Sprottlight On The Economy  

Canadian firm Sprott Asset Management (who recently issued a report claiming that the US stock market and gold markets are rigged) have created their own peak oil portal, including daily links to energy related news.

Apparently Shell are desperate to book more reserves, with a report saying that "Shell moved forward with Sakhalin project despite insufficient data possibly because it was under pressure to book more reserves, says Societe Generale's Aymeric de Villaret"

Local minnow Beach Petroleum reported a doubling of profits as it enters the coal seam methane sector. For some unfathomable reason AGL has also entered the coal seam methane arena via a joint venture with the dodgy Sydney Gas.

Richard Branson is upset by high fuel prices whacking Virgin Atlantic (and Virgin Blue for that matter) and is muttering about building his own oil refinery. Once again, someone is confusing refinery capacity and oil production capacity as the cause of high oil prices (though the article does quote an anlyst who points this out at least).

Hurricane Katrina sent fuel prices soaring further because it shut several US Gulf Coast refineries, which turn crude oil into products like diesel, gasoline and jet fuel. "If we don't start now to get more refineries built then fuel prices could literally rocket to $100-$200 (per barrel of oil) and the world economy would come to a grinding halt," Branson said in an interview on financial news network CNBC.

Branson did not say where he wants to put his refinery, but some analysts said he should not look to the United States, where no one has built a refinery in 29 years. Branson said plenty of places would welcome the jobs that a new refinery would create, adding "Some people will kick and scream, but they may be the same people screaming about the fact that they're having to pay enormous prices every time they get into the car."

But building a refinery to ease high fuel prices would be far from a quick fix: any refinery would take at least four or five years to build, if not longer. And according to Energy Security Analysis' Flemming, another refinery would not ease record high crude oil prices as Branson suggests, since it would not increase actual crude oil production.

With a global airline fuel bill this year of almost $100 billion, its not surprising all sorts of different strategies are being considered of course. Delta and Northwest are apparently set to file for bankruptcy by next Wednesday.

The New York Times has reasonably good editorial on good (and bad) ways to deal with the energy price spike, noting that the only sure way forward is to increase efficiency (via Energy Bulletin)

Local sharemarket tipsheet Huntleys has been dropping hints about Peak Oil for a year or two, but they seem to have decided it is imminent now, judging by their comments in a report on ROC Oil. They also mention the Jacala-1 wildcat to be drilled later in the year (shared with TAP and BHP) which is something of a great white hope for my bank balance.

We now base our headline oil stock recommendations on a US$60/bbl oil price and A$US$ rate of 0.76. Is this throwing caution to the wind? Perhaps! However it is possible that the spike in spot price could persist or increase. The +US$60/bbl futures price to 2011 supports this view as does the Hubbert's theory of peak oil production being reached now.

... the downside of taking this more bullish approach is a potential fall to US$35/bbl.

The Herald has a report called "Green Is Good" describing the rather Viridian approach being taken by the insurance industry in particular here, who are all too well aware of the costs climate change is already starting to impose on them.

The Herald also has a report on European efforts to defuse unrest over rising fuel prices.

In other local news, the Herald notes that "Petrol tops consumer worry list" - rising oil costs are starting to bite into consumer spending and confidence.

The price of petrol has forced its way to the top of the list of consumer worries amid warnings that fuel costs have passed a critical economic "stress point". Soaring petrol prices were rated the highest consumer concern, replacing terrorism, the health system and the environment, a Sensis consumer report found.

"Australians now believe high petrol prices aren't just a short-term fluctuation," said the report's author, Christena Singh. "We will have to wait and see whether this translates into lower levels of consumer confidence and spending behaviour." The Sensis survey found households with incomes below $35,000 were most likely to report concern over the price of petrol.

The Commonwealth Bank said its petrol stress indicator showed petrol prices had moved well above the "critical value" that would cause economic stress. It calculates the critical value to be $1.17 a litre and, with petrol prices now about $1.30, the bank says we have now "passed the point where some damage to consumer spending - that is, a period of below-trend growth - is unavoidable".

Personally I'm not that fussed about high petrol prices (aside from the feeling of annoyance I get when I fill up my car, which isn't very often) - as WorldChanging notes, high oil prices "push conservation" and I'd rather see economies starting to focus on efficiency and conservation before we hit the peak rather than after it.

We at Worldchanging are usually bullish on the power of markets to bring a bright green future: the price of energy determines people's usage much more than their environmental consciousness or policy decisions. Another piece of evidence has come in to support that. As the International Herald Tribune described last week, a study of Germany and Belgium's gasoline consumption during the first half of this year showed that higher prices caused consumption to drop by 10%.

This represents a huge amount of behavior change by ordinary consumers. The tribune contrasts this with the last ten years of international policy movements trying to push the Kyoto protocol and other oil-use reduction, and determine that "the market has achieved within a few months what international bureaucrats... have struggled to obtain in a decade." They do give a nod, however, to the importance of having policies like Kyoto in place when new market forces cause prices to fall. The key is clearly bringing policy and markets together more.

WorldChanging also has a brief note on the hot solar energy market (worldwide solar power generation nearly doubled over the 2003-2004 period), along with a piece on a power generating backpack, another one on a new way of storing hydrogen for fuel cells in the form of ammonia and finally a post on a new "green city" being built near Shanghai.