Monday July 28, 2008

The big Beijing 2008 Olympics China shutdown - commodities fall only temporary?

news.yahoo.com :

Beijing's Olympic shutdown begins Sunday [20 Jul 2008], a drastic plan to lift the Chinese capital's gray shroud of pollution just three weeks ahead of the games. Half of Beijing's 3.3 million vehicles will be pulled off the roads and many polluting factories will be shuttered. In a highly stage-managed Olympics, no challenge is greater than producing crystalline air for 10,500 of the world's greatest athletes.

- Earlier on, I was wondering aloud whether the shutdown of the massive Chinese industrial juggernaut might have something to do with the recent commodity meltdown, especially in crude oil, that had much of the world breathing a sigh of relief after helplessly watching prices nearly triple to $147.27 from $51 back in Jan 2007. Evidently, other people were also thinking the same thing :

seekingalpha.com :

Oil got denied when it almost tapped $150 and dived to $123, taking down the rest of the commodities world - metals, agriculture, coal, you name it. Sure, maybe it's the speculators the regulators have now caught, or maybe it's money coming out to chase the banks off their lows. But: What if it's because China has halted a big chunk of its manufacturing to clear the air for the Olympics ... just thinking what will happen starting September, when the Olympics are over, and the China manufacturing beast roars to life again? Devouring commodities for breakfast, lunch, dinner, and a midnight snack 7 days a week ...

- If, like they say, in a tight supply situation, all pricing occurs at the margins, the marginal decrease and, later, subsequent increase in demand in Chinese demand could just be the factor that tips the balance in either direction. If true, the commodities selldown could only be temporary, notwithstanding the American economic slowdown. Remember that the US economy has been slowing down for months, but the way commodities fell, it was like some giant switch was thrown. This massive China shutdown could have been that giant switch. Come Sep 2008, when the Beijing Olympics 2008 winds down, we'll get to see if this hypothesis is right.

(2008-07-28 23:39:08 SGT) [Energy] Permalink

Singapore petrol prices drop by 10 cents, largest in rapid succession of cuts

This article belongs to the Singapore inflation watch story arc.

channelnewsasia.com :

In the largest cut to date, pump prices of petrol and diesel have been adjusted down by 10 cents. As of 10am Monday [28 Jul 2008], stations run by SPC, Shell and Caltex had their pump prices down to S$2.110 for RON98 and S$2.036 and S$2.003 for RON95 and RON92 petrol respectively. With on-site discounts, this brings the mid-range 95 unleaded petrol below the two dollar mark for the first time in months. Diesel is now priced at S$1.863 per litre. Crude oil futures are holding steady and hovering at a seven-week low of about US$123 a barrel, despite talk over the weekend that the price of oil could drop to between US$70 and US$80.

- Enjoy the lower prices whilst stocks last. NYMEX crude oil prices seem to be firming up just a bit above $120 support. We haven't seen a drop yet to $110 or $100 and people are already talking about $70 and $80. It is a rather interesting sign, from a contrarian point of view.

See also :

1. Singapore petrol prices lowered 4 cents after crude oil drop
2. Singapore petrol prices down another 4 cents on lower crude oil prices
3. Singapore petrol prices drop 4 cents for third time in 2 weeks

(2008-07-28 23:07:20 SGT) [Energy] Permalink

Singapore NODX non-oil domestic exports fall 10.5% in June 2008

This article belongs to the Singapore stagflation watch story arc.

channelnewsasia.com :

Singapore's key non-oil domestic exports (NODX) fell an annual 10.5% in June, pulled down by weaker shipments to the US market as well as to China and Europe, IE Singapore said Thursday [17 Jul 2008] in its monthly report. The drop was steeper than the 1.8% fall forecast in a Dow Jones poll of economists, and unchanged from the 10.5% decline seen in May. Electronics exports, which have been dropping since February last year, contracted 14.6%, while non-electronic shipments eased 7.9%. NODX to the US recorded the largest decline of 24.3% to S$1.5 billion. The monthly figures are a closely watched barometer of Singapore's export-led economy in which GDP was valued at S$243.17 billion last year.

Stagflation is stagnant or slowing economic growth, with high or rising inflation at the same time. We've got the slowing economic growth, and we've got the rising inflation. With NODX figures being a leading indicator, and Singapore's GDP growing only 1.9% in Q2 2008, and inflation still running at 26-year highs, official stagflation may not be too far away. The question now is, what can be done about it?

See also :

1. Singapore stagflation : May 2008 exports fell most in 17 months; inflation at 26-year highs
2. Singapore GDP shrinks 6.6% in Q2 2008 as stagflation continues
3. Singapore retail sales growth slows as inflation hurts spending

(2008-07-28 22:32:14 SGT) [Biz] Permalink

Sunday July 27, 2008

Malaysia looking at building its first nuclear power plant

channelnewsasia.com, theedgedaily.com :

Malaysian utility Tenaga may construct the country's first nuclear power plant at a cost of US$3.1 billion but is braced for objections from the public, a report said on Tuesday [22 Jul 2008]. "We are looking at about US$3.1 billion for a 1,000 MW plant," said Mohamad Zam Zam Jaafar, head of Tenaga's nuclear energy taskforce. He said Malaysia going nuclear post-2020 was looking more and more like a necessity rather than a probability, and Deputy Prime Minister Najib Razak said in June that Malaysia may consider nuclear power to meet its long-term energy needs amid surging global oil prices. Currently, half of Malaysia's power plants run on gas. Other sources include coal and hydropower.

- It has been years, even decades in the making, but it looks like Malaysia's nuclear energy plans are starting to look more concrete, now that we have a dollar figure (US$3.1 billion), a power generation figure (1000MW), and a tentative date ("post 2020"). The figures look about right for a single typical mid-sized nuclear power plant module.

Provided there are no delays, it will be almost just in time for Malaysia's crude oil and gas production to peak and then to start their respective catastrophic declines. Yet another example that affirms my theory that producer countries with declining fossil fuel production tend to plan ahead for peak oil (and gas). There's really nothing quite like seeing your country's fossil fuel production steadily drop from year to year. Meanwhile, consumer countries like Singapore don't seem to have much plans beyond building LNG terminals, an interim stop-gas measure if there was any.

A nuclear-powered Malaysia would have access to cheap, reliable energy that does not produce greenhouse gases that cause global warming and climate change. And they would steal a march on their supposedly more high-tech and sophisticated southerly neighbour too. If Malaysia were to go nuclear, so should Singapore.

See also :

1. Malaysia "needs to develop nuclear energy"
2. Malaysia requires two nuclear reactors to generate electricity
3. Malaysia may go for nuke energy
4. Developing countries eye nuclear power: report

(2008-07-27 10:57:23 SGT) [Energy] Permalink

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."

See also :

1. Peak Oil - The pressure mounts
2. North Sea gas drying up faster than hoped
3. UK oil production continues to decline
4. Over 20 UK MPs and Lords form parliamentary peak oil group

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

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.

See also :

1. Singapore petrol prices lowered 4 cents after crude oil drop
2. Singapore petrol prices down another 4 cents on lower crude oil prices

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

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