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The crude oil price has lost 54% of its value since September 2014 and there are no indications that it will stop there in the absence of a major production cut by OPEC. It is not inconceivable that the price could even slide to $40 a barrel.
The reasons given so far for the steep oil price decline is glut in the global oil market caused by rising US shale oil production and a slowdown in economic growth in China and the European Union (EU) reducing the demand for oil. This was exacerbated by OPEC's very wrong decision not to cut production by at least 2 million barrels a day (mbd) to absorb the glut in the oil market. Had they cut their production, Russia and Mexico would have joined them and cut production by 500,000 barrels a day (b/d) and 300,000 b/d respectively, a total of 2.8 mbd capable of removing the glut and stabilizing the oil price. It is not too late for OPEC to reverse their earlier decision and cut production. Failure to do so could push the oil price down possibly to $40/barrel.
Climate change is the most significant global environmental issue, so policy discussions with mid- to long-term perspectives are ongoing worldwide (e.g., UNFCCC). At the same time, energy is a critical global issue in the current society. Recently, energy demand has dramatically increased in large emerging countries (e.g., China and India), driven by economic and population growth. This tendency will continue, thus raising concerns about energy supplies in the future. Also, because production and reserves of fossil fuels are located in a limited number of countries, other countries, including those in East Asia, that are poor in energy resources and dependent on imported fossil fuels will face potential price-fluctuations and geopolitical risks.
The UK Department of Energy and Climate Change (DECC) announced on Thursday 26 February the results of the first auctions for the allocation of Contracts-for-Difference (CfD). CfD is a policy under the UK Government's Electricity Market Reform programme for the competitive allocation of support to renewable energy technology projects. 27 CfD contracts have been awarded, that included 2 offshore wind farms, 15 onshore wind farms and 5 solar PV projects, securing support for more than 2GW of new renewable electricity capacity. The total amount of support amounted to a total of £315 million.
Crude oil prices have declined by 58% from June 2014 to January 2015. This sharp negative departure from trend takes place three years after the 2011 collapse of gold prices and the start of the commodities´ bear market which has seen an overall reduction of commodity prices by 46% per cent.
The oil price has reached a five-month high, with WIT oil futures breaking through the $55 per barrel level for the first time this year at the same time as the benchmark for crude oil volatility drops to 37 volatility points, reaching levels not seen since December 2014. Changes in crude oil price and volatility can be justified in terms of supply fundamentals namely the fall in US oil rigs, the slowdown of crude oil inventory build in the US, and increased concerns regarding the conflict in the Middle East. The recent run up in prices has led to renewed optimism in the energy sector. The main question for traders now is whether the period of bearish prices and increasing volatility is coming to an end.
In the past 10 years, "Ukraine" and "gas" have together been associated with the country's strife with its eastern neighbour, and by extension, with Europe's security of supply concerns. Given this, it is easy to overlook Ukraine's importance as a gas market in its own right. At 42.6 billion cubic meters (BCM) in 2014, the country's gas market ranks a close 4th in Europe, after Germany's (86.2), UK's (78.7) and Italy's (68.7).
The Government of Japan newly developed the Basic Energy Plan in April 2014, which reflected the situation after the Fukushima Daiichi nuclear disaster occurred in March 2011. However, the plan did not show the energy mix (expected percentages of energy sources) in the future. On April 28, 2015, the Ministry of Economy, Trade and Industry (METI) announced the Long-term Prospect of Supply and Demand of Energy plan*, which includes the energy mix for FY2030. This prospect is directly related to the discussion on Japan’s greenhouse gas (GHG) emission reduction target for FY2030 (Intended Nationally Determined Contributions or INDCs).
Are correlations across assets constant for every time interval?
Let´s analyze this question taking two series in the energy sector: kerosene and crude oil prices.
Oil is at the heart of Iran’s nuclear programme. Iran needs nuclear energy to replace the crude oil and natural gas currently being used to generate electricity, thus allowing more oil and gas to be exported. Without nuclear power, Iran could be relegated to the ranks of small exporters by 2020 with catastrophic implications for its economy and also the price of oil.
Iran would doubtless not be averse to possessing nuclear weapons. There is an element of security and also logic involved with Iran’s quest for nuclear weapons. Even the recent nuclear agreement will not shift Iran an iota from its determination to acquire nuclear weapons.
In November, Paris will be hosting the United Nations Climate Change Conference. This will be the 21st yearly session of the Conference of the Parties, also known as COP21, and the 11th session of the Meeting of the Parties (CMP 11) to the 1997 Kyoto Protocol.
The conference is expected to deliver a “New Kyoto”, a binding agreement between member nations on their commitment to reduce carbon emissions. This would be the result of a long and tedious process started in 1992 and without a doubt one of the main geopolitical achievements of the year. However, reducing CO2 emissions is not a benign task and therefore assessing the potential impact of an international agreement is critical for policy makers, business owners and any individuals interested in affordable access to energy and energy-supply security.
From a peak production of 6 million barrels a day (mbd) and crude oil exports of 5.7 mbd in 1974, Iran in 2014 was struggling even to produce 3.00 mbd with net exports down to 1.00 mbd. And if the current trend continues, Iran could cease to remain an oil exporter altogether by 2030. For the last fifteen years Iran has failed miserably to achieve its OPEC production quota of 4 mbd.
The decline in Iran’s oil exports over the last few years was not solely due to tighter sanctions but mainly to fast-depleting old oilfields whose reservoirs were damaged in the 1970s from excessive production under the Shah. Since then Iran has never had the chance to repair its damaged oil industry what with war with Iraq from 1980-1988 followed by stringent sanctions because of its nuclear programme.
INFO MAGAZINE - SEPTEMBER 2015
THE BUSINESS OF CLIMATE CHANGE
Back in 1990, as the green movement first gained critical mass amongst consumers, I was involved in the development of an advertising campaign in the UK and Germany. The TV spot did not show any glossy product shots, but simply a sequence of beautiful natural and animal scenes against a soundtrack of Louis Armstrong singing ‘What a Wonderful World’. At the end, a voice-over informed viewers that cars from Vauxhall and Opel would be fitted with catalytic converters at no extra cost (rivals were charging extra for these). The campaign was an enormous success, winning a Gold EFFIE Award that year for marketing effectiveness. Vauxhall and Opel’s brand image improved dramatically and the public bought their cars in record numbers.
Since then, it has become rather less straightforward to influence consumer attitudes and behaviour.
A mixture of general apathy, changing government priorities and frustration over “greenwash” has left the public confused and uncertain about their personal roles in limiting climate change. Moreover, surely as long as the US keeps guzzling gas and China keeps burning coal, there’s little an individual citizen can do?
Japan might have stolen a march on other countries and oil companies considering investing in post-sanctions Iran. The foreign ministers of Iran and Japan have agreed in discussions in Tehran on the 19th of October to expedite the conclusion of a bilateral investment agreement. A statement issued after the conclusion of their discussions also called for close cooperation between the two countries in the implementation of the International Atomic Energy Agency’s (IAEA) safeguards in order to help Iran implement its part of the nuclear deal reached last month with the major powers (P5+1) – namely the United States, Russia, China, France, Britain and Germany.
The five year stalemate around the giant gas field named Leviathan, located offshore Israel, might be finally resolved after a chain of events alarmed politicians and energy strategists in the only patch of land with not a drop of oil. Personally Israeli Prime Minister Benjamin Netanyahu stepped into the ring, displaying readiness to take the full responsibility for precipitating the stalled project against all odds, which are many. But first came the lightening news of the Italian energy major Eni discovering the Zohr gas deposit offshore Egypt with an estimated resource bas of some 850 bcm (the largest find since 1967). It turned into a game changer, diminishing the prospects of Israel to reach out to potential customers in Egypt and, for fear of Zohr’s export potential, to other energy hungry clients in the vicinity.
The gas bonanza, which befell Egypt, led to a close shave vote in the Knesset that approved a controversial framework deal on the Leviathan field development by a consortium of Houston-based oil company Noble Energy and Israeli company Delek Group.
IAEE President-Elect Prof. Kumbaroglu, Chairman of the Turkish Energy Policy Center at Boğaziçi University and DEPA Vice Chairman Prof. Andriosopoulos, Director of the Research Center for Energy Management at ESCP Europe Business School, have agreed at the Atlantic Council Energy and Economic Summit on the mutual benefit of regional cooperation to establish a Joint Gas Hub.
Establishing a natural gas hub at the Greek-Turkish border would benefit both countries and the EU by providing a reference point where gas prices are determined through competition from different sources of gas, IAEE President-Elect Kumbaroglu and DEPA’s Vice Chairman Andriosopoulos declared jointly.
How much relief and consolation can Greece extract from the first-ever “State of the Energy Union” report, produced on Nov. 18 by the European Commission? With all due respect for its commendable motivation to enhance solidarity and drive toward a harmonious cohesion of national interests, it does not provide a clear-cut vision from where exactly would, for instance, South East Europe and in particular Greece receive its LNG and pipeline gas. The European Commission amended the Regulation № 347/2013 of the European Parliament and of the Council as regards the Projects of Common Interest (PCIs), originally adopted in October 2013 (the review and update are scheduled every two years).
The list of PCIs grants special privilege to certain energy infrastructure projects worthy of political and financial support of the EU institutions.