Triple Crunch Log Jeremy Leggett
The average hedge fund loss in the first nine months of 2008 has been 13%, approaching 0bn
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The average hedge fund loss in the first nine months of 2008 has been 13%, approaching $300bn in total according to one estimate (£174bn, €223bn).851 Flood of investor lawsuits backs up amid criminal investigations of at least 15 companies. Most lawsuits allege, based on filings and other public statements, that executives knew they were in trouble while trying tor aise money. The companies also subject to ongoing federal investigations include Lehman, AIG, Fannie Mae, and Freddie Mac. 12 executives have received subpoenas.852 10-15 years to find if there can be any net energy gain from oil shales, oil companies say. Shell says it has stopped making forecasts because there are too many unknowns, even after 27 years of research, mostly focus on electric heaters that slowly heat the kerogen rock to 650-750 F. Exxon has investigated more than 30 different technologies. But government reports suggest there could a US resource of 800 billion barrels. More details in an OGJ review.853 (L) 21.10.08. DAY 37 Russia, Iran and Qatar announce that they have created a “gas Opec”. It will control 60% of global gas reserves. Gazprom boss Miller says “the end of cheap hydrocarbons has come to an end.” The news is greeted with consternation in the European commission. 22.10.08. DAY 37 As falling oil price threatens supplies, industry execs warn privately that 95mbd may be optimistic, FT reports. Rosneft and Gazprom, the two London-listed Russian giants, are heavily dependent on debt. Gazprom admitted yesterday to some problems refinancing debts, and has told TNK-BP it may not go ahead with purchase of a stake in the giant Kovytka field. Petrobras, needing $500bn to finance its giant subsalt fields, may face problems too.854 23.10.08. DAY 38 Record trading in oil-to-fall bets even at a 16-month low spot price. The need to hedge put options could depress the spot price still further, analysts say, at least in the short term. This exaggeration of price correction divorces the spot price from fundamentals, in just the same way that call options did on the rising price trend towards $147 oil.855 Greenspan admits he made a mistake. In Congressional testimony, the former chairman of the Fed says: “I made a mistake in presuming the self interest of (banks) was such that they were capable of protecting their shareholders.” Henry Waxman, chairman of the House of Representatives Oversight Committee, blames the Fed for not reining in aggressive lending policies, the SEC for allowing stanards to collapse at rating agencies, and the Treasury for arguing against meaningful oversight.856 Lord Stern says recession is a good time to invest in a low-carbon future. “Put simply, high-carbon growth willchoke off growth,” the leader of the Stern Review writes. The IEA estimates around $1 trillion a year in energy infrastructure investments over the next two decades. “If the majority of this is low-carbon, and some of it is brought forward, it will be an outstanding source of investment demand.”857 Drax will invest £2bn on the UK’s first large-scale biomass-burning power plants. They will be at three sites, totaling 900 MW, 3% of UK electricity. 24.10.08. DAY 39 The FTSE plunges 5% and the pound collapses against the dollar as the worst decline in UK quarterly output since 1990 is announced (a 0.5% decline in a quarter). Almost £50bn is wiped off the value of the UK’s top 100 companies. Economists say the recession looks like being much worse than they had thought, and fears of a prolonged slump echo round the world’s stockmarkets. Hedge funds amplify the problems. The problems in the real economy are not big enough to be causing this kind of volatility, Will Hutton argues. Hedge funds are involved. As the healthy funds bet on price and share movements, and the unhealthy funds clear their balance sheets, the shadow financial system is amplifying oncoming recession into potential slump.858 (L) Oil falls below $63 despite Opec announcing a a 1.5 mbd (4.5%) production cut to try and shore up the price. Oil has now more than halved since its high of $147 in July. Traders doubt that the cartel can implement such a big cut fully, based on their 60% historical adherence rate to cuts.859 The oil price slide has put as much as $250bn into the pocket of US consumers, according to an analyst quoted in Time magazine. By contrast WalMart’s US stores took $240bn last year. A Merrill Lynch banker says “it follows that there’s going to be some spending effect.”860 25.10.08 DAY 40 Russia’s oligarchs are in trouble as the credit crunch tightens. Bloomberg reports that Russia’s wealthiest 25 have lost $230bn ($146bn) over the last five months. They have used share value as collateral in raising debt, just as the banks used the value of mortgage-backed securities, and share prices have collapsed. Russia had 110 billionaires, according to Forbes this spring, with a collective wealth of over half a trillion dollars. Meanwhile 18.9m Russians live below the poverty line.861 Supermarkets continue to compete for title of greenest of them all. Asda’s new £27m “low-carbon store” in Liverpool, opening in two days time, will have doors on the refrigerators, one obvious (and long resisted) measure saving 8% of emissions in a store that will cut 50% of emissions overall. The title seems to change hands monthly. In August, Sainsbury’s opened a store in Dartmouth that cut emissions by 40% from the standard store. Then Tesco trumped that with a store in Shrewsbury that cuts emissions 60%. With 40% of a store’s costs being electricity, energy bills are now a driver alongside climate-change performance. All UK retail chains now have CO2 targets that go beyond tokenism, with Tesco aiming to halve emissions from existing stores and distribution centres worldwide by 2020.862 26.10.08. DAY 41 Free-market economists call Darling’s Keynsian strategy “misguided.” In an article in the Sunday Telegraph, the chief economist of Lloyds TSB corporate markets Trevor Williams, Tim Congdon and others say it is impossible to guess which sectors would shrink and therefore the government would risk misallocating resources. “The best tools are monetary not fiscal ones,” they say. Nouriel Roubini, the economist who predicted the credit crash, says the worst is yet to come. When he predicted an imminent generational crisis destroying banks, at in a meeting of the IMF in September 2006, the New York University professor was scoffed at. Traditionalist economists dubbed him “Dr Doom”, and a Cassandra. In February 2008, he posted a twelve step path to disaster on his blog. Each step panned out, faster than even he anticipated. This week he predicted the demise of hundreds of hedge funds, and said the stock markets will have to shut for at least a week to stem the panic.863 The Arctic ice cap is now melting even in winter. A team from University College London shows the ice cap thinned by 19% last winter, instead of growing back as it normally does. Shipping and aviation will count in UK emissions targets. The government has bowed to pressure. Friends of the Earth say this makes the world’s first climate-change law world class. Boeing says biofuel flying will take off in three to five years. Official approval will happen faster than had been thought, a spokesman says. Aircraft will not need modification to fly on a biofuel-kerosene blend. Boeing anticipates using a 30% blend. According to Boeing, 100% biofuel could be used in principle but the industry is not big enough. To operate all 13,000 commercial planes would require planting an area the size of all Europe, if soya bean production was used for fuel.864 27.10.08. DAY 42 UK government allocates £100m to electric motoring. £20m will go on procurement for the government fleet, including the Royal Mail and the police. Saudi Aramco’s annual review gives numbers for reserves “too good to be true,” says Matt Simmons. He says the report sets a target over the next 20 years of maintaining reserves at 260 billion barrels, for which it will need to lift “oil in place” from 714 billion barrels to 900 billion barrels. The report then glosses over the fact that of 754 well-site activities in 2007, only 15 wells were exploratory, with one gas find and two small oil wells (each 5,600 barrels per day). The report is not audited, Simmons says, and it should be.865 28.10.08 DAY 43 Bank of England says financial institutions’ losses in the crash to date total $2.8 trillion. It calls for fundamental reform of the banking sector. Anthropologists point to the parallels between the triple crunch and the fate of the Maya. Anthropologist David Webster says: “In common with the Maya, we’re not very rational in how we think about how the world works. They had their rituals and sacrifices. Magic, in other words. And we also believe in magic: that money and innovation can get us out of the inherent limits to our system, that the old rules don’t apply to us.” A slow-brewing environmental crisis did for the Maya. Confidence fell apart as the thin ice they were skating on, in terms of food supply, cracked. As it broke up, so did their civilization. Note: Gordon Brown blessed the magic along the way in 2004. “In budget after budget I want us to do even more to encourage the risk takers.”866 29.10.08. DAY 44 Another IEA leak: front page FT headline “World will struggle to meet oil demand.” The first authoritative field-by-field study shows output is declining faster than previously thought: 9.1% pa without further investment, and 6.4% even with investment. Investment of $360bn pa is going to be needed until 2030, the leaked copy of the World Energy Outlook shows ($7.9 trillion over the next 22 years). Investment will slow down because of low prices, and so the decline will accelerate with time. Oil consumption is now projected at 106 mbd by 2030.867 The long article inside the paper has a confusing sub-head: “IEA reassures on future supply.” The IEA report says: “future supply is far more sensitive to (production) decline rates than to the rate of growth in oil demand,” and output is declining much faster than previously thought. At the same time, the IEA says that “peak oil theorists” are wrong. The IEA’s scenario has Saudi Arabia rising to 15.7mbd in 2030, provided investments are made. Globally, almost all new production is offset by declines, so that conventional crude barely increases from 70.4 mbd in 2007 to 75.2 mbd in 2030. Unconventional oil contributes 8.8 mbd by 2030, 4 mbd of that from tar sands.868 Kuwait will struggle with new production, KOC executive says. Ibrahim A Faraj, Team Leader Contracts, Commercial Group, says the demand for Kuwait oil is expected to grow to 4 mbd by 2020, while output today is difficult even around 2.5mbd. Kuwait will need to focus more on heavy oil production to try and close the gap, he says.869 Peak oil within 5 years at latest, UK industry taskforce says. Eight British companies across a broad spectrum of industry (Arup, First Group, Foster and Partners, Scottish and Southern, Solarcentury, Stagecoach Group, Virgin and Yahoo) are warning of global peak oil, and the worst-ever energy crisis, by 2013 at the latest. At a press conference at the Stock Exchange on 28th October, we called for business and government to act proactively, learning the lessons of our collective failure to do so ahead of the credit crunch, and kick-starting a meaningful response to climate change in the process.870 Russian oil production has peaked, says ex TNK-BP CEO Bob Dudley. It looks set for a “protracted decline,” based at least in part on on too low investment.871 UK government tables an amendment to its energy bill proposing a feed-in tariff with a 3 MW cap. The utilities are opposed. (Note: the existing Conservative proposal has a 250 kW cap). The NGOs are aghast that there is no timeline proposed or indeed firm commitment to introduce a feed-in tariff. The government also proposes a Renewable Heat Incentive proposed, the first such in Europe. Note: UK produces les than 2% of its total energy from renewables and only about 5% of electricity. In Germany the figures are 8.5% and 14%. 30.10.08. DAY 45 Shell, BP and Exxon break yet more quarterly profits records. Exxon’s take is $14.8bn up from $11.6bn last quarter. Obama calls this “outrageous.” Shell’s are up 74% to $10.9bn (£6.7bn). Shell holds back on tar sands investment. A decision on the second phase of development was due next year, but at current oil prices will be deferred “to wait for costs to cool down,” as van der Veer puts it. 15% of Shell production is supposed to come from the tar sands by 2015. With petrol prices not falling in line with oil price drop, Darling tells companies to pass savings on. The Guardian calculates that the current 98p a litre at the pump, down from 119.7 in July at peak, represents a 35.9% real drop compared to the oil price drop of 45.5%. 31.10.08. DAY 46 Barclays, seeking to avoid taking government bailout, angers investors by raising £7bn from Gulf. The fear is that they are doing this to keep leeway for bonuses, and have taken money that is too expensive, ceding almost a third of the bank to investors in Qatar and Abu Dhabi. 1.11.08. DAY 47 Rescued bank RBS sets aside £1.79 billion in costs and bonuses for their investment bankers. The allocation, nearly 10% their £20bn bailout, os for the first six months of the year for a division that lost £5.7bn in that period. MP Vince Cable says they are “making monkeys” of the government.872 City bankers don’t have enough work to do, as deals dry up. Equity markets have given up all the value they built in the bull run from spring 2003 to summer 2007.873 UK homebuilding is halved by the crunch. Just over 75,000 new homes will be finished in 2008. Last year it was 160,000, and the government’s annual target stands at 240,000.874 Two thirds of China’s billionaires have been wiped out by the stock market crash. There were 66 in 2007, now 24.875 Growing numbers of climate scientists think the time has come to consider geoengineering solutions to climate change. Shading the earth from the sun could have the most immediate effect. But all proposals have drawbacks.876 (L) A Deutsche Bank report calls for the creation of “up to 25 million “green” jobs.” Reading like something from the New Economics Foundation, the report proposes “the creation of a “green” National Infrastructure Bank, which would provide funding for commercialization and scale-up of “green opportunities that are past the demonstration stage” which can “enter into public-private partnerships, where the government partners with the private sector to scale-up infrastructure initiatives.” The spending program should focus on a “green sweet spot” including energy efficiency in buildings, the electric power grid, renewable power and public transportation.” Page 3 calls for “bond underwriting: the National Infrastructure Bank could underwrite state, local and private-sector bonds, potentially enabling public-private partnerships or unlocking other appropriate financing for private-sector projects.” 877 (L) Natural gas is back with a bang, “set to become the darling of electrical generation,” according to an article in Petroleum Review. (L) 3.11.08. DAY 48 Four banks accrue billions in bonuses. A £7.45bn staff costs pot, including bonuses, is set aside by Barclays, Deutsche Bank, UBS and Credit Suisse, a Guardian investigation finds. The banks say this is vital to retain key staff. Meanwhile HBOS and RBS reveal more multi-billion write-downs. Former BP boss John Brown says fossil-fuel subsidies must be axed. In his first interview since leaving office, he contrasts the c.$200bn (£124bn) given to fossil fuels each year with the c.33bn given to renewables and nuclear. As for the “great bubbling” of low-carbon technologies, the oil companies risk being caught out. “When mobile phones came in, I don’t think it was the fixed-line operators who were the first to move,” he says.878 China and Russia sign another pipeline deal. Transneft and CNOOC reach agreement, after talks between PMs Wen Jiabao and Putin, on a 300k bpd spur to the East Siberian Pacific Ocean pipeline. The Chinese will lend Russia money for oil development, as well as buy the oil.879 4.11.08. DAY 49 UK signs a co-operation agreement on renewable energy with the UAE, specifically Masdar, while the PM is in the Gulf trying to stump up petrodollars for the IMF, and – so the Observer reported – for UK renewables. No details given in the FT article on this. Qatar has agreed to put $150m in a low-carbon fund alongside the Carbon Trust. 5.11.08. DAY 50 Appeals for a big UK interest-rate cut grow as economy worsens. Will Hutton calls for 1%. Martin Wold earlier called for 2%. World trade is seizing up. The Baltic Dry Index, which measures freight rates for dry shipped cargoes, has plunged from over 90% in a month.880 Oil and Gas UK says Browne view on axing subsidies is “misguided and dangerous.” UK oil and gas production protects our balance of payments by offsetting around £40bn of imports, and employs half a million people. Eradicating subsidies in the North Sea “will only drive away investors and ensure an early and enduring crisis in our energy supply.”881 6.11.08. Bank of England cuts interest rates fully 1.5% to a 53 year low. The cut, from 4.5 to 3%, is three times larger than any since the Monetary Policy Committee was established in 1997.Banks immediately claim they can’t pass on the full base-rate cuts because LIBOR is higher: 5.56%. The BBA, citing the BoE’s Financial Stability Report, defends the casein the teeth of a huge political and public backlash, pointing out that banks have lent £726bn than they had in deposits.882 I “For the sake of our security, our economy, our jobs and planet, the age of oil must come to an end.” Barak Obama 2007
BP scraps UK renewables activities to focus on the US, saying the returns are better there. BP plans to spend $1.5bn on US wind projects next year and have 1GW in place by end 2008, 3GW by 2010.884 7.11.08. Big lenders cave in the pressure to hand BoE rate cut on the customers. They issue a round of reluctant announcements after a meeting with Chancellor Darling. Haemorrhaging cash, GM says it will go bust without a bailout or merger. The automaker made a $4.2bn loss in the last quarter. Industry experts say Ford and Chrysler need bail-outs too, totaling up to $50bn, or 3m jobs will be lost. But they are not alone in contagion from the credit crunch. Toyota’s profits dropped 69% in the last quarter. Obama is pledged to help, but a year ago in a Detroit speech, he exhorted the industry to do more on fuel –efficient autos, saying: “It’s not a question of whether, but how: not a question of if, but when. For the sake of our security, our economy, our jobs and planet, the age of oil must come to an end.”885 Chinese premier says west must step up the climate effort. “Developing countries should shoulder the duty and responsibility to tackle climate change and alter their unsustainable lifestyle,” Wen Jiabao says in Beijing. Last month a senior Chinese official floated the notion of developed countries allocating as much as 1% of GDP for a fund to help developing countries adapt to climate change. China has set a 20% energy-efficiency improvement target by 2010.886 BP pulls out of UK CCS competition. It will instead focus on CCS projects with RioTinto in California and Abu Dhabi. Several hundred million pounds is on offer in the UK with the winner to be announced end 2009 to begin operation in 2014. Katine project reviewed: £2.5m raised in a year, donors see where it goes, progress being made. The Guardian committed to an ambitious three-year new kind of aid project a year ago: asking readers to raise money to help a community of 25,000 people in Uganda. The £2.5m raised so far is a generous response, allowing investment to date of $33 per person over 3 years. With it aid agencies have built and repaired 16 boreholes for clean water. Everything starts with clean water. They have built two schools, refurbished others, and distributed 2,000 textbooks. They have trained village health teams in early diagnosis of killer diseases, and delivered 2,678 mosquito nets. They have trained farmers groups in how to raise productivity, and to market products via the ubiquitous mobile phones. They have provided 264 bicycles. They have set up micro-credit schemes in partnership with Barclays bank, across 66 villages. Can such a project be scaled? The response of Barclays would tend to suggest it can. Inspired by what they saw, they have announced a $20m project to extend the model across Africa and Latin America.887 9.11.08 Analysts appeal for G20 leaders to pool response to the credit crisis when the meet next week. Columnists debate whether this meeting can be Bretton Woods 2. Some say no, that meeting took two years of preparation. Will Hutton argues that with almost $3 trillion of loan losses and a global financial derivatives market of $360 trillion, what choice can there be? His policy recommendations include the following. Beef up the IMF significantly: private capital flows run into trillions, but the IMF has only $250bn to deploy. Co-ordinate a global fiscal injection of funds. In the absence of any sense of willingness to pool genuine sovereignty (just like at the original Bretton Woods conference), at least create a “college” of international regulators. Bring back predictability by ending floating exchange rates: manage them, for the dollar, yen, and euro. Stop the escape of capital to destabilizing tax havens: we need global rules for these, just as for hedge funds and derivatives trading. End the culture of minimal regulation in the City: for example, set up licensed exchanges for global trade in financial derivatives.888 Yüklə 2,27 Mb. Dostları ilə paylaş:
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