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Triple Crunch Log                                                                                                            

industry. Observer: “It is understood that lawyers for Cameron International, the manufacturer of the BOP, will argue the device was so significantly modified in China that it no longer resembled the original component, and that Cameron should therefore not be held liable. Transocean, the owner of the Deepwater Horizon, which bought the BOP from Cameron, has already told congressional hearings into the disaster that the modifications were carried out at BP's request and "under its direction" as the lessee of the rig.”599

More trouble for BP as employees and contractors speak out. Ken Abbott, a whistleblower from BP's giant deepwater Atlantis platform in the Gulf of Mexico, alleges that operations there are “like a Wild Wild West show …. The big concern and primary driver was cost. I felt there was a whole lot of pressure on contractors to come up with the least cost. Everyone knew that the quickest way to get run off [the job] was not to find the cheapest way.” Abbott was run off the job, he believes because he pushed for better engineering documentation. Also, BP was the only company unofficially blacklisted by one Houston insurer because it pushed its contracters so hard. Observer: “Steve Arendt, a Houston-based oil industry safety specialist who investigated BP's refineries after the deadly Texas City explosion, says he found BP staff resistant to change. ….When Osha inspected 55 refineries between June 2007 and February this year, 97% of the serious violations it cited were against two of BP's plants.” …. “BP is the biggest employer in Houston, the home of close-knit Big Oil in the US, and uses dozens of contractors. It is not surprising that Abbott's employer apparently took BP's side over his and why contractors may be reluctant to hold BP to account.”600

KPMG says nuclear power “won't happen” without government subsidy. Britain's new generation of nuclear power stations will not be built if the Government refuses them any more support, a KPMG report commissioned by RWE npower will say this week. It is still uneconomic for utility companies to invest billions of pounds in nuclear power, the report concludes.  The report will say a carbon "floor price" is not enough for the big utilities to commit large capital investments to the nuclear sector, and recommend that the Government ought to introduce a variable premium tariff for all low-carbon technologies – from nuclear to renewables. EDF and Centrica are planning to build the first new British nuclear plant by 2017. A consortium of RWE and E.ON intend to follow with their first by 2020.601

19.7.10. US government detects a fresh leakage, and BP shares fall once again. Admiral Allen writes to Bob Dudley: “Given the current observations observations from the test, including the detected seep a distance from the well and undetermined anomalies at the well head, monitoring of the seabed is of paramount importance during the test period. When seeps are detected, you are directed to marshal resources, quickly investigate, and report findings to the government in no more than four hours.” News of those concerns prompted BP’s shares to drop back as much as 5 per cent, having risen when the new cap was fitted. Dave Stegemeier, senior consultant at PFC Energy, says he is “alarmed” by some of the leaks. “This can’t be what they hoped to be seeing,”’ he says.602

UK lagging behind competitors on energy investment, says Climate Change Committee. This risks setting back the creation of “green jobs”, according to a government advisory body. The UK spent 0.01 per cent of GDP on energy in 2007, the latest year for which comparative figures are available. That compared to 0.03 per cent in the US, 0.05 per cent in France and 0.09 per cent in Japan. About £550m of public money was spent on low-carbon technologies in 2009, about £260m of it on energy. The Committee calls on the government to concentrate support on six areas: offshore wind; wave and tidal power; carbon capture and storage; smart grids and meters; electric vehicles; and aviation.603

China became the world’s biggest energy user in 2009, IEA reports. And the US uses more per capita, than China does. As recently as 2000, the US consumed twice as much energy as China.604

“Today’s Keynesians have learnt nothing,” Niall Ferguson writes in the FT. “It was the war that saw the US (and all the other combatants) embark on fiscal expansions of the sort we have seen since 2007. So what we are witnessing today has less to do with the 1930s than with the 1940s: it is world war finance without the war.”   …. “Those economists, like New York Times columnist Paul Krugman, who liken confidence to an imaginary “fairy” have failed to learn from decades of economic research on expectations. They also seem not to have noticed that the big academic winners of this crisis have been the proponents of behavioural finance, in which the ups and downs of human psychology are the key. The evidence is very clear from surveys on both sides of the Atlantic. People are nervous of world war-sized deficits when there isn’t a war to justify them. According to a recent poll published in the FT, 45 per cent of Americans “think it likely that their government will be unable to meet its financial commitments within 10 years”. Surveys of business and consumer confidence paint a similar picture of mounting anxiety. The remedy for such fears must be the kind of policy regime-change Prof Sargent identified 30 years ago, and which the Thatcher and Reagan governments successfully implemented. Then, as today, the choice was not between stimulus and austerity. It was between policies that boost private-sector confidence and those that kill it.”605

20.7.10. Former Dow Jones reporter writes on Nasdaq.com that Saudi King’s view means peak oil is here. Brendan Coffey, a doubter of peak oil until 2006, now with Cabot Wealth Advisory: “The departure from the successful script OPEC has followed is a remarkable signal of change to me, one that to my mind indicates peak oil is here - there is only so much oil left, and the Saudis want to sell it when the oil crunch becomes apparent again.” …. “About 10 years ago, OPEC sources indicated Saudi Arabia needed to sell a barrel of oil at $18 to break even. Two years ago, data from ratings agency Fitch (which cares because it evaluates sovereign debt) estimated Saudi Arabia's breakeven had risen to $26. In January, Fitch pegged breakeven for the country at $68 a barrel. If it costs more to produce oil, it clearly is harder to get. And Saudi Arabia is the primary low-cost oil producer on the planet.” 606 

Investment recommendation by former Dow Jones reporter worried about peak oil: solar PV. Avoid oil companies, because their share price will involve forward pricing, not just the high oil prices of the day. “If you follow the market closely, you likely recall the fantastic year solar stocks had in 2007: Nearly every solar-related stock posted triple-digit gains that year, with the best performers, First Solar ( FSLR ) and Ascent Solar ASTI ), posting eye-popping 750% gains. The downside is the whole sector has suffered from a significant hangover since then as profit taking and then the 2008 financial crisis forced shares lower. Even industry leaders have plunged, like silicon wafer provider MEMC Electronic Materials, which has fallen to around $10 from a 2007 high of $90, and First Solar, which held up well through much of 2008 until it too succumbed to the bear market. It has fallen 50% from 2008's peak. But as we see in nearly every market and sector sell-

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