Triple Crunch Log Jeremy Leggett

Ethical investment now tops €1,000 bn in Europe. Traditional financial institutions, and brokers, have a growing involvement in SRI.

7.8.07. Highways Agency unveils plans to widen the M1 to ten lanes: a 50 mile stretch near Leicester as part of a £2.5 bn scheme.

US farmland soars in price on the back of ethanol boom. States like Illinois, Iowa, and Nebraska the price of a farm is going up fast. Meanwhile house prices crash

9.8.07. “Debtonation day”: the global credit crunch begins. The European Central Bank opens its emergency funds and the Fed pumps $24bn of temporary reserves into the US system as banks stop lending to each other. As described in the Bank of International Settlements Annual Report, 2008: “The simmering turmoil in financial markets came to the boil on 9 August 2007. On that day, a number of central banks felt compelled to take extraordinary measures in an attempt to restore order in the interbank market. The disorder was triggered by a freeze on redemptions from a small number of funds that had invested in structured finance products backed by US subprime mortgages of recent vintage. When or where it will end, no one can say with certainty.” ⁷⁷(F)

10.8.07. Credit crisis goes on even after central banks pour $323 bn into global economy: a sum equivalent to a quarter of the UK’s annual economic output, poured in over 48 hours. The FTSE 100 index lost £63bn or 233 points, the biggest fall since March 2003, when the dotcom bubble burst. All this year’s FTSE gains have now been lost.

Canada announces plan to build two military bases in the Arctic. The latest move in the squalid scramble for oil by Arctic nations came after the PM went on a three day visit. Under the Law of the Sea Convention, each country with a coast has sole exploitation rights in a limited “exclusive economic zone,” beyond which mineral resources are controlled by the International Seabed Authority. However each country was given a 10-year period within which to make claims to extend its zone, once they ratify. Norway (ratified in 1996), Russia (1997), Canada (2003), and Denmark (2004) have all launched claims. The US, of course, hasn’t ratified. The UN's ruling on these submissions will determine who gets the right.

Russian polar underwater footage found to have been “borrowed” from the film Titanic. Shown on Russian TV, and reproduced around the world on TV channels as real footage from below the North Pole, a 23 year old Finnish boy spots where there had really come from. “I've heard they don't always tell the truth in Russia, but I didn't think they could have screwed it up that badly,” he says.

See JL blog 35, 11.8.07, on PV’s potential.

11.8.07. Climate protest camp set up near Heathrow. The protests are scheduled to last a week and 1,500 are expected.

Nuclear heat makes oil-shale explitation by in-situ refining realistic, says nuclear engineer: Charles Forsberg of MIT, quoted at length in the Oil and Gas Journal.⁷⁸ (L)

12.8.07. IEA warns that Middle East runs the risk of becoming a net fuel importer. Rapid economic expansion, high summer temperatures, and too few refineries have power-rationing during peak hours in Kuwait and the United Arab Emirates, where industrial users are reportedly turning to coal and rolling blackouts have occurred in the emirates of Abu Dhabi and Sharjah.

Leaked report shows officials are briefing ministers that UK can never hit renewables target of 20% by 2020. They forecast 5%, not 20%, based on current policies. “As there is little or no CCS projected by 2020, that is not taken into account.” Recommendations for “statistical interpretation of the target” include counting nuclear as renewable.

13.9.07. UK housebuilders try to stop local government requiring renewables onsite. They want the Merton Rule outlawed and seem to be receiving a sympathetic hearing from government.

14.8.07. Chinese win an auction of two Siberian oilfields and the right to build a pipeline to China. The Chinese National Petroleum Corporation won the auction with Rosneft, the state oil company, for two oilfields close to the Chinese frontier. The Russian energy minister says the short spur line to China, a branch from the main line to the east coast, should be operational by late 2008.

Gazprom deal with Total over Shtokman reduces the oil major to a mere service provider. In probably the worst deal ever signed by an oil major, Total may not even be able to book the reserves.

Eminent Russians welcome global warming. Billions of dollars will be saved on heating and there will be fewer cases of depression, so says Vladimir Klimenko, a professor at the Moscow Energy Institute, a lab funded by the state-run oil and gas company. Agriculture will blossom, and watermelons could grow in Moscow. Konstantin Pulikovsky, head of Russia's environmental regulatory agency: “For our great northern country, I don't today see any imminent problems for the next 100 years.”

Lawsuits seeking reparation for global warming damage proliferate. Property owners in Mississippi are now seek damages from oil and power companies including Exxon and Duke Energy over damage to properties by Hurricane Katrina.

Around a quarter of British complacent on global warming, and >30% oppose air travel tax. A DEFRA poll suggests that c.25% agree with statements such as: “It takes too much effort to do things that are environmentally friendly” and “I don't believe my behaviour and everyday lifestyle contribute to climate change.” An Independent poll shows 44% support a tax on air travel for environmental reasons.

15.8.07. FTSE falls below 6,000 after big falls in Asian markets overnight. As traders panic on the trading floors, economists ask “what crisis?” Their belief in the “real economy,” and that this is a just a necessary correction, continues. America’s biggest mortgage firm, Countrywide Financial, is fighting for its life.

First direct action by the Heathrow climate camp. Protestors chain themselves to the gates at Biggin Hill, where corporate jets land. Much speculation about what the main camp actions will be.

WWF takes UK’s Export Credit Guarantee Department to court for funding Sakhalin 2 pipeline. WWF claims it is contrary to Britiain’s ethical foreign policy in promoting global warming and harming whales.

Eon eyes Gazprom deal: stake in a UK power plant for access to gas. The world's largest utility says for the first time that it is considering giving Gazprom stakes in UK power plants as part of talks over partnership in a Siberian gas field, Yushno Rosskoye.

Canadian internet blogger shows NASA made mistakes in calculating US temperature data: 1934 is the hottest year, not 1998. This embarrassing correction, which is to be much used by climate change deniers, changes the global pattern by a mere fraction: a statistically meaningless couple of hundredths of degree for 2 percent or globe. Rush Limbagh: “We have proof of man-made global warming,” he tells his radio audience. “The man-made global warming is inside NASA.”

16.8.07. FT opens an interactive website on the race for oil in the Arctic. Latest: Stephen Harper, Canada’s prime minister, has announced Canada’s intention to spend C$3.1bn (€2.14bn) building up to eight icebreaker naval ships. He also plans to set up additional military bases in the region. Meanwhile Danish and US explorers this week set off to map whether the hotly-disputed Lomonosov ridge is linked to Danish territory.

Scientists show that Atlantic deep circulation varies significantly over the course of a year. A UK team publishes the first detailed picture of Atlantic ocean currents from instruments strung out across the Atlantic in the Rapid/Mocha (Rapid Climate Change/Meridional Overturning Circulation and Heatflux Array) project.

17.8.07. FTSE falls 12.5% and analysts voice fears of a crash (when the market falls >20%). Ratings agencies take a hammering for not warning about the problems loudly enough.

Fed cuts interest rates by 50 basis points as they try to calm the markets (the first of four cuts totalling 250 bp through to January 31^st).

18.8.07. Flash floods pour into a Chinese coal mine, trapping more than 180 miners with little hope of survival. Official figures show 4,700 miners died last year (more than 12 a day), but independent labour groups put the real toll at up to 20,000 annually, professing that many accidents are covered up (more than 50 a day).⁷⁹

Damp British summer causes pine needle blight, resulting 2 million trees feeld: trees otherwise expected to reduce global warming. The Corsican pines affected do well in dry soil, and make up one fifth of British pine plantations.

19.8.07. Climate protestors target firms including offsetting companies. Climate Care and the Carbon Neutral are faced with protestors dressed as red herrings.

Iran seeks foreign investment in its oil sector. The retiring oil minister warns that low petrol prices will mean an energy crisis. The government introduced petrol rationing in June in an effort to cut imports. The new minister says boosting production is key. Iran is struggling to meet its OPEC quota. Foreign companies including Repsol and Shell are hesitating because of the probability of sanctions over Iran’s nuclear programme.

Kazakhstan and China agree a pipeline deal. Caspian oil will go to western China. Western governments with great hopes of long-running supply for the Baku-Tlilisi-Ceyhan pipeline, and other access to Europe, have hot competition.

20.8.07. Iraq says it will resume oil exports via a pipeline through Turkey. A security force of thousands is being trained to protect it. Sabotage at an average of two attacks a week has stopped exports via northern pipelines since the 2003 invasion. It will have half a million barrels a day capacity.

21.8.07. Norwegian oil company sells Kurdistan oil assets to an oil major, perhaps Shell. The price is $700m only, but is an indication of willingness of Big Oil to engage in Iraq.

22.8.07. Heatwave in Japan causes to TEPCO to ration power. The utility asks 23 customers in the chemical and non-ferrous metals sectors to cut electricity use as temperatures in the capital hit 37°C and air conditioning goes through the roof. It has had to shut down a nuclear plant damaged by a recent earthquake.

Bank of England figures show that Britain's consumer debt stands at £1,345bn - higher than the size of Britain's annual output of £1,330bn, according to the Office for National Statistics.

24.8.07. Energy Intelligence magazine concludes global supply/demand balance are unsure after 2010. Echoing Chris Skrebowski’s conclusions.

UK housebuilders and developers seem to have persuaded HMG to outlaw the Merton Rule. The Housebuilders Federation and British Property Federation have lobbied hard, but now local authorities, the renewable trade bodies and environmental NGOs are fighting back.

23.8.07. Russia cuts oil supplies to Germany. Lukoil instigates a one third cut in supply to refineries without explanation. There is speculation that it could have something to do with Lukoil’s search for European refinery assets.

23.8.07. Lee Raymond answers “no comment” to a question about the seriousness of global warming. The ex Exxon CEO is now Chairman of the National Petroleum Council. Also in the MSNBC interview: Q: Do you think the world is running out of oil? A: “The world is not running out of the resource. The problem we're getting into is the question, can we develop it in a timely way, given the constraints we have on the political front, the economic front, and just the time it takes to get things done?”

27.8.07. UK draws up plans for a second Thames Barrier. The current one won’t be able to cope beyond 2030 officials fear. The price tag would be £20 bn.

Wheat prices at a ten year high due to bad weather across the globe. Canada, the world’s second-largest wheat exporter, warns that output might be almost 20 per cent below last year’s levels. Wheat prices for December delivery surged to a record $7.54 (€5.50, £3.70) a bushel. In Europe, wheat prices have nearly doubled from €130 ($177.8, £88) to €237 a tonne this year. Bakeries across France are expected to raise the price of the baguette by about 5 cents in the coming weeks. We should recall that discontent over record bread prices helped spark the start of the French Revolution more than 200 years ago.

Kazakhs stop work at Kashagan for 3 months pending investigation of customs evasion and environmental mismanagement. ENI informed the Kazakh government in June that they had over-run by on costs by $19bn and couldn’t produce before 2010 (startup was due to be 2005, but has been serially delayed). The government, in echoes of Sakhalin 2, is furious. The oil, of which there may be as much as 30 billion barrels, is laden with poisonous sulphurous gases in a high pressure reservoir. As oil prices rise Kazakhstan has become dissatisfied with a contract that gives it only an 8.33 percent stake in the field through its national oil firm, KazMunaiGaz, and 10 percent of the project's revenue.

Unsold homes rise by 5% in US housing crash, and house prices fall across Europe in the wake of the sub-prime mortgage crisis. The unsold home tally is the worst for 16 years. But the worst of the sub-prime shake out is yet to come, analysts say.

Saudis begin recruiting for a 35,000-strong oilfield protection force to be ready in 2-3 years. The current Saudi army is only 75,000 strong. 5,000 currently protect the 80 oil and gas fields and 11,000 miles of pipeline.

UK Liberal Democrats aim to ban petrol cars by 2040. Ten point plan on climate includes 30% zero-carbon power by 2020.

Weather records tumble. In the past 14 months the UK has seen the hottest July, the hottest April, the wettest June, the hottest autumn, the hottest spring, and the second-hottest winter since records began. We have also seen the hottest single month, and - by a considerable margin - the hottest single 12-month period (April 2006-April 2007). Now we are on the brink of seeing the wettest British summer (June, July and August) since records were first kept for the United Kingdom in 1914. (31^st: confirmed).

US oil boss warns of “serious future gas shortages,” saying “the world has a natural gas problem.” With plenty of gas in storage and a mild summer, natural gas prices in the USA have been falling over the past few months. But according to ConocoPhilips CEO Jim Mulva this is a ‘current glut’ that could disappear with the onset of winter. The USA and UK may then find themselves bidding for the same spot LNG cargoes.⁸⁰

28.8.07. USGS cut in Greenland oil estimate, while increasing gas, suggests Arctic may gas prone. The conclusion is “significantly less” oil than estimated in 2000. From 47 bbl down to less than 9 bbl.

Russian oil tycoon flees country as Kremlin accuses him of tax evasion. A Moscow court sanctions the arrest Mikhail Gutseriyev, owner of Russneft, in a case echoing the Kremlin's onslaught against Yukos.

29.8.07. Record upstream oil industry investment led to just 2% increase in global oil and gas reserves in 2006, 1% for oil. Report by John S. Herrold and Harrison Lovegrove & Co. suggests worldwide upstream investment rose 45% to a record $401 billion in 2006 (in a year of record oil and gas profits of $243 bn), while proved reserve volumes increased only 263 billion barrels of oil equivalent (2%). Without 1.9 bb from the tar sands the industry would have produced more than it found

31.8.07. Ecuador offers to leave Amazonian oil in the ground if rich nations pay $350m a year: half the estimated revenue. A historic proposal.

x.9.07. Israel bombs an alleged nuclear plant in Syria with which the North Koreans were allegedly helping. Fears grow about an attack on Iran.

1.9.07. Moscow considers wheat export ban as prices rise. Bread prices are rising at home ahead of elections in December. Russia is the fifth biggest exporter. Ukraine, Indonesia and other food exporters are also reining in.

Pre-Bali agreement reached by 158 countries in Vienna: industrialized countries to cut by 25 percent to 40 percent of their 1990 levels by 2020.

2.9.07. Kashagan costs rise from $57bn to an estimated $136bn, over the full 40 years of the project, which would make it the most expensive industrial project anywhere, ever. It is certainly one of the most difficult ever tackled, being described by one geologist as “mad, bad, and dangerous to know.” Its oil is laced with poisonous hydrogen sulphide. Lying deep below the seabed under huge pressure, it presents the risk of explosion.⁸¹

3.9.07. Kazakhstan will seek $10bn damages from Eni et al for Kashagan delays. So says the deputy finance minister. The PM says KazMunaiGas should be appointed as co-operator because Eni has proved “incapable of fulfilling some of its obligations” (6^th). KMG currently owns 8%. 9^th: $19 bn of the eventual $137 bn development costs are already sunk. Eni’s partners are Exxon-Mobil, Shell, Total, Conoco-Phillips and Inpex.⁸²

Gazprom steps up pressure on Exxon to drop plans for gas exports to China from Sakhalin 1. The gas is needed domestically, the company says. Russian gas consumption rose 6/7% last year. Meanwhile, China is back in the global gas market, having baulked at signing long-term LNG contracts since its first and last deal, 5 years ago, with Australia.

4.9.07. Arctic ice melting at its fastest summer rate ever and will be ice free in 23 years if this continues. An area of the size of Britain melted this week. Sea ice extent is currently down to 4.4m square kilometres (1.7m square miles) and still falling, against a previous record low of 5.3m square kilometres in September 2005.

Soaring food ingredient costs lead suppliers to say that the days of cheap food are over. Some 15 years of low price inflation has come an end because of demand in the Far East and biofuel incentives, say Premier Foods and others. Wheat has doubled. Food as a proportion of average income is around 10. 7^th: UN warns of unrest as a result of food price rises in developing world.

4.9.07. Total cuts production targets 20% for the four years to 2010. The company has been hit by problems in Nigeria and Kazakhstan.

5.9.07. Scorching winds force downward revision of worst estimate for Australian wheat harvest. Australia is the number 2 exporter after the US. The crop could be 2 mt lower than expected because of the heat in Western Australia. Wheat prices have nearly doubled since April because of weather. Exports were 16 mt in 2005, and only 10.4 in 2006 because of drought. Wine exports face a potential 2/3 drop if the drought continues.

Poll of US executives shows oil price rise in their top three fears. The others are natural disasters and international terrorism. In a survey by Marsh of 100 CEOs in Fortune 1000 companies, fully half the executives think it unlikely that climate change will have long-term environmental and economic impacts.

NOAA satellite study shows more than 5% of global gas production is simply flared. Up to 170 billion cubic meters a year with an economic value of $40 billion.

President of the Reinsurance Association of America warns about climate impact on insurers Frank Nutter points out that a report last year by the Chief Risk Officer Forum, a group of 13 European insurers, warned that "the sheer magnitude of climate change could impact [on] a large number of industries to such an extent that sustainable insurability may ultimately be put into question.”

BBC scraps Planet Relief, a global warming equivalent of Comic Relief, under political pressure. Senior executives say the corporation has to be “even handed.” This is a victory for Michael Durkin, producer of Channel 4’s denierfest “The Great Global Warming Swindle.”

7.9.07. SEC begins an investigation of the credit agencies who graded obscure debt instruments. S&P and Fitch are under the microscope for getting fat on fees in the boom years of credit.

“Nuclear power’s new age,” concludes the Economist on its front cover. “In March 1986 this newspaper celebrated “The Charm of Nuclear Power” on its cover. The timing wasn't great. The following month, an accident at a reactor at Chernobyl in Ukraine spread radioactivity over Europe and despair in the Western world's nuclear industry.” “…..The industry became a byword for mendacity, secrecy and profligacy with taxpayers' money.” “Public opinion, confused about how best to save the planet, seems to be coming round. A recent British poll showed 30% of the population against nuclear power, compared with 60% three years ago. An American poll in March this year showed 50% in favour of expanding nuclear power, up from 44% in 2001.” (L)

Total CEO says world oil production is unlikely to rise above 100 mbd. Christophe de Margerie: “100m barrels [per day] … is now in my view an optimistic case. It is not my view: it is the industry view, or the view of those who like to speak clearly, honestly, and not… just try to please people.” “We have been, all of us, too optimistic about the geology. Not in terms of reserves, but in terms of how to develop those reserves: how much time it takes, how much realistically do you need.”⁸³

Sub-glacial earthquakes under Greenland ice cap increase fears of rapid disintegration. Quakes have been recorded of up to 3 on the Richter scale. An IPCC report author involved says the 4^th IPCC report report is out of date, so fast is the acceleration. Sea-level rise this century could be closer to 2 metres. Ice at Ilulissat is moving at 2m per hour – visible to the naked eye: 15 km per year. Enough freshwater is released in a day to supply the biggest city for a year. There are now thousands of moulins giving access to meltwater atop the ice sheet.

OPEC divided on whether to increase supply as winter approaches. OPEC controls 40% of global oil production.

APEC agrees a long-term aspirational greenhouse goal without targets. The 21 countries involved comprise 60% of the global economy. Also, if the Doha round of global trade talks fails, they say, they might go it alone.

9.9.07. Investment in clean energy in 2006 totalled $70bn. Perhaps $1 trillion was invested in energy altogether, i.e. clean energy is 7% and rising fast. This year the total will be $100bn at least of which c $20 bn will come from private equity. NEF’s NEX index was 100 in 2003, and now touches 400.

11.9.07. Oil price breaks $80 for the first time. The reason this time: US inventories fell by 7 mb last week, much higher than expected, to 322.6 mb.

Saudi Arabia and Dubai plan aluminium smelters despite gas shortages. According to the IEA’s “”Natural Gas Market Review 2007”, published in May, the following countries are currently facing gas shortages: Oman, UAE (includes Dubai), Iran, Saudi Arabia and Kuwait. Gas consumption in the Middle East and North Africa as a whole is expanding at some 7.4% a year (world 2.6% p/a).