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Triple Crunch Log                                                                                                            

10.11.10. Wall Street to sidestep ‘Volcker rule’. FT: “Wall Street groups will continue to invest billions of dollars in property and companies in spite of new rules aimed at curbing banks’ bets with their capital, executives say. … the Volcker restrictions do not apply to “principal investments” – banks’ direct purchases of securities, companies and property assets – because they are regarded as longer-term commitments and carry higher capital charges. Unlike short-term “proprietary trading”, which has traditionally had a modest impact on earnings, principal transactions were both an important driver of banks’ profits in the run-up to the financial crisis and a big source of losses.”1042

Europe’s energy chief pledges to dismantle barriers to a common European energy market as he unveils a strategy paper calling for €1,000bn in new investment over the next decade. FT: “Introducing a plan to help connect the continent’s oil and gas pipelines and enhance its electricity grid, Günther Oettinger, the energy commissioner, on Wednesday complained that the EU’s pipeline networks were “still operating within the borders of the principalities of the 19th century”. policymakers have settled on a more liberalised market as the linchpin of a strategy to address the biggest energy challenges confronting the bloc – from climate change to security of supply.”1043

The Green Deal energy bill will let consumers gamble on future savings. Green Deal bill allows consumers to shift the upfront costs of energy efficiency measures to suppliers. Guardian: “Under the government's "golden rule", a household with an £1,500 annual electricity and gas bill could have £10,000 of work done under the Green Deal. Spread over 20 years, the £500 annual charge would be offset by the fuel savings, so the bill remains less than £1,500. … Ian Marchant, the chief executive of Scottish and Southern Energy, one of Britain's "Big Six" energy suppliers, said that for example customers could decide to hedge themselves against higher prices by fixing 80% of their energy bill, including the Green Deal element. The remainder would be left "floating" so that households could save money by reducing their consumption. He added: "At the moment we do not offer people a choice. The package of service, product and pricing is pretty similar. But in the future people will make a lot of choices. "Consumers do not properly engage on energy, because we do not allow them to. That is not good for society and should change." It is possible at the moment to secure a fixed fuel tariff, but such offers vary in popularity. British Gas has about a tenth of its 15 million customers on a two-year fixed deal. The company is expected to offer pilot Green Deals next year.”1044

Solyndra: a setback for Silicon Valley’s solar aspirations pointing to weakness of the whole model? Solyndra – a Californian solar company that had been singled out for a $535m loan guarantee, marking it as a potential national champion – has announced that it was closing one of its two plants and delaying the expansion of the second. FT: “The coincidence strikes a discordant note. The solar business was meant to demonstrate how the Silicon Valley way of doing business could create a new, world-beating industry. Instead, it is in danger of becoming a rerun of one of the US tech industry’s least pleasant interludes: the memory chip war of a quarter of a century ago. … With private capital of nearly $1bn, money may not be an immediate concern – but Solyndra, and many others in the business, have yet to prove they have a model that works.”1045

11.11.10. Who’s right on oil demand, OPEC or the IEA? FT: “According to calculations by JCB Energy Markets, the IEA has “slashed 7.5mbpd out of its 2030 world oil demand forecast”. … The agency expects oil demand to rise steadily to 99mbpd by 2035, which would be 15mbpd higher than 2009. However, if we take the rise that Opec expects next year and assume it continues until 2035 (as we might expect by the IEA’s phrase “continues to grow steadily”), we come to a figure of 116mbpd. If we think the steady growth refers to the percentage rise in demand rather than the actual number of barrels, the figure is even higher - 121mbpd.”1046

IEA World Energy Outlook 2010: Questionable assumptions and major omissions, says The Oil Drum. “The World Energy Outlook 2010 makes quite a number of assumptions that seem wrong, and omits important ideas. Here are a few that Oil Drum staff members have mentioned. You may have others you think should be added to the list. 1. Net Energy. The WEO assumes all energy resources are equal, without considering "Net Energy" or "Energy Return on Energy Invested." … 2. Quality of Energy. One cannot simply substitute one type of energy for another. Even if we have a temporary surplus of natural gas, the vast majority of our cars cannot run on natural gas. … 3. Recession from High Prices (Low Net Energy). If we try to use lower and lower quality energy resources, prices can be expected to rise higher, because low net energy and high cost pretty much go hand in hand. There are strong indications that oil above $85 a barrel (in 2009$) sends the US economy into recession. … 4. OPEC Politicized Reserves. Many of the countries that the WEO is hoping to obtain increased oil production from between now and 2035 are countries that have very politicized reserves … 5. Questionable USGS Reserves. USGS published its last major set of reserve estimates in 2000, but it is not clear that these estimates are very useful in determining how much is actually extractable at prices economies can afford to pay. There are also questions as to whether there have been major mistakes in estimates. Just last week, the USGS announced that most of the oil resources it was expecting in the National Petroleum Reserve in Alaska were in fact, natural gas resources. 6. Omission of Export Analyses. Oil exports available to importers have been declining for five years now. Oil use by oil exporters rises each year, since populations of these countries are growing, and since leaders want to keep their citizens happy. The oil available to oil importers is only what is left, after oil exporters have taken what they see as necessary for their own needs. WEO does not look at this issue. 7. Overly Rosy View of Unconventional Natural Gas. Production of shale gas is currently high and prices are low. The question is whether this is a temporary market aberration (to be followed by bankruptcies and reduced production) or something one can count on as a major offset for future natural gas shortages. The Oil Drum has published articles … suggesting that production costs are much higher than current market prices. 8. Failure to address why world oil production has been flat for six years. If the amount of available oil reserves is so great, why hasn't new oil been rushed into production in the last six years, as oil prices spiraled to $147 barrel. … 9. Assumption that smart grid will be of more benefit than it will be. … 10. Assumption that major improvements in energy intensity of GDP can be expected in the future. … 11. Failure to consider constraints other than oil. There are many limiting factors, other than oil. 12. Failure to put together all of the costs. Under any scenario there will be huge costs involved.”1047

Arctic oil spill clean-up plans are 'thoroughly inadequate', industry warned. FT: “Report from US environment group warns that ice, freezing temperatures and high seas would overwhelm any clean-up attempts. …. the report, Oil spill prevention and response in the US Arctic Ocean, by the Pew Environment Group, warns that oil companies are not ready to deal with a spill, despite the lessons of the BP disaster in the

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