The Triple Crunch Log

Triple Crunch Log

The triple crunch log

2011

…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 full time day 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.

1.1.11. UK government launches £5,000 electric car grant scheme. Experts hail 2011 as 'breakthrough' year for electric cars as mass-market manufacturers roll out new models. Electric cars are set to experience a breakthrough in 2011 fdue to a £5,000 car grant introduced by the government today, experts predict. Guardian: “Motorists will have a choice of just one subsidised car to buy outright as the project is launched – the Mitsubishi i-MiEV – but should have a choice of nine or 10 fully electric and plug-in hybrid cars by 2012. Among the first available to buy will be the Nissan Leaf in March, which is billed as the first mass-market electric car. It is currently being made in Japan and will be made in Sunderland from 2013 onwards.”[1]

2.1.11. Floods in Queensland reach “biblical” proportions. An area the size of France and Germany combined is under water. The wettest spring in Australia for 20 years is related to an intense La Nina event.[2]

European debt markets 'face second credit crisis.' Telegraph: ”European debt markets could be hit by a second credit crisis within months as fears grow over the huge volume of new bonds that must be sold by governments and banks in 2011. Banks alone must refinance about €400bn (£343bn) of debt in the first half of the year, but add in the more than €500bn European governments must replace over the same period, as well as further hundreds of billions of euros of mortgage-backed debt maturing and there is the potential for chaos in the credit markets.”[3]

Will Hutton on next 25 yrs: expect a popular revolt against the City, or else – he argues – we will face economic and social decline.[4]

3.1.11. US eases barriers to deepwater drilling, but stringent new regulations remain in place for those who seek to resume. Since the ban on drilling below 500 feet was lifted in October no new permits have been granted.[5]

Vallar considers coal acquisitions worth up to be $1bn as it seeks FTSE listing. They are in North America and Australia. Nat Rothschild hopes to list by the summer. This month his cash-shell Vallar will be renamed Bumi plc, a vehicle which allows two powerful Indonesian families to list their assets in London.[6]

4.1.11. Rising oil price threatens fragile recovery in OECD, IEA warns. OECD import costs soared by $200bn to 790bn by in 2010 (up 33%), equivalent to a loss of 0.5% of the 34 member-nations’ GDP. The EU import increase was $70bn, equivalent to the combined budget deficits of Greece and Portugal. Brent crude hit $95 this week. Fatih Birol “2010 rang the first alarm bells and 2011 price levels could bring us to the same financial crisis times that we saw in 2008.”[7]

A Bloomberg survey of anlysts finds expectation that prices in 2011 will be second only to 2008. Barclays predicts OPEC will be become more proactive but won’t head off $100 oil.[8]

Coking coal badly hit by floods in Queensland, and steel prices rise accordingly. Thermal coal also badly affected, so electricity price rises in eg Japan re on the way. It is still raining, nd may be a month before the full damage becomes clear.[9]

5.1.11. US official enquiry concludes systemic failures in management led to the Macondo blow-out: in BP and other companies. William Reilly, a co-chair of the commission: “a pervasive problem of a complacent industry ….I relcutantly conclude we have a system-wide problem.” The Commission says such a spill “may well” happen again. BP shares rise nonetheless because of analysts’ conclusion that the implications for liability are good.[10]

UK MPs rule out a North Sea drilling ban, but urge companies to step up response plan shortcomings. The Commons energy and climate change committee had considered a moratorium, but felt the national interest would be imperilled.[11]

Jeff Rubin article: Peak oil means massive sovereign defaults. Treasury yields are low today because people expect a recovery. But with $100 oil there will be no such recovery. Global oil demand rose 2.5mbd last year, pushing us twoards $100 oil. And all the growth needed for the putative recovery would be heavily oil dependent.[12]

Sierra Club files its first lawsuit against a solar farm, in the desert near Barstow, California. They argue it would lie in the middle of a habitat fro rare plants and animals.[13]

World food prices rise for sixth month in a row to reach highest ever level since records began in 1990. The UN FAO says we are danger territory, and prices they could go higher yet if weather is unkind in critical agricultural regions.[14]

The 20 Ratcliffe coal protestors are spared jail sentences because of their motives, but….. The judge says that they acted with “the highest possible motives.”[15] But one protestor writes: “The jury received a more extensive education on climate change han most people get in a lifetime. That they could not vindicate our actions is nothing to get self-righteous about; it is deeply disturbing. If the jury, after everything they had heard, couldn't bring themselves to sympathise with our actions, who will?”[16]

A lawyer explains why the Kingsnorth 6 coal protestors were acquited and the Ratcliffe 20 weren’t. Mike Schwartz: “The Nottingham defendants were charged with conspiracy to commit aggravated trespass, and argued that they acted through "necessity" to prevent death and serious injury caused by climate change. Their own powerful testimony was supported by leading professors on epidemiology and population health who confirmed that climate change is currently contributing towards an additional 150,000 deaths each year around the world. It will only get worse. The Greenpeace defendants were tried for criminal damage to the power station's chimney and argued that they had "lawful excuse" for their actions: they sought to protect property around the world threatened by climate change. Again, their vivid accounts of melting ice caps, expanding oceans and deforestation – and resulting erratic weather, flooding and rising sea levels - were supported by expert evidence.” He also speculates that Climate-gate had happened in the interim, and could have had an impact.[17]

6.1.11. The real cause of the Deepwater Horizon spill was that we are heading for peak oil: Damian Carrington in the Guardian. We are oil addicted, so we have to drill deeper and take more risks etc.[18]

7.1.11. The big five UK banks defy political and public pressure to award huge bonuses to their bosses. Having ulilaterally given them up a year ago in the face of pressure, they evidently feel that the pressure has eased.[19] RBS has a total pool of £1bn, down from 1.3 last year. Nick Clegg says their actions are “wholly untenable” and the government will not stand idly by. “We have not given up” on the bonus issue, says an an ally of George Osborne.[20] Osborne calls on Europe to sort out the banking system, saying the response has not been bold enough.[21]

Ruling that two US banks wrongly foreclosed on homeowners is set to reverberate in the capital markets. The Massachussetts Supreme Court ruling is a barometer for thousands of other cases. Recall that the Attorneys General of 50 states have malpractice investigations underway.[22]

BP likely to face criminal charges and execs could go to jail, so US legal experts say, having read the National Commission’s conclusion about a “failure of management.” This despite the failure of the report to conclude “gross negligence”. The DoJ has had a criminal investigation underway since last June.[23]

Republicans endeavour to stifle climate change action from Day One of the new Senate. They have outlined three bills aimed at stifling the powers of the EPA.[24]

9.1.11. Institutional investors may exit en masse from Spanish assets after government cuts solar feed-in tariff retroactively. This it did just before Christmas, trimming the pre-agreed sum by €3 ($3.9bn) over the next three years. Asset manager and private quity groups say the move is illegal. A survey shows nearly half says they will reduce exposure to Spain generally as a result.[25]

UK gas supplies down to 5 days after coldest winter since 1890. This is a five year low. LNG helps with this, it is said. But LNG terminals are not regulated by Ofgem, and operate in a global market.[26]

Trans-Alaska pipeline leak forces BO to shut down 95% of Prudhoe Bay production. 15% of US crude supply lost. Repairs should take a week.[27]

Pentagon must “buy American” in solar panel preocurement, new military authorization law says. The Chinese will not be best pleased.[28]

10.1.11. Shale gas drillers take flight drilling faces highest costs for four years. Chesapeake, EOG and other s are being forced to look for tight-reservoir oil drilling where they can apply their fracking techniques, given the low gas price.[29]

Oil, gas and mining now make up one third of the value of the FTSE 100. On Monday January 4 oil and gas producers were the most weighted sector at 18.8 per cent, with blue-chip miners second for the first time, with 15 per cent – above the banking sector’s 14.5 per cent. By end of play Friday the blue-chip miners and banks were tied with a 14.7 per cent weighting. The total weighting of natural resources is more than a third of the index.[30]

Six anti-coal activists walk free as undercover policeman who had infiltrated their protest switches sides. He had become worried about global warming after seven years undercover, latterly with the protestors at the Radcliffe on Stour coal plant.[31]

11.1.11. Bob Diamond tells Treasury Select Committee that bonuses must stay: “the time for remorse is over.” In his impassioned defence, he says he wishes he could “make the issue of bonuses go away.” The usual arguments: they’ll all go abroad otherwise. He doesn’t say how much his bank is lending to businesses.[32]

Eon becomes the fifth of the Big Six energy companies to hike prices: 9% for electricity, 3% for gas, citing rising wholesale energy prices. EDF is the only one that has yet to do so.[33]

Final report of the US National Commission on the Deepwater Horizon blow-out contains no surprises. Be more careful please.[34]

Queensland floods now reach Brisbane, Australia’s third largest city, and could cut 1% off the 3.25% GNP Australian government growth projection for 2011. Thousands flee in low lying areas.[35] The city centre shuts down.[36]

Coal prices hit a two-year high. Australia is source of some 60% of seaborne coking coal, needed for steel making.[37]

Green infrastructure bonds are essential if we are to raise the cash for renewables. Ben Caldecott of Climte Change Capital: “In the last two years, studies have shown that around £200bn of low-carbon infrastructure investment is required in the UK between now and 2020. Ernst & Young estimatesthough that traditional sources of capital – ranging from utilities through to project finance and infrastructure funds – can only provide £50-80bn over the next 15 years. How can we close this staggering financing gap? By facilitating access to the deep pools of low-cost capital held by institutional investors. For example, in 2008 approximately £3 trillion of long-term assets were held by UK pension funds and insurance companies. Allocating a small proportion of this total over the coming decade, say 4-5%, to low-carbon infrastructure would close the gap in capital required.” Via the Green Investment Bank and Electricity market reform, this can now be done.[38]

12.1.11. 2010 was the joint warmest on record (with 2005) since 1880. So says NOAA: 0.62C (1.12F) above the 20th century average. Each year since 2005 has been in the top 15.[39]

Warmest year announcements by both NASA and NOAA, ignored by all UK press except the Guardian. A day later, Telegraph covers the story online.[40]

Portugal completes a successful debt auction, much watched obviously. Stocks rise to a new high on hopes of growth.[41]

Oil nears $100, buoyed by optimism on the economy, and supply problems in Alaska and the North Sea: $98.46 on Wednesday, the highest for two years.[42]

Vince Cable says he is hopeful of getting a bonus-constraint deal with banks, plus more lending to SMEs, and greater disclosure. Yesterday the Guardian had reported “Ministers cave in to City over bank bonuses,” despite al the rhetoric in opposition.[43]