addition to the reports above, a third shows six "pathways" with different mixes of renewable energy such as wind and solar power, nuclear generation, and carbon capture and storage for gas and coal plants. FT: “Despite Huhne telling parliament he was confident new nuclear reactors would be built, one option shows that the targets could be met even without any new nuclear power plants to replace the current reactors when they go out of service by 2035.” The projections assumed fossil fuel prices remain level at approximately US$80 (£51.46) a barrel of oil.635

Decc releases a carbon calculator website showing the effects of different energy policies on the UK's carbon emissions.636 637

UK government bans new coal-fired power plants without CCS. Charles Hendry, energy minister, says it is “already clear” that coal-fired stations without CCS technology would not be acceptable. At the same time, the government changed the rules on burning biomass to give a boost to the emerging industry.638

US renewable energy industry in call for action, saying it has stalled in absence of federal policy. Installations of wind power so far this year have dropped by 71 per cent from 2009 levels, says the American Wind Energy Association, such that more coal and natural gas power plants than wind and other renewable energy sources have been constructed. Industry groups have sent a letter to Harry Reid, Senate majority leader, urging the inclusion in the energy bill of a National Renewable Energy Standard - requiring energy producers to use a certain percentage of renewables. “Without immediate passage, hundreds of thousands of future jobs in the clean energy sector could be lost and surrendered to other countries forever,’’ the letter says. 639 Sheila McNulty in the FT: “The Obama Administration will have to act now, if does not want its green energy agenda and stimulus funding to go down in history as empty promises. This means speeding up approvals for stimulus funding for solar, wind and so on, and working with Congress to get a national RES passed. Time is running out.”640

A federal 'BP squad' is assembled by the FBI and other agencies for a criminal investigation. They will focus on at BP, Transocean and Haliburton at minimum, examining whether their cozy relations with federal regulators contributed to the oil disaster in the Gulf of Mexico, according to law-enforcement and other sources. FT: “While it had been known that investigators are examining potential violations of environmental laws, it is now clear that they also are looking into whether company officials made false statements to regulators, obstructed justice or falsified test results for devices such as the rig's failed blowout preventer. It is unclear whether any such evidence has surfaced.” Also on the scope is possible bribery of the MMS.641

The era of global oil giants is over, writes Nick Butler, former BP exec, in the FT. “Major oil companies, with BP prominent among them, have spent 20 years trying to demonstrate their social responsibility. For the moment negative images will predominate, particularly in the United States, a country going through a spasm of paranoid hostility to big business, and foreign oil companies in particular, comparable in intensity to the campaign that broke up Standard Oil a hundred years ago.” … “Measured on a ten year basis the value of shares in BP, Shell, and Total has fallen respectively by 28, 30 and 3 per cent. Over the same period Exxon, whose acquisitions have retained the cultural unity of the company, saw its share price rise by 134 per cent. The problem lies not in the pursuit of diversity itself, but failed attempts to marry this with a global corporate model in which all roads lead back to a head office in London or The Hague. Political considerations are now encouraging a rethink of centralised structures.” …. “The result is that, from necessity, a new model is emerging with a patchwork quilt of activities in which smaller national and larger international oil companies must work together in new partnerships.” The resulting new entities will be local in nature, but with access to global skills and capital.”642

28.7.10. NOAA finds ten unimpeachable “human fingerprints” on climate change. In the first major piece of new research since the “Climategate” fiasco, NOAA in the US has found that data from ten key climate indicators all point to the same finding: that the scientific evidence that our world is warming is unmistakable. Seven indicators are rising: air temperature over land, sea-surface temperature, marine air temperature, sea level, ocean heat, humidity, and tropospheric temperature. Three indicators are declining: Arctic sea ice, glaciers and spring snow cover in the northern hemisphere.643 644

Tony Hayward,“too busy” to attend Senate hearings on Lockerbie link, infuriates Senate further. “I have a busy week,” he says. FT: “Speaking to journalists at the company's London headquarters, Hayward claimed that he had been unfairly "demonised and vilified" in the US, where Barack Obama and other politicians have been severely critical of BP's actions and taken exception to some of Hayward's public comments.” … "I believe for it to move on in the United States it needs new leadership and it is for that reason I have stood down as the CEO. I think BP's response to this tragedy has been a model of good social corporate responsibility. It has mounted an unprecedented [spill] response.” … "Life isn't fair ... sometimes you step off the pavement and get hit by a bus.”645

Unlimited liability for Gulf spills would kill development says ConocoPhilips’ CEO. FT: “Jim Mulva, ConocoPhillips’ chief executive, says that the umlimited, liability some in Congress are proposing to punish operators for further spills in the Gulf of Mexico is inappropriate. That would raise the question of how many of the smaller companies operating in the Gulf could afford to get back out there to work following the lifting of the moratorium and even whether the risk reward equation would favor going out into the waters again for the biggest of companies.”646

53

Triple Crunch Log

Gulf of Mexico's deepwater oil industry is built on the amazing nature of salt deposits and their ability to form traps for oil, while suppressing temperature so it can be found deeper. “The earth is like a refinery,” one expert says. “With more temperature and pressure, more of the heavier hydrocarbons are cooked away. But the thick salt above the reservoir allows the oil to survive." The advances in understanding this in the last 25 years mean that “there are decades of exploration left in the Gulf of Mexico.” But pressures are high in these wells.647

29.8.10. Shell chief declines to rule out legal action against BP over post-spill regulatory crackdown, which has cost Shell tens of millions of dollars. He also defends deep-water drilling and sees no need for changes to Shell operations prior to the release of the accident investigation findings. 648

Staff of The Oil Drum conduct a critical review of Matt Simmons’s claims about the Macondo spill. 1. The real leak is seven miles away: “There is no evidence that the well recently capped by BP is not the original Macondo well, or that the original well is still flowing with no casing.” 2. Oil is flowing at 120,000 barrels/day: “The flow rates Simmons postulates are far beyond any well seen to date in the OCS.” 3. The real spill has caused a lake of oil larger than Washington state: “The area of Washington state is 71,303 square miles. If the lake is 500 feet thick, this would imply 177 trillion barrels of oil in the lake, vs. 2-4 trillion barrels estimated total reserves plus production to date for the world. Also, claims of a quantity of oil this large are not consistent with Simmons' claim of 120,000 barrels/day from the "real" well bore. For example, at this flow rate for 90 days, a spill the size of WA would only be 10 microns thick (.01 mm).” 4. Methane is lethal and toxic: “All of us inhale methane every day. While methane is clearly flammable and it is a potent greenhouse gas, it is completely non-toxic. Methane, like the nitrogen that makes up 78% of the earth’s atmosphere, is a simple asphyxiant. What that means is that it could kill you by displacing oxygen, but methane itself is non-toxic (unlike carbon

647 http://www.nytimes.com/gwire/2010/07/28/28greenwire-gulf-of-mexicos-deepwater-oil-industry-is-buil-68619.html?pagewanted=all648 http://www.ft.com/cms/s/0/ef3f7e60-9ada-11df-ae58-00144feab49a.html351 http://www.ft.com/cms/s/0/c7458506-668e-11df-aeb1-00144feab49a.html352 http://www.ft.com/cms/s/0/9203a112-6827-11df-a52f-00144feab49a.html 353 http://www.treehugger.com/files/2010/05/welcome-peak-oil-deeper-you-drill-the-more-you-might-spill.php 354 http://www.ft.com/cms/s/0/87cd590e-6859-11df-a52f-00144feab49a.html 355http://blogs.ft.com/energy-source/2010/05/26/early-bp-report-talks-of-mistakes-and-large-abnormality-prior- to-accident-say-congressmen/ 356 http://www.ft.com/cms/s/0/451599ac-68ed-11df-910b-00144feab49a.html 357 http://www.guardian.co.uk/environment/2010/may/27/gulf-oil-spill-top-kill 358 http://blogs.ft.com/energy-source/2010/05/27/obamas-energy-tangle/ 359 http://news.bbc.co.uk/1/hi/world/us_and_canada/10177716.stm360 http://www.cfr.org/publication/22204/us_deepwater_drillings_future.html361 http://www.energyfiles.com/global/deepwater.html362 http://www.guardian.co.uk/environment/2010/may/26/eu-analysis-carbon-emissions-target 363 http://www.pbworld.co.uk/index.php?doc=7&aid=126364 http://www.guardian.co.uk/business/2010/may/27/edf-nuclear-huhne 365 http://www.guardian.co.uk/business/2010/may/28/bp-shares-drop 366 http://blogs.ft.com/energy-source/2010/05/28/how-the-deepwater-horizon-oil-spill-compares/ 367 http://blogs.ft.com/energy-source/2010/05/28/how-the-deepwater-horizon-oil-spill-compares/ 368 http://www.guardian.co.uk/environment/2010/may/27/gulf-oil-spill-bp-obama 369 http://www.guardian.co.uk/money/2010/may/29/ethical-investments-communities-environment370 http://www.ft.com/cms/s/0/56b59b90-6bf3-11df-86c5-00144feab49a.html 371 http://www.ft.com/cms/s/0/a60eada8-6a95-11df-b282-00144feab49a.html 372 http://www.guardian.co.uk/environment/2010/may/30/oil-spill-bp-huge-risks-operation 373 http://www.guardian.co.uk/environment/2010/may/30/oil-spill-bp-huge-risks-operation 374 http://www.guardian.co.uk/environment/2010/may/30/oil-spill-deepwater-horizon-marshall-islands 375 http://www.nytimes.com/2010/05/30/opinion/30friedman.html 376 http://www.guardian.co.uk/world/2010/may/30/oil-spills-nigeria-niger-delta-shell377 http://www.guardian.co.uk/business/2010/may/30/financial-crisis-again378 http://www.guardian.co.uk/business/2010/may/31/bp-compensation-claims-us-oil-spill 379 http://thehill.com/blogs/e2-wire/677-e2-wire/100735-bp-ceo-id-like-my-life-back 380 http://www.ft.com/cms/s/0/3eca7c78-6c41-11df-86c5-00144feab49a.html381 http://www.guardian.co.uk/environment/2010/may/30/copenhagen-climate-talks-united-nations-letter382 http://www.guardian.co.uk/politics/2010/may/31/world-resources-shortage-threat-review383 http://www.ft.com/cms/s/0/d19c97d4-6d4a-11df-bde2-00144feabdc0.html 384 http://www.ft.com/cms/s/0/d19c97d4-6d4a-11df-bde2-00144feabdc0.html 385 http://www.bloomberg.com/apps/news?pid=20601087&sid=a8R2sUuN_W7o&pos=3386 http://www.ft.com/cms/s/0/d19c97d4-6d4a-11df-bde2-00144feabdc0.html 387 http://ftalphaville.ft.com/blog/2010/06/01/248181/bp-a-takeover-target/388 http://www.guardian.co.uk/environment/2010/may/31/bp-clashes-scientists-sea-oil-pollution 389 http://www.ft.com/cms/s/0/9930dd86-6d15-11df-921a-00144feab49a.html390 http://blogs.ft.com/energy-source/2010/06/01/how-difficult-are-relief-wells-some-comparisons-with-montara/391 http://www.guardian.co.uk/environment/2010/jun/01/storm-warning-deepwater-horizon-oil-spill-bp392 “Debunking peak demand,” Steven Kopits, Petroleum Review, June 2010. no url.393 http://www.guardian.co.uk/politics/2010/jun/01/chris-huhne-black-hole-nuclear-power-budget394 http://www.chathamhouse.org.uk/publications/papers/view/-/id/891/395 http://www.guardian.co.uk/environment/2010/jun/02/bp-criminal-inquiry-gulf-of-mexico396 http://www.guardian.co.uk/business/2010/jun/03/gulf-oil-spill-senators-ask-bp-to-suspend-dividends397 http://www.guardian.co.uk/business/2010/jun/03/gulf-oil-spill-senators-ask-bp-to-suspend-dividends398 http://www.ft.com/cms/s/0/e1e0e21c-6e53-11df-ab79-00144feabdc0.html399 http://www.ft.com/cms/s/0/80484514-6e8e-11df-ad16-00144feabdc0.html400 http://blogs.ft.com/energy-source/2010/06/03/whos-less-popular-than-bp-right-now/401 http://ftalphaville.ft.com/blog/2010/06/03/250766/bp-downgraded-to-aa-from-aa-by-fitch/

54

Triple Crunch Log

monoxide, for example).” 5. Use of a small bore nuclear device is the “only option” to stop the flow of oil: “The claims made by Simmons and documented in this essay are not credible. Some - such as the idea that methane is toxic - are factual errors. Other claims, such as an open gusher that BP is covering up, defy logic. How Simmons will respond if no evidence of his claims emerges remains to be seen.”649

Pipeline leak deals blow to Canada’s oil sands industry. About 4m litres of Alberta crude has spilled into waterways in southern Michigan.650

French government tells Areva and EDF to ‘get along’, or else lose more foreign nuclear contracts. FT: “Mr Proglio (EDF Chairman) has publicly questioned Areva’s independence and insisted that EDF, the state-owned utility which operates France’s 58 nuclear reactors, was best placed to lead France’s nuclear industry.651

Three years on, the markets, bankers, and ratings agencies are masters again, Philip Stephens writes in the FT. “The markets (and the bankers) still rule. … Finance, we were assured, would be pulled from its gilded pedestal. Main Street would reassert its primacy over Wall Street. The laisser faire capitalism of the Washington Consensus had had its day. The world’s richest economies would turn their minds to nurturing real, as opposed to financial, engineering. … There has also, of course, been one really big change: hundreds of billions of dollars in toxic assets that once sat on the books of the banks have been piled on top of the deficits caused by the crash-induced recession. Families are paying the bankers’ bills through rising taxes, shabbier public services and

402 http://www.guardian.co.uk/environment/2010/jun/02/oil-spill-bp-gulf-of-mexico403 http://www.nytimes.com/2010/06/03/us/03nuke.html404 http://www.guardian.co.uk/environment/2010/jun/02/gulf-oil-deepwater-sink-bp405 http://www.guardian.co.uk/business/2010/jun/02/edf-nuclear-waste-lobbying406 http://www.ft.com/cms/s/0/d3dd7000-6e2a-11df-ab79-00144feabdc0.html407 http://www.guardian.co.uk/environment/2010/jun/03/gulf-oil-spill-bp-dividend408 http://www.guardian.co.uk/global/2010/jun/03/bp-dividend-tony-hayward409 http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/7798790/Gulf-of-Mexico-oil-spill-Barack-Obama-to-rescind-billions-of-dollars-in-Big-Oil-tax-breaks.html410 http://247wallst.com/2010/06/03/is-peak-oil-finally-here/411 http://www.businessinsider.com/everyone-missed-it-but-the-eia-just-totally-confirmed-peak-oil-2010-6412 http://blogs.ft.com/energy-source/2010/06/03/bonn-courage/413 http://www.guardian.co.uk/global/2010/jun/03/jp-morgan-financial-services-authority-regulation414 http://blogs.telegraph.co.uk/finance/edmundconway/100006007/britain-risks-default-unless-government-cuts-public-sector-pensions/415 http://www.guardian.co.uk/business/2010/jun/04/bp-shares-rise-oil-spill-cap416 http://blogs.ft.com/energy-source/2010/06/04/dont-panic/417 http://www.guardian.co.uk/environment/2010/jun/04/deepwater-horizon-leak-bp-criticism418 http://www.guardian.co.uk/business/2010/jun/04/bp-chief-executive-faces-investors-gulf-oil-spill419 http://peakgeneration.blogspot.com/2010/06/peak-oil-means-deepwater-drilling-is.html420 http://www.businessweek.com/news/2010-06-04/china-spends-34-6-billion-on-renewables-ernst-young-says.html421 http://www.guardian.co.uk/world/2010/jun/04/financial-crisis-basel-bank-curbs-delay422 http://www.nytimes.com/2010/06/06/business/global/06toxic.html?pagewanted=2&src=busln423 http://www.ft.com/cms/s/0/786776b4-708f-11df-96ab-00144feabdc0.html424 http://www.nytimes.com/2010/06/06/us/06peak.html425 Sublime Magazine, June 2010.426 http://www.ft.com/cms/s/0/b345d9d0-7196-11df-8eec-00144feabdc0.html427 http://www.ft.com/cms/s/0/33121c48-719a-11df-8eec-00144feabdc0.html428 http://www.guardian.co.uk/business/2010/jun/06/bp-legal-challenge-oil-rig-safety-fears429 http://www.guardian.co.uk/business/2010/jun/06/bp-legal-challenge-oil-rig-safety-fears430 http://www.guardian.co.uk/business/2010/jun/06/seize-bp-barack-obama-told431 http://www.ft.com/cms/s/0/27c0ff92-7192-11df-8eec-00144feabdc0.html432 http://blogs.ft.com/energy-source/2010/06/07/the-cost-of-fossil-fuel-subsidies-557bn/433 http://www.ft.com/cms/s/0/335837f4-725e-11df-9f82-00144feabdc0.html434 http://www.ft.com/cms/s/0/76f45aa4-7247-11df-9f82-00144feabdc0.html435 http://www.ft.com/cms/s/0/b4d477f4-7252-11df-9f82-00144feabdc0,dwp_uuid=5158848c-b6a7-11db-8bc2-0000779e2340.html436 http://www.ft.com/cms/s/0/13311418-6f76-11df-9f43-00144feabdc0.html437 http://blogs.ft.com/energy-source/2010/06/08/why-it-will-take-more-than-this-to-affect-fossil-fuel/438 http://www.ft.com/cms/s/0/986a577e-72fb-11df-9161-00144feabdc0.html439 http://www.ft.com/cms/s/0/d1990b3c-6fc5-11df-8fcf-00144feabdc0,dwp_uuid=3ca8735a-6fb6-11df-8fcf-00144feabdc0.html440 http://www.ft.com/cms/s/0/b7c4e616-6fc7-11df-8fcf-00144feabdc0,dwp_uuid=3ca8735a-6fb6-11df-8fcf-00144feabdc0.html441 http://www.ft.com/cms/s/0/0126d2d6-6fc5-11df-8fcf-00144feabdc0,dwp_uuid=3ca8735a-6fb6-11df-8fcf-00144feabdc0.html442 http://www.ft.com/cms/s/0/dc65a5c8-6fc2-11df-8fcf-00144feabdc0,dwp_uuid=3ca8735a-6fb6-11df-8fcf-00144feabdc0.html443 http://www.theoildrum.com/node/5230444 http://www.bloomberg.com/apps/news?pid=20601087&sid=aMfETcYI2t7Y  445 http://www.ft.com/cms/s/0/a2e795a8-7356-11df-ae73-00144feabdc0.html446 http://www.ft.com/cms/s/0/a2e795a8-7356-11df-ae73-00144feabdc0.html447 http://www.guardian.co.uk/environment/2010/jun/09/barack-obama-bp-tony-hayward448 http://www.ft.com/cms/s/0/9e38e194-73db-11df-87f5-00144feabdc0.html449 http://www.guardian.co.uk/business/2010/jun/10/bp-shares-plunge-gulf-mexico450 http://www.guardian.co.uk/business/2010/jun/10/bp-shares-plunge-gulf-mexico451 http://www.guardian.co.uk/commentisfree/cifamerica/2010/jun/10/us-bloodlust-bp-oil-spill452 http://blogs.ft.com/energy-source/2010/06/09/bp-british-parochialism-or-british-pariah-ism/453 http://www.ft.com/cms/s/0/6b195284-733c-11df-ae73-00144feabdc0.html

55

Triple Crunch Log

higher unemployment. Political resolve has given way to fear. … As they struggle to reduce huge budget deficits, western politicians almost everywhere are in thrall to global capital markets. David Cameron has made no bones about it – Britain’s prime minister says he is slashing spending on the welfare state and paring back the nation’s global role because the Bank of England has told him that the rating agencies would be satisfied with nothing less. The rating agencies – remember them? Some may recall that these very same organisations were deeply complicit in the chicanery that saw worthless debt instruments repackaged as top-notch financial securities. I am sure I heard the politicians say they would be cut down to size. It never happened. The rating agencies never repented; and now they are masters again.”652

Cameron makes free trade appeal to India on to day trade mission with 29 UK CEOs and chairmen. FT: “David Cameron, the UK prime minister, on Thursday appealed for New Delhi’s support to defeat forces of economic nationalism that threatened to close down the world trading system at a time of economic weakness.” Mr Cameron, on the final day of a two-day visit to India, tried to focus attention on the UK’s desire to gain improved market access to India’s fast growing economy….653

30.8.10. Russia's heat wave is showing signs of ending Russian global-warming doubts, Time magazine reports. “As the worst heat wave on record spawns wildfires that are destroying entire villages, Russian officials have made what for them is a startling admission: global warming is very real. At a meeting of international sporting officials in Moscow on July 30, Russian President Dmitri Medvedev announced that in 14 regions of the 454 http://www.guardian.co.uk/commentisfree/cif-green/2010/jun/09/oil-spill-credit-crunch-bp455 http://www.guardian.co.uk/business/2010/jun/09/bp-annual-statistical-review-us-gulf456 http://www.bp.com/liveassets/bp_internet/globalbp/globalbp_uk_english/reports_and_publications/statistical_energy_review_2008/STAGING/local_assets/2010_downloads/statistical_review_of_world_energy_full_report_2010.pdf457 http://www.reuters.com/article/idUSTOE65803S20100609458 http://www.ft.com/cms/s/0/88bde5ee-7494-11df-b3f1-00144feabdc0.html459 http://www.ft.com/cms/s/0/f7b6db16-74d2-11df-aed7-00144feabdc0.html460 http://www.ft.com/cms/s/0/49e6cec8-74d3-11df-aed7-00144feabdc0.html461 http://www.ft.com/cms/s/0/a63ab74a-7427-11df-87f5-00144feabdc0.html462 http://blogs.ft.com/energy-source/2010/06/10/oil-spill-probably-not-a-supply-side-changer-at-300k-bd/463 http://www.newsweek.com/2010/06/10/behind-petroleum.html464 http://blogs.telegraph.co.uk/news/jamesdelingpole/100042904/bow-down-to-peak-oil-says-bbcs-cthulu-worshipping-newsnight/465 http://www.building.co.uk/news/lend-lease-bans-bovis-from-£40bn-nuclear-sector/5000815.article466 http://www.guardian.co.uk/world/2010/jun/13/bp-oil-spill-timetable467 http://www.ft.com/cms/s/0/168b5580-771c-11df-ba79-00144feabdc0.html468 http://www.guardian.co.uk/commentisfree/2010/jun/13/bp-energy-oil-recession-economy469 http://www.guardian.co.uk/business/2010/jun/13/banking-commission-report-alistair-darling470 http://www.guardian.co.uk/business/2010/jun/13/sir-fred-goodwin-tony-hayward471 http://www.guardian.co.uk/commentisfree/2010/jun/13/will-hutton-banks-crash-refuse-reform 475 http://blogs.ft.com/energy-source/2010/06/15/the-nightmare-oil-well-and-five-questions-for-bp/476 http://www.guardian.co.uk/environment/2010/jun/15/exxon-bp-oil-gusher-congress477  http://www.ft.com/cms/s/0/52b23b50-7951-11df-92c1-00144feabdc0.html478 http://blogs.ft.com/energy-source/2010/06/17/compulsory-relief-wells/479 http://www.ft.com/cms/s/0/0203b99e-797f-11df-b063-00144feabdc0.html480 http://www.guardian.co.uk/business/2010/jun/16/ernst-and-young-lehman-inquiry481 http://www.guardian.co.uk/business/2010/jun/16/viewpoint-auditors 482 http://www.guardian.co.uk/environment/2010/jun/17/gulf-oil-spill-bp-chief-tony-hayward483 http://www.guardian.co.uk/business/2010/jun/17/tony-hayward-congressional-committee484 http://www.google.com/hostednews/afp/article/ALeqM5iIN4LLwRZNGXJac1HEex_vVY4NdA485 http://www.guardian.co.uk/business/2010/jun/18/bp-gulf-oil-leak-estimates486 http://blogs.ft.com/energy-source/2010/06/17/simmons-says/487 http://www.guardian.co.uk/environment/2010/jun/18/sheffield-forgemasters-loan-new-nuclear488 http://www.guardian.co.uk/environment/2010/jun/20/gulf-oil-spill-bp-lying489 http://www.ft.com/cms/s/0/d2c5270c-7c95-11df-8b74-00144feabdc0.html 490 http://www.ft.com/cms/s/0/94aec29e-7c99-11df-8b74-00144feabdc0.html491 http://www.guardian.co.uk/business/2010/jun/20/frontier-oil-exploration-pollution492 http://ftalphaville.ft.com/blog/2010/06/21/266581/bp-and-anadarko-turn-on-each-other/493 http://www.guardian.co.uk/environment/2010/jun/21/bp-oil-spill-deepwater-horizon-leak494 http://www.guardian.co.uk/world/2010/jun/22/belarus-gas-row-russia495 http://blogs.ft.com/energy-source/2010/06/23/administration-response-to-ruling-on-moratorium/496 http://www.guardian.co.uk/environment/2010/jun/23/judge-drilling-ban-shares-oil497 http://www.ft.com/cms/s/0/0d250e1c-7e17-11df-8478-00144feabdc0.html498 http://blogs.ft.com/energy-source/2010/06/22/the-deepwater-horizon-effect-spreads-wider/499 http://www.ft.com/cms/s/0/43cc3c94-7eec-11df-8398-00144feabdc0.html500 http://www.guardian.co.uk/environment/2010/jun/24/bp-refits-gulf-mexico-oil-cap501 http://www.ft.com/cms/s/0/d9c7e826-7fb7-11df-91b4-00144feabdc0.html502 http://www.guardian.co.uk/environment/2010/jun/24/huhne-renewable-energy-security503 http://www.ft.com/cms/s/0/6a1caee4-7f49-11df-84a3-00144feabdc0.html504 http://www.ft.com/cms/s/0/96ca4a38-7fbb-11df-91b4-00144feabdc0.html505 http://www.economist.com/node/16397110?story_id=16397110506 http://www.theaustralian.com.au/business/peak-oil-and-gas-plans-55m-ipo/story-e6frg8zx-1225884481093507 http://www.ft.com/cms/s/0/a20fb29a-8202-11df-938f-00144feabdc0.html508 http://www.nytimes.com/2010/06/28/opinion/28krugman.html?ref=paulkrugman509 http://www.guardian.co.uk/world/2010/jun/28/g20-summit-economics-global-imbalances510 http://www.guardian.co.uk/business/2010/jun/28/g20-proposals-let-bankers-off-the-hook511 http://www.guardian.co.uk/environment/2010/jun/28/bp-oil-spill-bill-100m-day 512 http://www.guardian.co.uk/environment/2010/jun/28/bp-plans-offshore-drilling-expansion513 http://www.ft.com/cms/s/0/227b1b14-82e8-11df-8b15-00144feabdc0.html

56

Triple Crunch Log

country, "practically everything is burning." … Then, as TV cameras zoomed in on the perspiration shining on his forehead, Medvedev announced, "What's happening with the planet's climate right now needs to be a wake-up call to all of us, meaning all heads of state, all heads of social organizations, in order to take a more energetic approach to countering the global changes to the climate." For Medvedev, such sentiments mark a striking about-face. … "We will not cut our development potential," he said during the summer of 2009 (an unusually mild one), just a few months before attending the Copenhagen climate summit … Two months before Copenhagen, state-owned Channel One television aired a documentary called The History of a Deception: Global Warming, which argued that the notion of man-made climate change was the result of an international media conspiracy. A month later, hackers sparked the so-called Climategate scandal by stealing e-mails from European climate researchers. The hacked e-mails, which were then used to support the arguments of global-warming skeptics, appeared to have been distributed through a server in the Siberian oil town of Tomsk, raising suspicion among some environmental activists of Russia's involvement in the leak. …. in the outskirts of Moscow, burning fields of peat, a kind of fuel made of decayed vegetation, periodically covered the city in a cloud of noxious smoke, making it painful to breathe in parts of the Russian capital.654

Safety concerns delay approval of the first U.S. nuclear reactor in decades . 14 of the 26 new reactor applications inching through U.S. Nuclear Regulatory Commission's (NRC) scrutiny are for Westinghouse’s

514 http://www.guardian.co.uk/environment/2010/jun/28/drive-switch-green-power-setback 515 http://blogs.ft.com/energy-source/2010/06/29/oil-spill-in-gulf-could-cause-dead-zone-further-hitting-sealife/516 http://www.ft.com/cms/s/0/bac553ac-83a7-11df-b6d5-00144feabdc0.html517 http://www.guardian.co.uk/business/2010/jun/29/barack-obama-energy-bill518 http://www.guardian.co.uk/business/2010/jun/29/financial-auditors-not-sceptical-fsa519 http://www.ft.com/cms/s/0/3a4d4966-83af-11df-b6d5-00144feabdc0.html520 http://www.guardian.co.uk/commentisfree/2010/jun/29/g20-slash-and-burn521 http://www.guardian.co.uk/environment/2010/jun/30/hurricane-hits-bp-oil-cleanup522 http://www.guardian.co.uk/business/2010/jun/30/consumer-anger-bp-petrol-stations523 http://www.guardian.co.uk/business/2010/jun/30/bp-share-rise-takeover-speculation524 http://www.guardian.co.uk/environment/2010/jun/30/uk-loans-brazil-offshore-drilling525 http://www.guardian.co.uk/environment/2010/jun/30/climate-change-carbon-emissions-targets526 http://www.guardian.co.uk/business/2010/jul/01/european-banks-calm-fears-funding-crisis527 http://www.guardian.co.uk/business/2010/jul/01/bp-china-oil-spill528 http://www.guardian.co.uk/environment/2010/jul/01/eigg-island-renewable-energy 529 Photon magazine, July 2010, no url.530 Photon magazine, July 2010, no url.531 Photon magazine, July 2010, no url.532 http://www.bloomberg.com/news/2010-07-01/how-to-make-an-american-job-before-it-s-too-late-andy-grove.html533 http://www.ft.com/cms/s/0/72ea44d4-861d-11df-bc22-00144feabdc0.html534 http://www.guardian.co.uk/business/2010/jul/02/bp-cooperative-group-oil-spill535 http://www.ft.com/cms/s/0/6d0daae8-8572-11df-aa2e-00144feabdc0.html536 http://www.businessweek.com/news/2010-07-02/edf-s-french-nuclear-spending-plans-face-scrutiny-update1-.html537 http://www.theoildrum.com/node/6649538 http://www.zawya.com/Story.cfm/sidZW20100704000064/Saudi%20King:%20Halt%20To%20Oil%20Exploration%20To%20Save%20Wealth539 http://www.guardian.co.uk/environment/2010/jul/04/bp-oil-spill-relief-well540 http://www.guardian.co.uk/business/2010/jul/04/pension-funds-corporate-governance-investors541 http://www.guardian.co.uk/business/2010/jul/04/obama-hands-solar-firms-2bn542 http://blogs.ft.com/energy-source/2010/07/05/saudi-arabias-real-energy-problem/543 http://www.guardian.co.uk/business/2010/jul/05/bp-asks-oil-spill-partners-for-400m-dollars 544 http://blogs.ft.com/energy-source/2010/07/05/china-and-india-the-co2-culprits-of-2009/545http://edition.cnn.com/2010/BUSINESS/07/03/india.petrol.strike/index.html? eref=edition_business&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+rss/edition_business+(RSS:+Business)&fbid=YhAd2PXftO0546 http://www.guardian.co.uk/business/2010/jul/05/government-borrowing-public-sector-cuts547 http://www.rigzone.com/news/article.asp?a_id=95542&hmpn=1548 http://blogs.ft.com/energy-source/2010/07/06/spain-wants-it-both-ways-on-energy-like-everyone-else/549 http://www.ft.com/cms/s/0/00b27dbc-891c-11df-8ecd-00144feab49a.html550 http://www.ft.com/cms/s/0/f6be6d0a-8a03-11df-bd30-00144feab49a.html551 http://www.guardian.co.uk/business/2010/jul/07/abandoned-oil-wells-gulf-mexico552 http://www.guardian.co.uk/environment/2010/jul/07/climategate-review-clears-scientists-dishonesty553 http://www.guardian.co.uk/environment/2010/jul/07/germany-renewable-energy-electricity554 http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7877724/EMU-break-up-risks-global-deflation-shock-that-would-dwarf-Lehman-collapse-warns-ING.html555 http://www.nytimes.com/2010/07/09/us/politics/09obama.html?_r=2&WT.mc_id=US-SM-E-FB-SM-LIN-OTS-070810-NYT-NA&WT.mc_ev=click556 http://www.guardian.co.uk/environment/2010/jul/10/bp-gulf-oil-spill-new-cap557 http://www.guardian.co.uk/business/2010/jul/11/peak-oil-energy-disruption558 http://blogs.ft.com/energy-source/2010/07/12/peak-oil-or-supply-crunch-or-both/559 http://www.telegraph.co.uk/finance/newsbysector/energy/7883357/Nuclear-targets-at-risk.html560 http://www.guardian.co.uk/business/2010/jul/12/standard-and-poors-george-osborne561 http://www.ft.com/cms/s/0/74cbd9c4-8dee-11df-9153-00144feab49a.html562 http://www.guardian.co.uk/commentisfree/2010/jul/12/britain-empire563 http://blogs.ft.com/energy-source/2010/07/12/terry-engelder-interview/564 http://blogs.ft.com/energy-source/2010/07/13/the-new-cap-heralds-a-test-for-bps-well-casing/565 http://www.ft.com/cms/s/0/a3a15814-8eb1-11df-8a67-00144feab49a.html566 http://www.ft.com/cms/s/0/a4ac6992-8e07-11df-b06f-00144feab49a.html567 http://blogs.ft.com/energy-source/2010/07/13/have-oil-demand-growth-rates-peaked/

57

Triple Crunch Log

AP1000 PWR. If The first is due to go online in 2016 in Georgia. But reactor is on its 18th design revision and key safety questions remain unresolved. The first involves the durability of the reactor's shield building. The second involves the separation of the concrete shield building from the steel containment vessel.655

EDF first-half net income tumbles 47% after prospects for US nuclear project dim. EDF also says building its Flamanville EPR model will cost more – the total is up to €5bn from €4bn now - and is two years behind schedule. Lessons are being applied to the EPR site at Taishan in China.656

Italy tries to halt BP deep water drilling off Libya. FT: “Plans by BP to start drilling for oil and gas off Libya within weeks have prompted growing calls for a moratorium on deepwater operations while Mediterranean states assess the environmental impact in light of the Gulf of Mexico disaster. Stefania Prestigiacomo, Italy’s environment minister, has become the first senior official within the European Union to suggest that a moratorium might be appropriate while the Mediterranean’s 21 littoral states find a “common voice”.”657

Expert points to window of opportunity for fossil fuel tax. Oxford economist Dieter Helm says voters’ resistance is being outweighed by the government’s urgent need to raise more revenue.658

2.8.10. UK 'value' falls by £94 billion in 2009, according to the Office for National Statistics (ONS). The ONS, which adds up the value of infrastructure such as buildings and roads as well as financial assets, says the worth of the UK fell by £94 billion to £6.67 trillion last year, a decline of 1.4%. It was the second successive year of falls after an unbroken sequence of growth stretching back to 1992. The fall in 2008 was 4.3%, or £303 billion. 568 http://www.guardian.co.uk/business/2010/jul/12/falkland-oil-production-exploration569 http://www.ft.com/cms/s/0/6f9b9046-8ea9-11df-8a67-00144feab49a.html570 http://blogs.ft.com/energy-source/2010/07/14/well-cap-test-delayed-what-is-the-administrations-concerns/571 http://www.ft.com/cms/s/0/e1164e92-8f07-11df-a4de-00144feab49a.html572 http://www.ft.com/cms/s/0/777b82ac-8f81-11df-8df0-00144feab49a.html573 http://blogs.ft.com/energy-source/2010/07/14/clean-energy-bearing-up/574 http://blogs.ft.com/energy-source/2010/07/14/clean-energy-bearing-up/575 http://www.evwind.es/noticias.php?id_not=6484576 http://www.guardian.co.uk/environment/2010/jul/14/un-carbon-offset-coal-plants577 http://www.guardian.co.uk/environment/2010/jul/14/jr-ewing-dallas-solar-power578 http://www.youtube.com/watch?v=N1t2JhGu12Y; http://www.youtube.com/watch?v=pYliD30yaFc ; http://www.youtube.com/watch?v=WF4oHC1GZmg 579 https://www.citigroupgeo.com/pdf/SEU31877.pdf580 http://sefi.unep.org/fileadmin/media/sefi/docs/publications/FINAL_UNEP-REN21_Press_Release.pdf581 http://sefi.unep.org/fileadmin/media/sefi/docs/publications/FINAL_UNEP-REN21_Press_Release.pdf582 http://sefi.unep.org/fileadmin/media/sefi/docs/publications/FINAL_UNEP-REN21_Press_Release.pdf583 http://sefi.unep.org/fileadmin/media/sefi/docs/publications/FINAL_UNEP-REN21_Press_Release.pdf584 http://sefi.unep.org/fileadmin/media/sefi/docs/publications/FINAL_UNEP-REN21_Press_Release.pdf585 http://sefi.unep.org/fileadmin/media/sefi/docs/publications/FINAL_UNEP-REN21_Press_Release.pdf586 http://sefi.unep.org/fileadmin/media/sefi/docs/publications/FINAL_UNEP-REN21_Press_Release.pdf587 http://sefi.unep.org/fileadmin/media/sefi/docs/publications/FINAL_UNEP-REN21_Press_Release.pdf588 http://www.guardian.co.uk/business/2010/jul/15/banking-recession589 http://www.guardian.co.uk/business/2010/jul/15/jp-morgan-chase-bankers-bonus590 http://www.ft.com/cms/s/0/4bd43894-904c-11df-ad26-00144feab49a.html591 http://blogs.ft.com/energy-source/2010/07/15/why-the-tech-revolution-isnt-a-template-for-an-energy-revolution/592 http://blogs.ft.com/energy-source/2010/07/15/wall-st-and-peak-oil/593 http://blogs.ft.com/energy-source/2010/07/15/the-future-is-gas-and-unconventionals/594 http://www.ft.com/cms/s/0/f1ccc254-9045-11df-ad26-00144feab49a.html595 http://www.ft.com/cms/s/0/d93b0498-9037-11df-ad26-00144feab49a.html596 http://www.guardian.co.uk/environment/2010/jul/16/bp-gulf-oil-spill-north-sea-ban597 http://www.guardian.co.uk/environment/2010/jul/16/us-senate-climate598 http://www.guardian.co.uk/environment/2010/jul/18/deepwater-horizon-blow-out-preventer-china599 http://www.guardian.co.uk/environment/2010/jul/18/deepwater-horizon-blow-out-preventer-china600 http://www.guardian.co.uk/business/2010/jul/18/bp-oil-spill-gulf601 http://www.telegraph.co.uk/finance/newsbysector/energy/7896510/KPMG-says-nuclear-power-wont-happen.html602 http://www.ft.com/cms/s/0/2c85916e-9370-11df-bb9a-00144feab49a.html603 http://www.ft.com/cms/s/0/dfbba87e-9364-11df-bb9a-00144feab49a.html604 http://www.ft.com/cms/s/0/937fdd2c-934b-11df-bb9a-00144feab49a.html605 http://www.ft.com/cms/s/0/270e1a6c-9334-11df-96d5-00144feab49a.html606 http://community.nasdaq.com/news/2010-07/has-peak-oil-arrived.aspx?storyid=29215607 http://community.nasdaq.com/news/2010-07/has-peak-oil-arrived.aspx?storyid=29215608 http://www.ft.com/cms/s/0/9765d2c8-94dd-11df-af3b-00144feab49a.html609 http://www.ft.com/cms/s/0/5632a0b8-94b7-11df-b90e-00144feab49a.html610 http://www.ft.com/cms/s/0/f6a439b2-945d-11df-be4d-00144feab49a.html611 http://www.ft.com/cms/s/0/73c055f0-94f6-11df-af3b-00144feab49a.html612 http://www.guardian.co.uk/environment/2010/jul/21/renewableenergy-windpower613 http://www.ft.com/cms/s/0/7e1002ce-94f3-11df-af3b-00144feab49a.html614 http://www.ft.com/cms/s/0/128dcc6a-95c6-11df-b5ad-00144feab49a.html615 http://www.ft.com/cms/s/0/4c71a218-95b1-11df-b5ad-00144feab49a.html616 http://www.ft.com/cms/s/0/4000596a-95df-11df-bbb4-00144feab49a.html617 http://blogs.ft.com/energy-source/2010/07/22/simmons-former-bush-energy-advisor-weve-now-killed-the-gulf-of-mexico/618 http://www.ft.com/cms/s/0/e548185c-95af-11df-b5ad-00144feab49a.html619 http://www.ft.com/cms/s/0/9a56f5ca-95dc-11df-bbb4-00144feab49a.html620 http://www.guardian.co.uk/environment/2010/jul/22/first-molten-salt-solar-power/print621 http://www.ft.com/cms/s/0/f01cda18-95c5-11df-b5ad-00144feab49a.html622 http://www.guardian.co.uk/environment/2010/jul/25/bp-oil-spill-sole-blame623 http://www.guardian.co.uk/environment/cif-green/2010/jul/23/sustainable-development-commission-porritt

58

Triple Crunch Log

Housing remains the UK's most valuable asset - up £126 billion or 3.2% to £4.05 trillion over the year and accounting for 61% of the country's net worth.659

3.8.10. Global warming set to exceed 1.5°C, the Hadley Centre and other UK climate policy institutions find in a new report. The report suggests that efforts to hold to the 1.5°C target are likely to be futile and that, as many scientists and politicians have long argued, efforts should be focused on the 2 degree target. “Even if global emissions fall from 47bn tonnes of carbon-dioxide-equivalent in 2010 to 40bn tonnes in 2020, and are then reduced to zero immediately afterwards, we estimate that there would be a maximum probability of less than 50 per cent of avoiding global warming of more than 1.5°C above the pre-industrial level.” But there is a big caveat: “more research is needed into the likelihood of triggering feedbacks or irreversible impacts, such as large rises in sea level, during temporary overshooting of a 1.5°C goal.”660

China overtakes US as world's biggest energy consumer. IEA figures show China's power consumption more than doubled in the past decade to reach the equivalent of 2.26bn tonnes of oil in 2009, creeping past the US total of 2.17bn tonnes. This was because China's GDP rose by 8.7%, putting it on course to soon overtake Japan as the world's second biggest economy, and its emissions – already the world’s highest - rose 9%. Guardian: “The government is trying to reduce the impact of this and similar expansions by promoting renewable energy such as wind, solar and geothermal power. Last week, the state media said China would spend about 5 trillion yuan on clean energy in the next decade and reduce its dependency on coal from 70% to 63% by 2015. … China's dependency on imported oil reached 50% for the first time last year and is forecast to rise to 75% by 2030. In recent years, it has also become a major importer of coal from Australia and its nuclear power plans have helped to push the price of uranium to unprecedented highs.”661

Fossil fuel subsidies are 10 times those of renewables, Bloomberg figures show . A Bloomberg New Energy Finance report shows government subsidisies to renewable energy and biofuel industries in 2009 of between $43bn (£27bn) and $46bn, including support provided through feed-in tariffs, renewable energy credits, tax credits, cash grants and other direct subsidies. In June, IEA figures showed that $557bn was spent by governments during 2008 to subsidise the fossil fuel industry.662

UK's largest coal-fired power plant could switch to biomass within 10 years. But 4 GW Drax will only go ahead if the government agrees to grant renewable subsidies to such converted coal plants. “The opportunity to turn it into a renewable power company is an exciting one and makes sense for the UK's carbon targets and for our shareholders,” says the finance director. Guardian “Drax hopes to convert the first unit – capable of generating 660MW of electricity – next year. It is thought that no coal plant of this size has been converted anywhere in the world. … Drax has biomass supply contracts in place but refuses to divulge where the material will come from, citing commercial confidentiality. Material such as wood chip pellets will be imported from North America and Africa, while UK-sourced biomass like tree stumps and corn stubble will also be used. Drax insists that all of it will be sustainably sourced.”663

Tim Harford confesses in the FT where he went wrong on the credit crunch: not paying attention . He fears his errors are “fairly representative of the economics profession.” “The near-collapse of the banking system demonstrated that governments are indispensable – but indispensable klutzes nonetheless. The various interventions were botched” but “I am still profoundly grateful that governments did something rather than nothing.” “I thought that the details did not much matter. Derivatives sounded like a sensible idea in principle and that was all I needed to know. I said very few silly things about banks only because I said very few things about banks, full stop. I wasn’t paying enough attention. This is a failing that comes naturally to economists. … I didn’t know anything about banking when the credit crunch began, at least the people running the banks didn’t know anything about banking either. The joke always gets a laugh. I wonder if it is really that funny.”664

BP oil spill confirmed as ‘world’s worst’ as US government scientists estimate 4.9m barrels escaped in all. 3.3m barrels in the Ixtoc 1 spill of 1979, which had previously been estimated to be the world’s biggest leak. BP managed to capture about 800,000 barrels of the estimated 4.9m in its containment efforts.665

4.8.10. BP oil spill mostly cleaned up, says US government, as static kills looks like working. 75% of the oil has been captured, burned off, evaporated or broken down. FT: “BP said it had reached a significant milestone overnight when mud forced down the Gulf of Mexico well – the static kill operation – held back the flow of crude.”666

5.8.10. Scientists say it is 'just not true' that the vast majority of oil from the BP spill has gone. For example, John Kessler, of Texas A&M University, who led a National Science Foundation on-site study of the spill : “Recent reports seem to say that about 75% of the oil is taken care of and that is just not true. The fact is that 50% to 624 “Accidental laboratory,” New Scientist, 24 July 2010. no url.625 http://www.guardian.co.uk/business/2010/jul/25/seven-us-banks-collapse626 http://www.ft.com/cms/s/0/6d4e261c-98e7-11df-9418-00144feab49a.html627 http://www.ft.com/cms/s/0/ac25bc7c-98d0-11df-9418-00144feab49a.html628 http://www.guardian.co.uk/business/2010/jul/25/shale-gas-drilling-blackpool629 http://www.guardian.co.uk/environment/2010/jul/26/offshore-turbine-britain630 http://www.guardian.co.uk/business/2010/jul/26/aid-africa-international-development631 http://www.nytimes.com/2010/07/27/business/global/27iht-renepr.html?_r=2&src=busln&pagewanted=all632 http://www.nytimes.com/2010/07/27/business/global/27iht-renuke.html?_r=3&src=busln&pagewanted=all633 http://www.guardian.co.uk/environment/blog/2010/jul/27/energy-energy634http://www.decc.gov.uk/publications/basket.aspx?filetype=4&filepath=what+we+do/uk+energy+supply/237- annual-energy-statement-2010.pdf635 http://www.guardian.co.uk/environment/2010/jul/27/huhne-wind-nuclear-energy636 http://2050-calculator-tool.decc.gov.uk/637 http://www.guardian.co.uk/environment/blog/2010/jul/27/decc-carbon-calculator638 http://www.ft.com/cms/s/0/6f775570-99c4-11df-a0a5-00144feab49a.html639 http://www.ft.com/cms/s/0/24a95480-99b5-11df-a852-00144feab49a.html640 http://blogs.ft.com/energy-source/2010/07/28/us-renewable-energy-no-longer-a-priority/641 http://www.washingtonpost.com/wp-dyn/content/article/2010/07/27/AR2010072706052.html642 http://www.ft.com/cms/s/0/197255c8-99ae-11df-a852-00144feab49a.html643 http://blogs.ft.com/energy-source/2010/07/28/noaa-finds-human-fingerprints-on-climate/644 http://www.ncdc.noaa.gov/bams-state-of-the-climate.645 http://www.guardian.co.uk/business/2010/jul/27/tony-hayward-bp-social-corporate-responsibility646 http://blogs.ft.com/energy-source/2010/07/28/unlimited-liability-for-gulf-spills-would-kill-development/

59

Triple Crunch Log

75% of the material that came out of the well is still in the water. It's just in a dissolved or dispersed form.” Rick Steiner, a former University of Alaska marine biologist: “It seems that there was a rush to declare this done, and there were obvious political objectives there. Even if there is not a drop of oil out there, and it had truly magically vanished, it would still be an environmental disaster caused by the toxic shock of the release of 5m barrels of oil.”667

Cement finally seals the Macondo oil well after oil is forced back down into reservoir by drilling mud. Thad Allen says the well cannot be considered permanently killed until a relief well was completed later this month when the relief well will pump cement into the bottom of the well to ensure it is sealed at both ends.668

More than 4 million caught in Pakistan flooding: Sindh braces as water envelops southern Punjab. In Punjab, Pakistan's bread basket, over 1m acres of crops have been destroyed.669

Gas industry should heed NY moves against shale boom technology, Sheila McNulty argues on FT.com. “This week, the New York state Senate voted by a wide margin - 48 to 9 - in favour of a temporary suspension through May 15, 2011, on new drilling permits for the fracturing of shale rock deep under the ground … The New York Senate effort must be approved by the entire State Assembly to become law.  The body is not expected to consider the matter until September. If it is not pushed through quickly, a new governor will be elected in November, and it is unclear if he or she will be more in favour of developing the resources or protecting the environment. There are a lot of uncertainties there. But it is certainly an issue the industry must keep its eye on. … If New York does pass a bill against hydraulic fracturing, it might get others to rethink the process.”670

6.8.10. Smoke from Russian fires blankets Moscow. Visibility is down to 50 metres in some areas, with flights cancelled and people advised to stay at home.671

8.8.10. Russian troops dig a five-mile canal around Sarov nuclear base as wildfires grow. Emergency action is reported to have 'stabilised' the threatening situation at Sarov, the closed town where first Soviet nuclear bomb was built, and still the main nuclear weapons site. All explosive and radioactive material are removed from the nuclear site as a precautionary measure.672

Russian farmers on brink of bankruptcy as unprecedented heatwave and drought scorch grain crops. The wildfires add to their fears. Ft “Russia banned grain exports last week in a move to ease panic on domestic markets caused by the failing harvest.”673

UN says up to 6m affected by Pakistan floods as rising Indus waters spread south. Anger is rising at the government for the low level of assistance.674

Senior insurers say insurance can help accelerate the adoption of green energy by assessing, quantifying and spreading risk. Blooberg: “They are backstopping warranties on solar panels, helping start-up companies with short track records offer multidecade guarantees on their products and win over skeptical customers and project financiers. … They are advising companies on how best to incorporate renewable energy systems into their factory operations and offering property insurance that will pay not just to rebuild a structure in the event of a loss like fire but reconstruct it in a more environmentally friendly and energy-efficient way. …. Nikolaus von Bomhard, chief executive of Munich Re, says climate change should not just be an opportunity for insurance companies to sell more policies for loss prevention. Insurance, he argues, can play an important “pace-making” function, helping accelerate the adoption of green energy by assessing, quantifying and spreading risk.” 675

Three years after the financial crisis, financial reforms have failed to address fundamental problems. The credit crunch began on 9 August 2007¸the history books record, and led to much talk of change. But now? Guardian: “Many are beginning to question whether anything has really changed at all; others maintain that things have simply got worse, that the old hegemony has been reinforced rather than loosened, widening the disparity between the wealthy and the rest.” Sir John Gieve, former deputy governor of the Bank of England. "But in two big respects, I don't think it did change the world. First, the speed of globalisation, the integration of the global economy, including finance, is continuing, and second, it is continuing around broadly a free-market model. There have been far fewer repercussions than there were after the 1930s,. Then there was a real contest in the world about what was the right model for a modern society, and the crash convinced many people that capitalism and free markets were not the right way forward, but there has been no echo of that this time. Maybe India and China have slowed down on deregulating their financial industries, but broadly speaking, the direction the world had been moving in is continuing. It reflects an end of ideology. Capitalism is still the only game in town.” Guardian: “John Varley, chief executive of Barclays, underlined that point this week. From his point of view, banks are considerably less risky and more liquid. In the year of the

649 http://www.theoildrum.com/node/6789650 http://www.ft.com/cms/s/0/f0fb3c4c-9b2c-11df-baaf-00144feab49a.html651 http://www.ft.com/cms/s/0/15a18100-9a88-11df-87fd-00144feab49a.html652 http://www.ft.com/cms/s/0/c0074548-9b47-11df-baaf-00144feab49a.html653 http://www.ft.com/cms/s/0/0728b26e-9af7-11df-ae58-00144feab49a.html654 http://www.time.com/time/world/article/0,8599,2008081,00.html655 http://www.scientificamerican.com/article.cfm?id=slow-reactor-safety http://www.scientificamerican.com/ article.cfm?id=slow-reactor-safety656 http://www.bloomberg.com/news/2010-07-30/edf-reports-47-drop-in-first-half-profit-amid-french-u-s-nuclear-delays.html657 http://www.ft.com/cms/s/0/b8b3d062-9d87-11df-a37c-00144feab49a.html658 http://www.ft.com/cms/s/0/5f30d454-9e54-11df-a5a4-00144feab49a.html659 http://www.independent.co.uk/news/uk/home-news/uk-value-falls-by-pound94-billion-2041594.html660 http://blogs.ft.com/energy-source/2010/08/03/global-warming-to-exceed-15°c-finds-report/661 http://www.guardian.co.uk/environment/2010/aug/03/china-overtakes-us-energy-consumer662 http://www.guardian.co.uk/environment/2010/aug/03/fossil-fuel-subsidies-renewables663 http://www.guardian.co.uk/business/2010/aug/03/drax-coal-burning-carbon-emissions-biomass664 http://www.ft.com/cms/s/0/add48752-9f32-11df-8732-00144feabdc0.html665 http://www.ft.com/cms/s/0/3e40d4ac-9e5d-11df-a5a4-00144feab49a.html666 http://www.guardian.co.uk/environment/2010/aug/04/bp-static-kill-successful667 http://www.guardian.co.uk/environment/2010/aug/05/oil-spill-white-house-accused-spin668 http://www.ft.com/cms/s/0/d0bb7b30-a0af-11df-badd-00144feabdc0.html669 http://www.guardian.co.uk/world/2010/aug/05/pakistan-flood-spreads-punjab-sindh

60

Triple Crunch Log

credit crunch, 2007, the bank's crucial tier one ratio – a measure of its financial health – was 4.7%. Today it is 10%, showing that the bank is holding a larger capital cushion to support its business. In the same period, the bank's leverage has fallen from 33% to 20% of that tier one capital, and the amount of liquid assets it holds – such as government bonds – has jumped from £20bn in the year of the credit crunch to £160bn now.”676

9.8.10. THIRD ANNIVERSARY OF THE START OF THE CREDIT CRUNCHHigh cost of borrowing is a deadly legacy of the credit crunch for the young. The cost of borrowing for households has soared despite interest rates falling to a record low and the banks returning to bumper profitability. The most common mortgage taken out by its customers took last month had a starting interest rate of 6.49%, almost six percentage points above the Bank of England's historic low rate of 0.5. Rates for personal loans and credit cards are usury personified. Guardian: “The decade of easy money came to an abrupt halt in August 2007 but what has emerged since is a divided Britain in which young adults are paying the price of the credit crunch while their parents have landed a get-out-of-jail-free card. … Exhortation by the Chancellor to make the banks lend more is also likely to fall on deaf ears. By some estimates the UK banks have to find an astonishing £800bn over the next few years. They owe around £180bn under the emergency Special Liquidity Scheme, introduced in 2008 and designed to run until 2012. There is a further £200bn in another emergency vehicle, the Credit Guarantee Scheme, designed to run until 2014, and as much as £400bn in other securities that will need to be repaid or refinanced. It's not an environment in which retail credit will be eased or extended. …. The slow-burn victims of the credit crunch have been savers, particularly the elderly who rely on deposit accounts to provide an income. Before the credit crunch, savers could find rates as high as 7%, but they went the same way as Icesave. Today, typical rates are closer to 2.5%-3%. … The reality is that many employees will simply not be able to afford to retire. Working into our 70s may be the true legacy of the credit crunch.”677

NOAA’s sanguine assessment of the Macondo spill is questioned by more academics. Thomas Shirley, professor of life sciences at Texas A&M University: “We don’t know where most of the remaining oil is. Some of it will be buried in sediments, some of the denser oil will have combined with organic compounds. Perhaps the very largest proportion of the oil consists of micro-molecules, less than 100 micrometers across.” At that size, the oil could remain in suspension in the sea “for a very long time”, harming fish stocks. Christoph Gertler, of Bangor University: the “dispersed” fraction referred to by NOAA consisted in large part of “compounds that can be easily taken up in the food chain and any living tissue. “When higher organisms are confronted with such unknown chemicals, they try to oxidise them, creating very aggressive, carcinogenic and mutagenic compounds.678

The majority of people in the US believe oil companies should be more regulated in the wake of the Macondo spill, according to a Harris poll carried out for the Financial Times. US respondents to the poll were also the most damning in their opinion of BP, with almost two-thirds saying they thought less of the company.679

The UK energy secretary lifts a ban on councils selling of surplus electricity to the national grid as UK aims to meet EU energy targets. This could raise £100m a year for cash-strapped local authorities in England and Wales. The Local Government Association says council-owned wind turbines and solar panels on town halls, council homes, leisure centres and other municipal buildings could be money spinners.680

Low-carbon investment at risk, CBI warns. John Cridland, deputy director-general of the CBI: “Uncertainty on plans for electricity market reform, slow progress on clean coal and nuclear power, as well as the cost of renewable energy are adding to the mood of caution among investors. We need investment from companies, not delays from government.” FT: The government has said it will abolish the Infrastructure Planning Commission, replacing it with a Major Infrastructure Unit that would ensure ministers would have the final decisions on key infrastructure. But the details of how this will work are still unclear. For instance, it is not known who would have the final say on a large energy project such as a nuclear power station or wind farm.681

China tells companies to close outdated factories in energy drive. FT: “China plans to close outdated factories owned by more than 2,000 companies in heavy industries in the clearest sign yet of Beijing’s determination to meet its low energy targets even at the expense of economic growth. …. Beijing said it would target 18 industries, including steel and cement, and took the unusual step of listing each company affected and the amount of production it must close by the end of September. … China’s previous efforts to reduce energy consumption were thrown off course by the $586bn stimulus package launched in 2008. … At the end of 2009, China had reduced energy intensity by 15.6 per cent from 2005 levels, but energy intensity increased in the first quarter of this year by 3.2 per cent.”682

Moscow death rate doubles as smoke from wildfires shrouds capital: 700 Muscovites are dying each day. The weak and elderly have struggled to escape the smog and debilitating heat.683

Floods and mudslides on 3 continents, as drought hits Africa. The Met Office says high pressure over Russia has forced the jet stream much further south than usual this year, a pattern that has remained almost stationary over recent weeks, meaning low pressure has been sitting over Pakistan longer than normal, intensifying the monsoon rains. Helen Chivers, a spokeswoman with the Met Office: “The extremes of rainfall are getting heavier and are entirely consistent with climate change predictions.”684

Met Office: human enhancement of the greenhouse effect is becoming clear in current extremes. Peter Stott, head of climate monitoring and attribution at the Met Office: “So are we seeing the effects of climate change in these extreme weather events? Analysing the observational data shows clearly that there has been a rise in the number of extremely warm temperatures recorded worldwide and that there have been increases in the number of heavy rainfall events in many regions over land. Evidence, including in India and China, that periods of heavy rain are getting heavier, is entirely consistent with our understanding of the physics of the atmosphere in which warmer air holds more moisture. Our climate change predictions support the emerging trend in observations and show a clear intensification of extreme rainfall events in a warmer world.”685

670 http://blogs.ft.com/energy-source/2010/08/05/industry-should-heed-ny-moves-against-shale-boom-technology/671 http://www.guardian.co.uk/world/2010/aug/06/russia-fires-moscow672 http://www.guardian.co.uk/world/2010/aug/08/russia-nuclear-base-wildfires673 http://www.ft.com/cms/s/0/716ff576-a315-11df-8cf4-00144feabdc0.html674 http://www.ft.com/cms/s/0/93a5042c-a308-11df-8cf4-00144feabdc0.html675 http://www.nytimes.com/2010/08/09/business/energy-environment/09iht-green09.html?_r=3&partner=rss&emc=rss676 http://www.guardian.co.uk/business/2010/aug/08/credit-crunch-analysis677 http://www.guardian.co.uk/money/2010/aug/09/high-cost-borrowing-legacy-credit-crunch

61

Triple Crunch Log

Be wary of 'solar for free' offers, consumer groups tell UK householders. Those tempted by a rash of new "solar for free" offers could double their financial savings by paying for the panels themselves, Consumer Focus and Which warn. Guardian: “Under the "rent your roof" model, the companies earn the tariff worth approximately £835 a year and the homeowner benefits from an annual saving of around £110 off their electricity bill. Homesun, ISIS Solar and A Shade Greener are three of the firms planning to do a deal with more than 120,000 homeowners by 2015, with Homesun promising to fit 2,000 homes in the next 12 months. But homeowners would almost certainly be better off paying for the solar panels themselves, even taking into account interest on a loan for the upfront cost of around £10,000 for a typical home. … Under the "free solar" model, a homeowner would save in the region of £2,750 on energy bills over 25 years, the length of the tariff offer. By paying for their own panels with a loan at 7.7% interest repaid over 10 years and earning income from the feed-in tariff, they could save around £6,506 over the same period. … Since the tariff started on 1 April, 12.12 megawatt peak (MWp) of solar panels have been installed at 4,822 homes, up from 3.8MWp in 2007, 4.42 MWp in 2008 and 5 MWp in 2009. Solar panel makers are responding to the demand, with Sharp announcing it will double annual production at its UK plant to 500 MW in December. The Wrexham plant, which currently employs 750 people. … One UK solar energy company, SolarCentury, has seen its direct employees and network of installers rise from 200 staff in January to 350 now and predicts it will employ more than 500 by 2011. … The government predicts the cost will be around £8 on every energy bill by 2020.”686

Toxins levels are rising rapidly in tar sands tailings ponds: the volume of arsenic and lead has 26 per cent in last four years, and mercury and heavy metals are rising fast, Environment Canada says. FT: “The companies also released huge amounts of pollutants into the air last year, including 70,658 tonnes of volatile organic compounds, which can damage the function of human organs and nervous systems, and 111,661 tonnes of sulphur dioxide, a key contributor to acid rain. …. The numbers “are just ridiculously huge,” said Justin Duncan, a staff lawyer with Ecojustice who helped prosecute the 2007 court case that forced Environment Canada to release the data.687

Matthew Simmons, peak oil guru, dies in an accidental drowning at his home. On June 16, Simmons announced his retirement as chairman emeritus from Simmons & Co. so he could focus on the Ocean Energy Institute.688 NYT: “With the fate of the global economy hinging on a reliable energy supply, it is dangerous to blindly trust big oil producers’ own estimates of their reserves. Any transition away from oil, after all, would need to be planned for decades in advance. Mr. Simmons’ quest for more information should not die with him.”689

Skype I.P.O. could help Silicon Valley, where the average VC fund has made no money since 1998. NYT: “Skype’s initial public offering may add a dose of healthy hype to Silicon Valley. The Internet telephone group’s $100 million float should be red hot. … If its estimated 2011 revenue of $1 billion is valued on the same multiple as Google, the company might be worth more than $5 billion. That would be a huge gain for the  private equity backers at Silver Lake who led Skype’s carve-out from eBay, clarified copyright issues with its founders and tweaked its software. They valued it at $2.75 billion at purchase in 2009. Valuing Skype in line with Google may sound optimistic. But there’s the issue of scarcity — the $100 million sale of stock is minuscule. This could set off a scramble for the available shares, sending them rocketing. The Valley needs a bit of this sort of ebullience. Venture capitalists are sitting on a huge backlog of companies that could go public, which is one reason the average fund established since 1998 hasn’t made any profits for investors.” 690

10.8.10. Fed downgrades recovery outlook, and shifts from tightening to easing. FT: “The US Federal Reserve on Tuesday took a first step toward extending its crisis-era monetary policy regime, as it downgraded its view of the economic outlook amid rising fears of a double-dip recession. Meeting in Washington, Fed monetary policymakers agreed to begin reinvesting more than $150bn (£95bn) in annual proceeds from maturing mortgage-backed and agency securities into Treasury debt, halting plans to allow a natural shrinkage of the $2,300bn balance sheet the US central bank built up during the recession. The move signals a significant shift in thinking at the Fed, which only a few months ago was tilting towards tightening monetary policy to fend off inflation as the economic recovery gathered strength.”691

How Britain's homes could make deep emissions cuts cost-free. British homeowners can green their properties using government loans – and visit one of 50 functioning 'superhomes' before committing. Guardian: “The government's “Green Deal” hopes to accelerate this push, offering householders loans of up to £10,000 for energy efficiency improvements and installation of domestic renewable energy sources. “pay as you save” loans, designed to overcome the upfront financial obstacles such as the average £12,000 price of solar panels, should start in late 2012. Under the scheme, the cost of the loan repayments – which are tied to the property, not the owner – should be outweighed by the savings on householders' energy bills.”692

Greenland ice sheet faces “tipping point in 10 years,” unleashing 23 ft sea-level rise over the century to follow, scientists tell Congress. Guardian: “The entire ice mass of Greenland will disappear from the world map if temperatures rise by as little as 2C, with severe consequences for the rest of the world, a panel of scientists told Congress today. Greenland shed its largest chunk of ice in nearly half a century last week (100 sq miles), and faces an even grimmer future, according to Richard Alley, a geosciences professor at Pennsylvania State University. “Sometime in the next decade we may pass that tipping point which would put us warmer than temperatures that Greenland can survive," Alley told a briefing in Congress, adding that a rise in the range of 2C to 7C would mean the obliteration of Greenland's ice sheet. The fall-out would be felt thousands of miles away

678 http://www.ft.com/cms/s/0/b4154478-a3ea-11df-9e3a-00144feabdc0.html679 http://www.ft.com/cms/s/0/17d6ee7e-a334-11df-8cf4-00144feabdc0.html680 http://www.guardian.co.uk/environment/2010/aug/09/huhne-local-council-renewable-power681 http://www.ft.com/cms/s/0/405108c4-a31d-11df-8cf4-00144feabdc0.html682 http://www.ft.com/cms/s/0/99982b84-a3e4-11df-9e3a-00144feabdc0.html683 http://www.guardian.co.uk/world/2010/aug/09/moscow-death-rate-russia-wildfires684 http://www.guardian.co.uk/world/2010/aug/09/floods-mudslides-drought-extreme-weather685 http://www.guardian.co.uk/environment/2010/aug/09/climate-change-flooding686 http://www.guardian.co.uk/environment/2010/aug/09/solar-photovoltaic-panels-homes687 http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/oil-sands-toxins-growing-rapidly/article1667306/688 http://www.bloomberg.com/news/2010-08-09/matthew-simmons-investment-banker-peak-oil-theory-advocate-dies-at-67.html689 http://www.nytimes.com/2010/08/10/business/10views.html?_r=1&src=busln

62

Triple Crunch Log

from the Arctic, unleashing a global sea level rise of 23ft (7 metres), Alley warned. Low-lying cities such as New Orleans would vanish.”693

Russian fires raise fears of radioactive smoke drifting towards Moscow. There is growing alarm in Moscow that the heatwave and choking fumes could augmented now by plumes of radioactive smoke from regions coated with fallout from the Chernobyl nuclear disaster 24 years ago. NYT: “Russia has a history of whitewashing potentially embarrassing national disasters, a lingering legacy of the Soviet era. It took days for the Soviet government to inform its people of the Chernobyl explosion, leaving thousands unknowingly exposed to deadly radiation.”694

BP spill suits to be heard in New Orleans, the geographical and psychological heart of the disaster. A judicial panel orders scores of damages lawsuits launched against them to be heard in New Orleans, not Texas. FT: “The judicial panel ordered initial proceedings in the Gulf of Mexico cases to be heard by Judge Carl Barbier, who has come under pressure from some quarters to recuse himself because he once held bonds issued by Transocean, the owner of the Deepwater Horizon platform where an explosion first started the spill, and Halliburton, a contractor on the rig.”695

BarCap to slash several hundred jobs in cost-cuts following a sharp fall in market activity in the second quarter. FT: “It is also likely to raise questions about BarCap’s aggressive expansion in recent years under the leadership of Bob Diamond. The investment bank generated more than 80 per cent of Barclays’ pre-tax profits in the first half of the year, in spite of a slowdown in activity amid volatile markets and fears of a sovereign debt crisis in Europe. … BarCap has added almost 4,000 staff since last June – bringing its total headcount to 25,500 – in its drive to join the ranks of the world’s leading investment banks. That growth, however, has come at a price, with first-half salary and bonus costs across the Barclays group running at nearly £5bn, £1bn higher than the same period in 2009. Most of that growth is attributable to BarCap.”696

India to list its state-owned coal mining company by October. FT: “Indian companies have sold $17.5bn of shares in 93 deals this year, the highest value since 2007 when they offered $22.8bn of shares in IPOs, according to Dealogic, the data company. This year’s total makes India the second highest issuer of shares among emerging economies after China, whose companies have issued stock worth $85.5bn. The Indian government, which wants to divest stakes in state-owned companies to raise money to counter its rising fiscal deficit, has led the charge. …. Coal India claims to be the largest coal producer in the world, accounting for 85 per cent of Indian output. India has the world’s fourth largest coal reserves.”697

11.8.10. World equities slide as markets shun risk and investors seek safety of government bonds. The deteriorating outlook for economic growth, led by the US, is fanning an aversion for holding risky assets. Bond yields in Germany and the US touch record lows. Youth unemployment hits record high, a report by the International Labour Organisation shows. Young people worldwide continue to be hardest hit by recession. Of around 620 million economically active 15 to 24-year-olds, 81 million were unemployed at the end of 2009, the highest number since records began in 1991, the UN agency says. That put the global youth unemployment rate at 13%, up from 11.9% just before the global downturn in 2007.698

Tropical storm forces BP to halt relief well drilling. The bottom kill (pumping of cement to permanently seal the hole top and bottom) can only be started after the storm passes, in a few days time.699

BP revenues to secure $20bn fund for damages with US production revenues, which account for about a quarter of its annual output, as collateral. FT: “The deal provides the British oil group with some certainty by giving the US government an incentive to allow it to continue existing operations. … The company’s largest single-producing region in the US is the Gulf of Mexico, where it operates 89 producing wells and has a share in 60 others. No oil has leaked into the gulf since the well was capped on July 15, although BP is still trying to seal it permanently – the spotlight has fallen on compensation.” Public Citizen writes to the President: “The proposal would inhibit the government’s ongoing criminal probes of the company. The government would be reluctant to mete out harsh sanctions to BP – such as banning the company from federal leases in the gulf – if the victims’ fund relies on BP revenue from the gulf.”700

BP share price remains becalmed after closure of the Macondo disaster. FT Lex: “The group has announced a $32bn charge against the cost of the incident, a new chief executive from October 1, and plans to dispose of up to $23bn of assets on top of last month’s $7bn sale to Apache. The news on  the scale of the damagee has been good, and the tide of reputation-sapping developments seems to have turned. BP can begin to reinvent itself. So why is its share price becalmed? … The price fell 54 per cent between April 20 and the trading low on June 25. Since then the stock has only regained about one-third of that. The rise since July 27, when BP announced the charge as well as Tony Hayward’s replacement by Bob Dudley, has been a paltry 4 per cent.”Spill claims will test limits of BP’s liability, law experts claim. David Logan, professor at the Roger Williams University school of law: “It’s certainly going to put one person at the centre of a series of decisions that to some extent might shape the future of the oil and gas industry in the domestic waters of the US.” FT: “Mr Barbier’s appointment appears on the surface to be bad news for BP, which had tried to get the judge to recuse himself from the case because of his former holdings of bonds issued by Transocean, the Deepwater Horizon’s owner, and Halliburton, a contractor on the rig. Mr Barbier sold the holdings and declined to stand down on the grounds that the bonds did not represent an ownership interest, a decision backed by the Court of Appeals.”701

Mexico’s deep-water drilling: hopefully not in BP’s footsteps. In April 2011, Mexico plans to drill a well 2,600 metres deep in its part of the gulf: a well more than twice as deep as Pemex has ever drilled before, showing how much pressure the company is under to develop deep-water reserves. Cantarell once produced more than 2m barrels a day of crude; now it yeilds less than 600,000. FT: “And, other than deep water, no major

690 http://www.nytimes.com/2010/08/10/business/10views.html?_r=1&src=busln691 http://www.ft.com/cms/s/0/0567152a-a49c-11df-8c9f-00144feabdc0.html692 http://www.guardian.co.uk/environment/2010/aug/10/homes-emissions-cuts693 http://www.guardian.co.uk/environment/2010/aug/10/greenland-ice-sheet-tipping-point694 http://www.nytimes.com/2010/08/11/world/europe/11russia.html?_r=3&ref=global-home695 http://www.ft.com/cms/s/0/23391c08-a4b8-11df-8c9f-00144feabdc0.html696 http://www.ft.com/cms/s/0/05b4ac82-a4be-11df-8c9f-00144feabdc0.html697 http://www.ft.com/cms/s/0/3be49650-a4af-11df-8c9f-00144feabdc0.html698 http://www.guardian.co.uk/business/2010/aug/11/unemployment-and-employment-statistics-recession699 http://www.guardian.co.uk/environment/2010/aug/11/bp-halts-drilling-as-storm-looms

63

Triple Crunch Log

possibilities are, shall we say, on the horizon. Development of the onshore Chicontepec basin, once hyped by Pemex, has so far produced dismal results.” A Mexican government official expresses doubt that if BP can hit trouble in Macondo, what price Pemex, drilling even deeper?702

IEA warns Gulf spill effect has put the oil industry’s ability to find enough new oil “on a knife edge.” “Some 30 per cent of existing global oil, and nearly 50 per cent of new supplies by 2015, needs to be sourced from offshore, much of it from deep water,” the IEA says in its monthly oil market report. “Operating and regulatory standards may be tightened, and sensitive frontier areas may see permitting delays.” The IEA adds that “fortunately” few oil-rich countries’ governments were considering blanket bans on deepwater development. “Greater detail on the impact of drilling restrictions in the Gulf has led us to hike our estimate of potentially ‘lost’ oil production to 60,000 barrels a day in 2010, rising to 100,000 b/d in 2011.” World oil demand in 2010 is forecast to average 86.6m barrels a day and 87.9m b/d in 2011, a small increase on earlier predictions.703

Eon warns German government to live up to election pledge to extend life of nuclear stations. FT: “Berlin wants to prolong the phase-out of nuclear energy beyond 2021 – the date set by the leftist coalition of Social Democrats and Greens a decade ago – and use windfall profits to speed up the introduction of renewable energy. But chancellor Angela Merkel’s Christian Democrats are split over whether to grant only limited lifetime extensions, from an average of 32 to about 40 years, or whether to raise the limit closer to the international average of 60 years.704

Widening Pakistan flood disaster dwarfs aid efforts, which have still reached only a tiny fraction of an estimated 14m people hit by the floods. FT: “Flying over Swat gives a glimpse of the scale: it is as if a giant boulder has rolled down the valley, shattering two-lane concrete bridges, snapping buildings in half and gouging cliffs to leave roads jutting into space.” “Nobody has food,” says Qazi Inam of Save the Children. “If anybody is rich, if anybody is poor, there is no difference.”705

12.8.10. BP to pay record fine over for continued safety violations at Texas City refinery: $50m, five years after the lethal explosion. Osha has found more than 300 “egregious, wilful violations” in the refinery – BP’s biggest. While BP did not admit guilt, it agreed in a settlement with Osha to a maximum allowable $21m fine and to spend $1bn on the refinery over the next five years, bringing it into compliance. … But BP has not accepted any responsibility in agreeing to pay the fine.706

17 countries experience record temperatures so far in 2010: Russia, Belarus and Ukraine but also many African, Middle Eastern and Latin American countries. Guardian: “The number of record highs is itself a record – the previous record was for 14 new high temperatures in 2007. … Pakistan, now experiencing its worst ever floods, had Asia's hottest day in its history on 26 May, when 53.5C (128.3F) was recorded in Mohenjo-daro, according to the Pakistani Meteorological Department. This June was also the hottest ever on record and 2010 is on course to be the warmest year since records began, according to separate data from the US National Oceanic and Atmospheric Administration published last month.707

14.8.10. We have to create a more local, decentralised energy system, writes UK energy minister Greg Barker. “When David Cameron became Prime Minister he pledged that the new Coalition would be the greenest government ever. As Climate Change Minister my job is to help deliver this promise. …. the old dominance of the energy economy by a few large corporations is also being challenged. Our homes, businesses and communities can also become dynamic players in the new energy economy by producing their own green electricity and selling it back into the national grid. New feed-in tariffs – a system of financial incentives to encourage households and communities to produce their own electricity – are at the heart of our efforts to "green" Britain and empower consumers and to create a more local, decentralised energy system. With interest rates providing little return on financial investments, the domestic and community scale feed-in tariffs provide some of the best secure investment returns available in the market. … whatever changes we implement to increase the level of large-scale renewable roll-out, investors can be certain that there will be no surprises or retrospective policy changes as we recognise that investor confidence is key to deployment. ….So I want to send a clear message to industry and international investors: If you invest in the UK, whether it is in micro-hydro or huge offshore wind, you can expect plenty of 'TLC' – transparency, longevity and certainty in the new Government's energy policy.”708

Will China leapfrog France as a nuclear superpower? Telegraph: China “wants to build 153 new plants using existing technology and believes it can cut the costs of French and Japanese-based reactor designs by one third by rolling out the parts in bulk.”709

16.8.10. The reality of nuclear energy is inconsistent with dreams of a renaissance, ETH nuclear expert says.“Nuclear energy is not on the rise – the hard facts point to a continuing, slow phase-out around the world. … Of the more than 200 countries in the world, only 30 use nuclear power. In July 2010, a total of 439 nuclear power plants with a net installed capacity of 373.038 gigawatts (GW) were connected to various national electricity grids, about 1.2GW more than at the beginning of 2006. … During the next five years, on average, roughly 10 new nuclear reactors are expected to become operational every year. But this assumes that all are constructed according to schedule, and the nuclear industry has rarely met its promised construction deadlines.” The build rate will struggle to exceed the closure rate. And then there is the uranium resource problem. 710

700 http://www.ft.com/cms/s/0/ea29c836-a598-11df-a5b7-00144feabdc0.html701 http://www.ft.com/cms/s/0/4a26b6c6-a595-11df-a5b7-00144feabdc0.html702 http://blogs.ft.com/beyond-brics/2010/08/11/mexicos-deepwater-drilling-in-bps-footsteps/703 http://www.ft.com/cms/s/0/02ed8bd2-a544-11df-b734-00144feabdc0.html704 http://www.ft.com/cms/s/0/df3b88a8-a587-11df-a5b7-00144feabdc0.html705 http://www.ft.com/cms/s/0/de38b086-a567-11df-a5b7-00144feabdc0.html706 http://www.ft.com/cms/s/0/e878cca6-a63f-11df-8767-00144feabdc0.html707 http://www.guardian.co.uk/world/2010/aug/12/heatwave-record-temperatures-world708 http://www.telegraph.co.uk/finance/newsbysector/energy/7945733/We-have-to-create-a-more-local-decentralised-energy-system.html709 http://www.telegraph.co.uk/finance/newsbysector/energy/7945754/Will-China-leapfrog-France-as-a-nuclear-superpower.html

64

Triple Crunch Log

Plan to relieve Macondo well pressure. FT: “US government officials are considering installing a new blowout preventer – the stack of valves intended to stop oil and gas escapes – into BP’s ruptured well in the Gulf of Mexico. Thad Allen, the retired former Coast Guard admiral and national incident commander, told reporters that the “most important” thing now is to “manage the pressure”.”711

17.8.10. Obama to tighten terms of deep-water oil drilling permits. The use of environmental waivers for oil and gas companies seeking deepwater drilling permits has come under fire in the aftermath of the Macondo spill.  BP received such a waiver for Deepwater Horizon on April 6, 2009.712

UK's biggest companies are carrying £73bn pension deficit. Telegraph: “Many of Britain's biggest companies face a "material risk" from the size of their pension deficits, with 10 members of the FTSE 100 weighed down by pension liabilities that are greater than their market value,” including BT, British Airways and Invensys.713

18.8.10. Scientists dispute White House claim that spilled BP oil has vanished. Guardian: “At least two independent teams of scientists reported new evidence of oil persisting deep under the surface of the sea. … University of South Florida scientists, returning from a 10-day research voyage, said they found oil on the ocean floor in the DeSoto canyon, a prime spawning ground for fish far to the east of BP's rogue oil well. Preliminary results suggested that oil was getting into the phytoplankton, the microscopic plants at the bottom of the Gulf food chain. … Scientists from the University of Georgia also disputed the White House claim, releasing their own analysis suggesting 70% to 79% of the oil in the Gulf of Mexico remained in the water. “The idea that 75% of the oil is gone and of no concern for the environment is just absolutely incorrect,” said Charles Hopkinson, a marine science professor at the university. 714

BP might not be able to execute the final kill of its well until September, says Thad Allen. Guardian: “BP and government officials had yet to agree on a way to pump cement into the bottom of the well without putting too much pressure on a cement seal at the top. Engineers are assessing whether to install a new blow-out preventer or a new system for relieving pressure on the cap at the top of the well.”715

19.8.10. Huge oil plume found below the surface in the Gulf. The Woods Hole Oceanographic Institution reports a plume 22 miles long, more than a mile wide and 3,500ft under the sea. FT: “Contrary to previous assumptions by scientists, the WHOI team found no so-called “dead zones”, or regions with oxygen depletion where little marine life could exist. The report found that of dozens of samples taken, only a few measured below expected levels of oxygen, and that those were only “slightly depleted”.”716

20.8.10. Church of Scotland makes a stand against a coal power station as protesters target RBS over coal. The church has joined a coalition of environment groups opposing plans to construct the 1852MW Hunterston station, which has seen about 14,000 written objections from across the UK and beyond. Guardian: “The development came as climate camp protesters gathered near the Royal Bank of Scotland headquarters in Edinburgh for a weekend of action. Climate activists are threatening a day of disruption and direct action against the bank and Edinburgh festival events sponsored by RBS on Monday.”717

710 http://www.guardian.co.uk/environment/cif-green/2010/aug/16/nuclear-energy-renaissance711 http://www.ft.com/cms/s/0/448d9478-a95f-11df-a6f2-00144feabdc0.html712 http://www.ft.com/cms/s/0/98b97898-a98a-11df-a6f2-00144feabdc0.html713 http://www.telegraph.co.uk/finance/personalfinance/pensions/7933402/UKs-biggest-companies-are-carrying-73bn-pension-deficit.html714 http://www.guardian.co.uk/environment/2010/aug/18/bp-oil-spill-vanished715 http://www.guardian.co.uk/environment/2010/aug/18/bp-oil-spill-vanished716 http://www.ft.com/cms/s/0/339ca42a-abbb-11df-9f02-00144feabdc0.html?ftcamp=rss717 http://www.guardian.co.uk/environment/2010/aug/20/church-scotland-coal-power

65