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Triple Crunch Log                                                                                                            

Pension funds are failing people as stewards of their cash. Ruth Sutherland argues that the credit crunch and the oil spill should together be a line in the sand. “The Green Investment Bank Commission estimates that up to £1 trillion is needed by 2030 to upgrade and decarbonise Britain's infrastructure – investment on a scale not seen since reconstruction after the second world war. Pension funds have £1.5tn of assets under their control and are meant to be long-term investors, so they should be ideal candidates to put up some of the capital. But there is no guarantee they will do it.” One option is to enfranchise pension fund members, she says, so they - the end owners - can cut through the layers of advisers, brokers, analysts, and money managers to reach and influence the boards of the companies causing the problems. 540

Obama gives nearly $2bn to two solar companies to create up to 5,000 jobs. Abengoa will get $1.45bn to build a huge solar thermal plant in Arizona. Abound Solar will get $400m in loan guarantees to build a solar panel manufacturing plant in Colorado.541

5.7.10. Saudi oil pronouncement is in context of 4.4 mbd spare capacity, and 11% of oil diverted to gas. FT: “Saudi oil minister Ali al-Naimi said in June that the country wouldn’t need to increase its oil production capacity until 2020. The country now reports it has 4.4m b/d of spare capacity - more than double the ‘cushion’ that it officially targets. Upstream reported in May that Saudi Arabia is exploring for hydrocarbons in the Red Sea, and has recorded 22,000km of seismic data there, among challenging geography including 2km-plus water depths, high temperatures and a layer of salt. It has also commissioned exploration around the Manifa oil field in the Persian Gulf. But the overall focus is on gas, not oil, because of the Kingdom’s domestic electricity supply problem. It heavily subsidises both fuel and electricity use, and consequently consumption is growing too fast for domestic gas supply to keep up with. Platts reported last month that Saudi Arabia diverts about 877,000 b/d - or 11 per cent of its current oil output - to its own domestic electricity supplies.”542

As Gulf spill cost passes $3bn, BP hands a $400m bill to Anadarka and Mitsui, its partners on the Macondo well. Around 44,500 personnel, more than 6,500 vessels and 113 aircraft are involved in the clean up. Two caps are now in place, and together have trapped over half a million barrels to date. A floating riser system, designed for rapid connection and disconnection appropriate for the hurricane system, should be in place within a week.543

China and India offset the developed world’s recession-induced fall in CO2 emissions last year. FT: The Netherlands Environmental Assessment Agency (PBL), a national policy institute, estimates that total CO2 emissions from fossil fuels and cement in the OECD and Russia collectively fell by 7 per cent last year.  China and India’s emissions rose by 9 per cent and 6 per cent, respectively. The result was that total world emissions growth was flat between 2008 and 2009 …the first time since 1992 that CO2 emissions haven’t increased.”544

Indian opposition calls for nationwide strikes over lifting of fuel subsidies. CNN:India is moving to roll back fuel subsidies. The government recently lifted state controls on gasoline and is determined to market-link diesel prices as well. But India's bold plans to reform the decades-old regulations are meeting stiff resistance. Opposition parties have called for a nationwide strike for Monday over fuel-price rises that threaten to stoke India's double-digit inflation further.”  …. “Singh's government, now in the second year of its second term in office, remains firm. "(O)ur people are wise enough to understand that excessive populism should not be allowed to derail the progress our country is making, and for which it is winning kudos internationally as well," the prime minister told reporters last week as criticism at home mounted over cutting fuel subsidies.”545

“Public speculation rather public profligacy is the real villain of Labour years,” Philip Inman argues in the Guardian. “Borrowing in 2009 reached £159.2bn, which was equivalent to 11.4% of national income. Added to all the other borrowing down the years the UK's accumulated mortgage was £950.4bn, equivalent to 68.1% of national income. Borrowing projections (without Osborne's extra spending cull) showed the debt graph heading for 90% of national income. It all sounds like the nation is drowning under the weight of debt. And for some doomsayers it is.” “….Consumer spending grew as property wealth sustained confidence. With property values in decline from the autumn of 2007, consumption dived. Alistair Darling borrowed to fill the gap, not to fund welfare or departmental budgets – they had risen, but not uncontrollably.” “….It is in the consumption and asset price numbers that politicians should look for the roots of the crisis. It is in the over-spending by private households that we find the causes of the crisis much more than in the overspending of governments.” “….Vince Cable, when Liberal Democrat treasury spokesman, was one of the most vociferous critics of Labour's laissez-faire policies regarding private consumption. From 2003 onwards he called for higher taxes and a limit on lending to curtail ballooning property prices. Yet now in his role as secretary of state for business innovation and skills, he must nod while George Osborne blames spending by the previous Labour government for the country's ills rather than the British obsession with property. A glance at the budget projections shows that Cable and Osborne expect the property boom to be back within a couple of years and providing even more tax receipts than before. In 2015/16 stamp duty taxes will fill the exchequer with £17.7bn, with the majority from duty on property sales. A £10bn net boost to the exchequer will mark a return to a consumption-led boom and a return to all the same old problems.”546

6.7.10. Deepwater oil discoveries are increasingly important to the global and U.S. reserve base, according to research compiled by IHS CERA. The volume of new oil reserves coming from deepwater has been rising since the 1990s, and accelerating in recent years. The figures show that from 2006 to 2009, annual world deepwater discoveries in over 600 feet of water accounted for 42 percent to 54 percent of all discoveries onshore and offshore. In 2008, deepwater discoveries added 13.7 billion BOE to global reserves. Global deepwater production capacity in 2,000 feet (610 m) of water or greater has more than tripled since 2000, rising from 1.5 million b/d in 2000 to more than 5 million b/d in 2009, i.e. global deepwater production also exceeds that of any country except Saudi Arabia, Russia and the U.S. Pre-Macondo projections showed deepwater production capacity had the potential to rise to 10 million b/d by 2015.  Crucially, the average size of deepwater discoveries significantly exceeds new onshore discoveries: about 150 million BOE for 660 feet+ wells in 2009, compared with the onshore average of just 25 million barrels.  U.S. Gulf production accounting for 30 percent of U.S. crude oil production in 2009, or 1.6 million b/d out of 5.3 million b/d. This 2.6 million b/d of Gulf supply was the result of a 33 percent, or 399,000 b/d, increase in output from 2008, which has contributed to a drop in U.S oil imports.547

Spain wants to double its subsidies for domestic coal-fired power. The EU is giving it trouble in doing so, under competition rules. Umpeloyment is running at 20% and PM Zapatero is from the coal-mining district, Leon. The FT observes that governments everwhere are doing this kind of thing. Under pressure, domestic jobs

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