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Triple Crunch Log                                                                                                            

burner by both the media and politicians. This in turn means that the real size of Opec spare capacity is critical. If we take the last plots of spare capacity from the IEA and EIA as published by Rembrandt we find that at the point in mid-2008 when every oilfield installation on earth was straining to produce more $147 oil we still had a notional Opec spare capacity of over 1mn b/d (EIA) and over 2mn b/d (IEA).

It seems reasonable to assume that this 'residual' spare capacity is either imaginary, unsaleable or some sort of untouchable 'iron reserve'. In my books this reduces the 'real' Opec spare capacity to under 4mn b/d whether you use the IEA or EIA data. (One of my slides from ASPO Washington shows this)

However as Rune showed on the Oildrum this probably exaggerates the spare capacity. Al Husseini claims Opec's decline rate is 1mn b/d per year. I would put it rather higher. Even if we believe that all the new capacity that has come onstream since mid 2008 is operating to its claimed capacity it is hard to get to a real spare capacity figure of 3mn b/d and not that hard to get it down nearer 2mn b/d.

Two further clues all suggest real spare capacity is less than it appears. Recent press reports suggest Saudi is apparently relaxed about higher prices and not offering more availability.

And, if you compare the IEA's estimate of Opec crude production capacity in July 2008 (excluding Indonesia) of 34.23mn b/d with their estimate for October 2010 of 35.26mn b/d, we find after all those new fields have started up Opec capacity has only increased by 1mn b/d in the last 2.25 years or significantly less than non-Opec capacity increases.

So in my books the crunch comes in 2013 with an anticipatory price run up in 2012.1129

As EU agrees bonus crackdown, banks look immediately raise salaries, and threaten to leave. Guardian: “Bankers are in line for big pay rises as major financial firms attempt to sidestep draconian new guidelines from Europe that restrict the way bonuses can be paid. … The guidelines from the Committee of European Banking Supervisors, first issued in October and agreed today, could potentially cap the size of a bonus relative to a banker's salary. They also require 40%-60% of a bonus to be deferred for three to five years so that it can be clawed back in the event that performance turns sour. …. Experts warned that the guidelines might actually reduce any incentive to link pay to performance. Jon Terry, remuneration partner at PricewaterhouseCoopers, pointed out that base salaries for senior bankers were already three to four times higher than 18 months ago. … Bankers, who have already warned they might leave the UK as result of regulation, are now expected to issue fresh warnings about the competitive challenges they face. Lodge said: "This could put big multinationals at a disadvantage. This could tip the balance quite quickly."1130

Irish finance minister slaps a 90% tax on bonuses paid by Irish banks. Guardian: “Among the few bonuses to be declared so far are those for 2,400 staff at stricken Allied Irish Banks, which is due to issue €40m of bonuses next Friday – despite being bailed out as part of the International Monetary Fund-EU Irish rescue package. The imminent payments have prompted anger in Ireland and finance minister Brian Lenihan has announced a new 90% tax on all future bonuses awarded to bankers.”1131

11.12.10. Deal is reached at Cancún summit: all major economies agree to cut emissions and establish a fund to help nations most vulnerable to climate change. Guardian: “The UN climate change talks produced a modest deal today that for the first time commits all the major economies to reducing emissions, but not enough to meet their promise of keeping the global temperature rise to 2C. The agreement, which took four years to negotiate, should help to prevent deforestation, promote the transfer of low-carbon technologies to developing countries and, by 2020, establish a green fund, potentially worth $100bn (£63bn) a year, to shield the more vulnerable countries from climate change. However, governments failed to reach agreement on how far overall global emissions should be cut, and there are many loopholes for countries to avoid making the deep reductions that scientists say are needed. Researchers from the Climate Action Tracker said the pledges would set the world on course for 3.2C warming – a catastrophe …. By the end of the conclusive round of exchanges, which began at around 7pm local time on Friday night and did not end until after 3am yesterday morning, the only resistance to a deal came from Bolivia…. OUTCOMES: All countries to cut emissions. Forest deal to provide finance for countries who avoid emissions from deforestation. Finance deal to potentially provide $30bn for developing countries to adapt to climate change now, and up to $100bn later. A new UN climate fund to be run largely by developing countries. Easier transfer of low carbon technology and expertise to poor countries. China, the US and all major emitters to have actions inspected. Scientific review of progress after five years.1132 (The deal recognises the goal of reducing greenhouse gas emissions from industrial countries by 25-40% from 1990 levels within the next 10 years - current pledges amount to about 16%).

Deal gavelled through by a strong chair, as in Kyoto. Guardian: “The Bolivian delegation objected strongly to the deal which they say does not go far enough. But the deal was ruthlessly gavelled through by the chair of the meeting, Mexican foreign minister Patricia Espinosa. The move was greeted by cheering, applause and a standing ovation in the conference hall.” Espinosa also issued multiple assurances of no side groups, which helped with buy in. FoE: “Russia, Japan and the US, backed by powerful vested interests, have pursued a selfish agenda which has opened the door to a hazardous system where emissions targets would be decided on the whim of politicians, rather than by science.”1133

Further details on the banking curbs, evasion of them by the banks, and need for a clamp down. Guardian: “At first glance, the guidelines from the committee of European banking supervisors appear commendably tough. They go further than anything agreed between the Group of 20 leading industrial nations, and require that less than a third of any bonus is paid in cash, and that between 40% and 60% is locked up for three to five years – so it can be taken back if a deal turns sour.  …. The reasons for tackling bankers' bonuses are manifest. One is provided by Gordon Brown in his new book, where he estimates that if financiers had taken "10% less per year between 2000 and 2007, they would have had... some £50bn more [in capital] to help them to withstand the crisis." As readers and taxpayers will recall, £50bn was the sum the government injected into the banking system in 2008, to prevent an even bigger crash.”1134

Areva sells Kuwait a billion euro stake, including a put option: the Kuwait Investment Authority will hold nearly five percent. AFP: “Areva said its outlook for 2012 included a revenue of 12 billion euros and "a double-digit operating margin." The French government holds 93 percent of Areva -- set up in 2001 -- and discussions about attracting other investors, including Qatar and Japan's Mitsubishi, have been underway for some time.”1135 FT: “Kuwait’s sovereign wealth fund will be able to sell its 4.8 per cent stake in the French nuclear group Areva back to the government if Paris fails to bring the state-owned company to a full listing

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