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Triple Crunch Log                                                                                                            

Times: “France is being forced to import electricity from Britain to cope with a summer heatwave that has helped to put a third of its nuclear power stations out of action. With temperatures across much of France surging above 30C this week, EDF’s reactors are generating the lowest level of electricity in six years, forcing the state-owned utility to turn to Britain for additional capacity. Fourteen of France’s 19 nuclear power stations are located inland and use river water rather than seawater for cooling. When water temperatures rise, EDF is forced to shut down the reactors to prevent their casings from exceeding 50C.”291

5.5.10. Three die in Athens as anarchists torch a bank during protests against the IMF / EU austerity programme, a condition of the €110bn bailout extended to the Greek government. The euro falls to a 14 month low against the dollar.292

Investors bet on a Tory win in UK election as they pile into gilts. The expectation seems to be that Cameron will deal best with the nation’s £163bn deficit – 11% of GDP, higher than Greece’s – and provide something of a safe haven in the troubled Eurozone.293

BP admits in a private congressional briefing that the oil escape could reach 40,000 barrels a day as White House backs a move by Senators back to put oil companies on the hook for $10bn for a spill. It could be retroactive, because under current laws (20 years old) BP’s liability is capped at $75m. BP faces 20 lawsuits to date.294

Moody’s changes BP’s Aa1 debt status from “stable” to “negative” on the basis of oil-spill fears, because it is “remains impossible to assess the full extent of the costs and business impact on BP’s results”. Equity analysts are more sanguine, having opined that the total exposure will be “limited” to $3-10bn.295

CBIC’s Jeff Rubin likens the Deepwater Horizon to Three Mile Island. Writing in the Globe and Mail, he says: “Will the unfolding environmental catastrophe from the ruptured Deepwater Horizon well in the Gulf of Mexico become deep-water oil’s equivalent to the Three Mile Island accident? In terms of environmental degradation and economic cost, it’s already become much more. The real legacy of Three Mile Island wasn’t what happened back in 1979, though, but rather what happened, or more precisely didn’t happen, over the course of the next 40 years in the United States. Literally overnight, the near-meltdown of the reactor core changed public acceptance of nuclear power plants. No company in the U.S. has built a new one since.”296

Blind voting on policies puts the Greens as the most popular UK political party. The website VoteForPolicies.org.uk lists policies and asks people to vote for those they prefer. A quarter of the 245,000 people who took the test ended up voting for the policies of the Greens, about 18% each for the LibDems and Labour, and 16% for the Tories.297

6.5.10. Hung Parliament in the UK. Meanwhile, Wall street is gripped by panic that Greek crisis will spread. Stliglitz and Roubini are doubtful that the Euro can survive. They do not think governments can or should squeeze their spending to the degree the IMF and EU stipulate. Professor David Blanchflower, former Bank of England monetary policy committee member, says it is  "crazy" for highly indebted countries such as Greece, Spain, Portugal and Britain to enter a “death spiral” of spending cuts : “All anyone is talking about is austerity, but all you get is more unemployment and low growth. Then you find yourself in a spiral of debt as low growth forces you to cut spending further.”298

Citywire website: “Would you put up with what is being asked of the Greek people?” As part of the IMF/ EU bailout Greek leaders are proposing the following measures: Public sector pay to be frozen till 2014; Public sector salary bonuses – equivalent to two months’ extra pay – to be scrapped or capped; Public sector allowances to be cut by 20%; State pensions to be frozen or cut, with the contribution period up from 37 to 40 years; average retirement age raised from 61 to 63, and early retirement restricted; VAT to be increased from 19% to 23%; Taxes on fuel, alcohol and tobacco raised to 10%; A new one-off tax on profits to be introduced, plus new gambling, property and green taxes. 299

Dome to stem the oil flow moved into place. The leak is now 5,000 barrels a day. The structure weighs almost 100 tonnes. Such a capping has never been undertaken in waters this deep.300

7.5.10. EU crisis goes global. European shares finish at a 6 month low as more shares change hands in London than at any time since the credit crisis in autumn 2008. Other exchanges are down too.301

EU drops new emissions regulations that could have shut Drax. Pressure from the utilities, arguing that they cannot get enough new generating capcity onstream until 2020. makes a key committee put off the industrial emissions directive from 2016 until 2019. The parliament is likely to ratify this in July. The Large Combustion Plants Directive remains in place.302

Critics focus on corruption of the rigs watchdog: a pattern repeated from the credit crunch? FT: “Just as the financial crisis revealed that US regulators were often too cosy with institutions that they were meant to supervise, BP's huge oil spill in the Gulf of Mexico has shone an unflattering light on the agency charged with regulating US oil resources. For more than a decade, the Minerals Management Service, a federal agency within the interior department, has been accused by government watchdogs of failing to inspect offshore oil leases and relying too heavily on industry data in collecting royalties and other fees related to oil and gas. In a low point for the agency, a scathing 2008 report by the inspector-general of the interior described a culture of "substance abuse and promiscuity" within the MMS department charged with collecting royalties on leases and revealed that two MMS employees had, literally, been in bed with industry contacts.”303

Environmental insurers see silver lining from Gulf spill. The Gulf of Mexico oil disaster could also be the largest non-insured business interruption loss in US history, and there is a potential silver lining.  Insurers are writing business for gaps in eg the hospitality industry’s coverage. As for direct losses, Swiss Re estimates that the total insured loss could fall in the $1.5 billion to $3.5 billion range, with its own loss pegged at $200 million before taxes. Lloyd’s of London currently estimates net claims to be between $300 million and $600 million. A BP spokesman says the company is self insured, but did not provide further details.304

8.5.10. Hydrate crystals block the cofferdome as oil hits shore for first time. BP now plans to do a “junk shot”: blast the blow-out preventer with debris (shredded rubber etc) under pressure, hoping to block the leak.

9.5.10. Deep-water oil’s ability to offset depletion may hinge on the Macondo cofferdam operation. If it succeeds, it should capture around 85 per cent of the leaking oil, then the spill (around 100,000 barrels, 4.2 m gallons so far) will end up at less than half the amount spilled in the 1989 Exxon Valdez disaster and won't even make it into the top 100 oil spills by volume. But if it fails, the relief well might take three months, and the spill could reach 450,000 barrels, just under twice the Exxon Valdez (into the top 50 spills). Douglas

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