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Wednesday July 23, 2008

Peak oil to hinder world development - UK lawmakers

peakoil.com -> in.reuters.com, appgopo.org.uk (pdf) :

The looming peak in world oil production will set back international development and threatens to hinder efforts to make poverty history, a report by a group of UK lawmakers said. "The deepening energy crisis has the potential to make poverty a permanent state for a growing number of people, undoing the development efforts of a generation," the report released on Monday [21 Jul 2008] said. "Communities across the globe are more vulnerable than ever, living in an unsustainable present and facing an uncertain future."

A rally in oil prices, which hit a record $147.27 a barrel earlier this month, is leading to more interest in peak oil. The 20-member parliamentary group, chaired by lawmaker John Hemming, was formed in 2007. Its report refers to warnings that peak oil is likely to occur "before 2015" and the current jump in oil prices is "a prelude to even more severe increases in the next decade." Its recommendations include the formation of an energy security working group and funding to boost local food production and energy security.

- Seeing how the UK's North Sea crude oil production has already peaked and has been in decline since 1999, and how the UK is turning out to be a permanent oil importer, and now has to resort to opening a giant gas pipeline from Norway, it is not surprising that the British have a rather keen interest in Peak Oil.

From a peakoiler's point of view, it is rather similar to the Australian case where they were not very much aware of the issues surrounding Peak Oil until Australia's own oil production peaked, and it was then announced by their government that they were running out of oil. To paraphrase early peakoiler Jay Hanson, people are unable to think about something until either they have experienced it first hand, or they have undergone extensive study to learn more about it *before* they experience it.

Peakoilers like myself fit into the latter group - people are always surprised when they hear that I am not from the oil & gas industry, and that I am just an "interested party" working in IT. There are basically two ways to spread awareness to people who do not live in countries with rapidly declining oil production - you could call it the carrot and stick approach. First, one could tell them it's a profitable hobby, which from my own experience can be quite true, and second, one could just wait for crude oil prices to start another record-breaking run, and say, "I told you so."

Myself, I have been doing both, going around telling people how I have hedged 100% of my petrol bills so I am no longer affected by the vagaries of rising or falling petrol prices. And, as far back as 2004, when oil prices were only in the $30's, I have been telling people, "I told you so."

(2008-07-23 09:21:45 SGT) [Energy] Permalink Comments [0]

Tuesday July 22, 2008

Singapore petrol prices drop 4 cents for third time in 2 weeks

This article belongs to the Singapore inflation watch story arc.

channelnewsasia.com, petrolwatch.com.sg :

Good news for motorists. Singapore petrol prices have fallen for the third time in two weeks. Shell cut prices on Monday [21 Jul 2008], and Caltex, Esso/Mobil and SPC also lowered their prices shortly after. They lowered prices for their petrol by 4 cents on average, and 2 cents for diesel. RON92 petrol is now selling at $2.133 per litre, RON95 at $2.166, and RON98 at $2.240. Diesel has slipped just below $2.00 and is now going for $1.993 per litre. Petrol pump prices have risen 14 times consecutively since July 2007, before falling on July 9 and again on July 17.

- Like I said earlier, enjoy the lower prices while they last. Chances are crude oil prices are at a local minimum, a short-term floor near $130 support, after the $10 fall that was triggered by all the demand destruction talk.

Even during the depths of the Great Depression, energy usage only went down about 8% overall. And the world's largest oilfields are depleting faster than that, with fields such as Mexico's Cantarell, formerly the world's second largest oilfield and now slipped to third place, seeing production decline by 18% in the past year. As I remarked to a colleague just now, it's a race to see if demand declines faster, or supply declines faster. I'm betting on the side of supply declining faster, and this being a short dip in demand which will turn out to be just a blip in the grand scheme on things. Crude oil support levels are $130, $120, $110 and $100, while resistance levels are $150, $180, $200, $300 and beyond.

So, enjoy the lower prices, while stocks last. Literally.

(2008-07-22 14:16:58 SGT) [Energy] Permalink Comments [0]

Monday July 21, 2008

Singapore retail sales growth slows as inflation hurts spending

This article belongs to the Singapore stagflation watch story arc.

bloomberg.com :

Singapore's retail sales growth slowed in May 2008 as consumers bought fewer cars and spent less on furniture amid the fastest inflation in 26 years, spurred by surging commodity and energy costs. The retail sales index gained 4.8% from a year earlier, after climbing 7.5% in April, the Statistics Department said today [15 Jul 2008]. Faster inflation has left consumers with less to spend, hurting an economy that expanded at the slowest pace in five years in the second quarter. Vehicle sales in May declined 1.9% from the same month in 2007. From April, auto sales dropped 3.4%. Oil prices have doubled in the past year, reaching a record $147.27 per barrel on July 11. Prices of grains such as rice and wheat have also hit records, increasing costs for consumers.

- Notice how they are once again commenting on the second order here, when they talk about the rate of retail sales growth slowing from 7.5% in Apr to 4.8% in May, year-on-year. The figures are starting to turn toward negative territory. Now the question that remains is not whether we are heading into a stagflationary recession, but how long we will remain there, and what we can do about it.

(2008-07-21 17:09:15 SGT) [Biz] Permalink Comments [0]

Hyperinflation : Zimbabwe introduces $100 billion dollar banknotes

This article belongs to the Zimbabwe inflation watch story arc.

channelnewsasia.com, cnn.com :

Zimbabwe, grappling with a record 2.2 million percent inflation, has introduced new $100-billion-dollar currency notes in a bid to tackle rampant cash shortages, the central bank said. The new note will go into circulation on Monday [21 Jul 2008]. As high as they are, though, the bills still aren't enough to buy a loaf of bread. They can buy only four oranges. The new note is equal to just one U.S. dollar.

Zimbabwe has been ravaged by hyperinflation which shot up from 165,000 percent in February to 2.2 million in June. Independent economists however believe the official inflation figure is grossly understated, estimating it could be running between 10 million and 15 million percent. Zimbabwe's chronic economic crisis has left at least 80% of the population living below the poverty threshold and mass shortages of basic goods in shops.

Zimbabwe's hyperinflation is running faster and faster. It has got to be the one place in the world where the weakening US dollar is still welcomed with open arms, and that's only because the local currency is a hundred billion times weaker. Just 2 months back, they introduced the $500 million dollar notes, and now they have these $100 billion dollar notes. So they are adding a zero to the currency roughly every month. After they hit trillion and then quadrillion, either scientific notation would have to come in or people would have to start grappling with such exotic words as quintillion, sextillion, septillion and so on. If they don't collapse entirely or turn around by then, their people could be turning into septillionaires and yet are none the richer.

(2008-07-21 09:16:53 SGT) [Biz] Permalink Comments [1]

Friday July 18, 2008

China on brink of blackouts and power outages due to price controls on electricity

ft.com :

China faces its worst power shortage in at least four years as soaring coal prices and government-set electricity tariffs force dozens of small power plants to shut down rather than face mounting losses. Facing what may be the worst coal shortage ever, nearly half of China's provinces have started to ration electricity going into the peak summer season. Coal prices in China have doubled since the start of 2008, and power demand doubled in 5 years. China relies on coal for 80% of its power generation. This year's electricity shortfall could be more severe than in 2004. The emerging power shortages have important implications for both inflation and growth.

China's problems mirror those of other Asian countries, such as Indonesia and Malaysia, where the rising fuel prices have impacted governments that subsidise fuel. China has also been struggling with petrol and diesel shortages as record crude oil prices forced small domestic refineries out of business.

- If the situation seems familiar, that is because it is the exact same problem as the one that caused the diesel shortages. The government of China fixes the price of the outputs (diesel, electricity), while the price of the inputs (crude oil, coal) rises rapidly in the open market. Large government-run enterprises continue to run, absorbing increasingly larger losses, while smaller companies, refusing to operate at a loss, give up and close up shop. This phenomenon has been amply documented and titled "Revolt of the Teapots", where teapots refer to those small China refineries.

This also demonstrates another phenomenon, which is the principle that "all action occurs at the margins", especially in a tight supply situation. In this type of situation, it does not require a major supply disruption to move the market, but relatively small disruptions will cause prices to rapidly escalate and bring chaos to a formerly orderly market.

Subsidies do not work in the long run, and neither do price controls. The Chinese government is trying to do something about it but how that will turn out remains to be seen.

(2008-07-18 16:51:36 SGT) [Energy] Permalink Comments [0]

Singapore petrol prices down another 4 cents on lower crude oil prices

This article belongs to the Singapore inflation watch story arc.

Pump prices at service stations across Singapore have been adjusted downwards for both petrol and diesel. The prices for all grades of petrol are down another 4 cents per litre, with RON98 at S$2.28 per litre, RON95 at $2.206, and RON92 at S$2.173. The move by Shell, SPC, ExxonMobil and Caltex comes a week after the fuel companies made a similar 4-cent price cut, the first after 14 consecutive price rises earlier. This time the cuts included a 2-cent reduction for diesel. This brings the price down to S$2.013 a litre, which is still over $2.00 per litre, and much higher than in the past. The price of crude oil dropped to $130 after staging its biggest fall in 17 years.

- Somehow I held off pumping petrol until late yesterday evening and to my surprise found that the petrol price had gone down another 4 cents. If only I had this sense of timing for my most recent crude oil purchase where I am down $10 per barrel already. That's okay, since Peak Oil has not been cancelled. All motorists (including myself heh heh), do enjoy your fill-ups at these prices while stocks last, because we will eventually be back on track again to $200 oil.

Updated :

1. Singapore petrol prices drop 4 cents for third time in 2 weeks

(2008-07-18 13:52:31 SGT) [Energy] Permalink Comments [0]

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