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Introducing Empire Oil: A DeSmog UK Special Investigation

Introducing Empire Oil: A DeSmog UK Special Investigation

The UK likes to brag about its credentials as a global climate leader. But a new DeSmog UK investigation reveals that beneath the green veneer lies some dirty business.

At the centre of it all is the City of London and its junior stock exchange, the Alternative Investment Market (AIM).

DeSmog UK’s new three-part investigative series Empire Oil: London’s Dirty Secret, lifts the veil on a “boys’ club” that generates wealth for The City from environmentally damaging activities in politically unstable regions.

Through detailed analysis of company activity and market data, it exposes how AIM’s “light touch” regulation and complex offshore company structures create an opaque corporate environment in which conflicts of interest have been shown to thrive.

Part one, ‘Black Gold’: London’s African Oil Hub, maps the London oil companies operating in Africa. It identifies:

  • How the UK government provides ongoing support for international fossil fuel exploration despite its domestic and international climate change commitments;
  • 12 private and public limited oil and gas companies headquartered in London that have operations in Africa, all of which have ties to tax-havens in British overseas territories and crown dependencies;
  • The failure of international regulation to tackle issues regarding a lack of transparency for companies operating in unstable markets.

Part two, Taking AIM: London’s Wild West Stock Market, lifts the lid on London’s junior stock exchange, the Alternative Investment Market (AIM). It shows:

  • A history of scandals and company collapse on AIM, and a lack of public sanction and enforcement;
  • A “light touch” regulation system behind which companies are rarely named and shamed for abusing the system;
  • Fundamental problems with AIM’s regulators, known as nomads, that also act as company brokers and can have vested interests in the companies they oversee;
  • The potential for oil, gas, and mining companies to manipulate information about assets in politically unstable regions, and the obstacles to verification for investors.

…click on the above link to read the rest of the article…

Nine Uncomfortable Canadian Energy Facts

Nine Uncomfortable Canadian Energy Facts

We’re not cutting emissions as much as we should, and we’re dependent on an increasingly expensive source of oil.

Canadians are global energy pigs; we’re high emitters of carbon and certainly aren’t leaders in renewable energy.

In addition “aspirational” plans by Canadian politicians won’t deliver promised emission reductions on climate change without major reductions in energy consumption.

These are just some of the hard energy facts contained in Canada’s Energy Outlook, a new and encyclopedic report by David Hughes, one of Canada’s foremost energy experts.

Hughes, whose reliable research is cited by the likes of Bloomberg, Nature, The Economist and The Tyee, has been analyzing energy trends for industry and government for more than 30 years.

Unlike many environmentalists, Hughes does not believe that a transition to renewables or even reductions in greenhouse gases will be seamless, easy or cheap. Here’s why:

1) Canadians live high and large on largely fossil fuel-based energy.

On a per capita basis we consume energy at more than five times the world average. We even consume more energy than oil hungry Americans and twice as much as the average citizen in the Organization for Economic Co-operation and Development. Citizens in Germany, France, the United Kingdom and Japan, nations that don’t export oil, consume energy at less than half the rate of Canadians.

Canada consumed 2.5 per cent of the world’s energy in 2016, and that consumption has increased at .13 per cent per year over the past five years. Fossil fuels, of course, dominated Canada’s energy menu: oil and gas at 57 per cent; coal at five per cent; nuclear at seven per cent; hydroelectricity at 27 per cent and solar and wind at 3.1 per cent.

…click on the above link to read the rest of the article…

Ex-Venezuela Oil Boss: PDVSA Is Collapsing

Ex-Venezuela Oil Boss: PDVSA Is Collapsing

Venezuela

The man who ran Venezuela’s state oil company PDVSA for a decade after 2004 says that the country’s oil firm is on the cusp of total collapse and expects oil production to drop by 600,000 bpd each year amid lack of investment.

Rafael Ramirez, who has long been a rival of Venezuela’s incumbent leader Nicolas Maduro within Hugo Chavez’s inner circle, told Bloomberg in a phone interview that “PDVSA may fall into an accelerated spiral downward.”

According to OPEC’s secondary sources, Venezuela’s oil production averaged 2.154 million bpd in 2016 and 1.916 million bpd in 2017. In March 2018, its production plunged to 1.488 million bpd.

Ramirez became oil minister in 2002 and then head of PDVSA in 2004. During his ten-year tenure at the company, Venezuela’s production dropped by 10 percent. Since Ramirez left PDVSA, oil production has lost another 30 percent, with the steepest drops occurring over the past two years amid total economic collapse and lack of investment.

At the end of last year, Venezuela said that it would launch a criminal investigation into Ramirez over alleged corruption in a wider graft probe that ended with dozens of oil executives arrested.

Ramirez is currently in a self-imposed exile in a European city.

Some analysts saw the corruption purge at the end of 2017 as politically motivated with Maduro getting rid of opponents and tightening his grip over the oil industry—Venezuela’s only foreign exchange income source. Maduro also named a National Guard major general—Manuel Quevedo—as the new head of PDVSA and the country’s oil ministry. Quevedo’s lack of any oil industry experience further worried analysts that mismanagement would continue and even increase.

…click on the above link to read the rest of the article…

Shifting energy import patterns enhance China’s clout in the Middle East

Shifting energy import patterns enhance China’s clout in the Middle East

Subtle shifts in Chinese energy imports suggest that China may be able to exert influence in the Middle East in alternative and subtle ways that do not involve military or overt economic pressure.

The shifts involve greater dependency of the Gulf states on oil and gas exports to China, the world’s largest importer, at a time that the People’s Republic has been diversifying imports at the expense of Gulf producers.

The shifts first emerged in 2015 when Chinese oil imports from Saudi Arabia rose a mere two percent while purchase of Russian oil jumped almost 30 percent. Russia rather than Saudi Arabia has been for much of the period since China’s biggest crude oil supplier.

The shifts were reinforced by the US shale boom, a resulting drop in US imports from the Gulf, and President Donald J. Trump’s tougher trade policies.

“With the Trump administration, the pressure on China to balance accounts with the U.S. is huge… Buying U.S. oil clearly helps toward that goal to reduce the disbalance,” said Marco Dunand, chief executive and co-founder of commodity trading house Mercuria.

At the same time, China became in 2016 the largest investor in the Arab world with investments worth $29.5 billion, much of which targeted infrastructure, including the construction of industrial parks, pipelines, ports, and roads.

Compounding the impact of shifts in Chinese energy imports is the fact that despite support for Russian policy in the Middle East, Beijing increasingly fears that Moscow’s approach risks escalating conflicts and has complicated China’s ability to safeguard its mushrooming interests in the region.

Viewed from Beijing, the Middle East has deteriorated into a part of the world in which regional cohesion has been shattered, countries are fragmenting, domestic institutions are losing their grip, and political violence threatens to effect security and stability in northwest China.

 

…click on the above link to read the rest of the article…

China’s Growing Oil Demand Has Created A Geopolitical Dilemma

China’s Growing Oil Demand Has Created A Geopolitical Dilemma

oil pipeline

China has become the world’s largest oil importer, and despite establishing the largely successful yuan-denominated oil futures, Beijing will have to grapple with an overlooked geopolitical and economic consequence as it seeks to quench its thirst for oil and gas.

As China relies more on both foreign crude oil imports and imported gas in the form of LNG and piped gas from neighboring countries, the outflow of petro-dollars or in this case petro-yuan will see the country contend with the decades-long dilemma that the U.S. faced; a massive transfer of capital to foreign oil producers.

Worse yet, for the U.S. at the time of its foreign oil import dependence, the transfer of funds was often to less-than-friendly Middle Eastern oil producers, including Saudi Arabia who in the 1970s and 80s could arguably have been called a quasi-friend or at least an ally of convenience. The U.S. needed Saudi oil as American oil production continued to decline while U.S. oil consumption spiked to unprecedented levels. For their part, the Saudis needed, and still do, the U.S. Navy’s 5th to keep open vital shipping lanes including the world’s most important maritime chokepoint, the Strait of Hormuz, to allow the export of massive cargoes of crude to foreign markets.

China’s insatiable oil thirst

China surpassed the U.S. in annual gross crude oil imports in 2017 by importing 8.4 million barrels per day bpd compared with 7.9 million bpd of U.S. crude oil imports. China had become the world’s largest net importer (imports less exports) of total petroleum and other liquid fuels in 2013. New refinery capacity and strategic inventory stockpiling, combined with declining domestic production, were the major factors contributing to its recent increase in imports.

…click on the above link to read the rest of the article…

Israel Closes Airspace Near Syria Border Ahead Of Netanyahu Speech With “Dramatic News About Iran”; Oil Surges

Moments ago, Israel’s Channel10 reported that Netanyahu is set to make “significant” televised announcement on Iran on Monday evening at 8pm local time (5pm GMT) in what his office said would be “dramatic news about Iran” and “significant development regarding” the Iran nuclear agreement. As Channel 10 adds, Netanyahu previously relayed the Iran info to Trump on Saturday and Pompeo on Sunday, during his visit to Israel.

The speech will come after Israel’s security cabinet convened for an impromptu, unscheduled meeting in the wake of the strike on Syria overnight, which as we noted earlier reportedly killed 11 Iranians.

Meanwhile, hinting that Israel may be about to launch another, far more powerful strike on Syria, Ynet reports that Israel has closed its airspace near the Golan Heights and the Israel-Syria border, most likely in anticipation of one or more bombing/missile attacks on Syrian territory.

Having slumped earlier following the disappointing German inflation data, WTI has regained all losses on the news that Israel may be about to attack Syria, even following Putin’s direct warning to Netanyahu not to continue airstrikes on Syria.

Developing story

Can India Break Its Oil Addiction?

Can India Break Its Oil Addiction?

New Delhi

India is one of the world’s largest oil consumers, accounting for around 4 percent of global consumption. Only the U.S. and China outrank India in this regard, making it a key player in the oil market.

While India’s oil consumption has seen remarkable growth in the past few years, the recent rise in oil prices may soon force the nation to scale back its reliance on oil importation. In this new oil price environment, continued import growth would put a significant strain on the country’s economy.

India’s Prime Minister, Narendra Modi, has largely benefitted from the slump in oil prices over the last three years, exploiting the low prices by levying a heavy tax on this key commodity. Before Modi came into office, Brent crude averaged $99.43 a barrel. In his very first year, that figure fell by 42 percent before hitting historic lows the following year when WTI dropped below $27.

As the economy has benefited from high taxation on petroleum and diesel, India has experienced a retail energy price significantly higher than that of its South Asian neighbors – with taxes accounting for half of the total retail cost of fuels in India.

As the price of oil fell, the Indian government increased the excise duty on gasoline nine times over the course of three years. The failure of the government to pass these savings on to the consumer resulted in the alienation of the poorer classes of Indian society.

At present, there is a $10.2 billion difference between the market and retail price of oil in India. This gap has led to India having one of the largest state supported societies in the world, with only Saudi Arabia, Iran, Venezuela and China spending more on state support.

A False Economy

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The Oil Curse Comes to Washington

The Oil Curse Comes to Washington

Prices rise and prices fall.  So, too, they fall and rise.  This is how the supply and demand sweet spot is continually discovered – and rediscovered.

When supply exceeds demand for a good or service, prices fall.  Conversely, when demand exceeds supply, prices rise.  Producers use the information communicated by changing prices to make business decisions.  High demand and rising prices inform them to increase output.  Excess supply and falling prices inform them to taper back production.

This, in basic terms, is how markets work to efficiently bring products and services to market.  Five year plans, command and control pricing systems, and government price edicts cannot hold a candle to open market pricing.  But not all markets are created equal.  The market for gumballs or garbage bags, for instance, is much simpler than the market for solar panels or jet engines.

What we mean is some markets are subject to more government intervention than others; especially, if there’s a large money stream that can be extracted by government coercion.  Sometimes governments nationalize an entire market – for the good of the people, of course.

Strange and peculiar price movements can indicate there’s something else besides natural supply and demand mechanics going on.  On April 6, a barrel of West Texas Intermediate (WTI) grade crude oil cost about $62.  Ten months ago, that same barrel of WTI oil cost about $43.  About 24 months ago, it was only about $30 a barrel.

Yesterday, April 26, WTI oil was about $68 a barrel.  What’s going on?

Price Fixing Accidents

Indeed, the oil market is subject to mass government interventions the world over.  The push and pull of these hindrances to regular market determined price discovery can prompt wild price distortions.  We don’t pretend to understand the many variables at play that influence the price of oil.  Still, today, we scratch for clarity and edification, nonetheless.

…click on the above link to read the rest of the article…

Merkel Caught in the Energy Conundrum for Germany’s Future

Merkel Caught in the Energy Conundrum for Germany’s Future

The nominal U.S. President, Donald Trump, will meet with the two main European leaders next week with the goal of pushing the President off his position to end the Iran Nuclear Deal, or JCPOA. But it is the bigger issues of energy security that will be the real focus.

From soy-boy Emmanuel Macron of France to the Gelded One of Germany, Angela Merkel, putting the European Union back in its place is one of the few things that Trump may still be able to affect the trajectory of when it comes to foreign policy.

He has no control over Syria, having ceded his authority to the neoconservative crazies who have been wrong about everything since the fall of the Soviet Union.  I also don’t think he has much control over negotiations with North Korea.

While everyone on the right keeps talking about how he keeps winning, after the disaster of his strikes on Syria, why would anyone take him seriously during Korean demilitarization talks?

Does anyone think now Donald Trump has the leeway to negotiate an end to the Korean War and make those terms stick?

And if you do, do you think Xi or Putin or Kim himself do?

EU Fracturing

And that brings me back to Macron and Merkel.  They were split on striking Syria.  It’s obvious that Macron saw this as an opportunity to up his ‘street cred’ with the globalist oligarchy, cozying up to the U.S. and U.K. and finish what his predecessors started in Syria decades ago.

Macron is positioning himself to replace Merkel as the de facto leader of the EU. He’s been groomed for this position as Merkel’s time on the world stage comes to an end.

…click on the above link to read the rest of the article…

Stop and Assess

Stop and Assess

America has become Alzheimer Nation. Nothing is remembered for more than a few minutes. The news media, which used to function as a sort of collective brain, is a memory hole that events are shoved down and extinguished in. An attack in Syria, you ask? What was that about? Facebook stole your…what? Four lives snuffed out in a… a what? Something about waffles? Trump said… what? Let’s pause today and make an assessment of where things stand in this country as Winter finally coils into Spring.

As you might expect, a nation overrun with lawyers has litigated itself into a cul-de-sac of charges, arrests, suits, countersuits, and allegations that will rack up billable hours until the Rockies tumble. The best outcome may be that half the lawyers in this land will put the other half in jail, and then, finally, there will be space for the rest of us to re-connect with reality.

What does that reality consist of? Troublingly, an economy that can’t go on as we would like it to: a machine that spews out ever more stuff for ever more people. We really have reached limits for an industrial economy based on cheap, potent energy supplies. The energy, oil especially, isn’t cheap anymore. The fantasy that we can easily replace it with wind turbines, solar panels, and as-yet-unseen science projects is going to leave a lot of people not just disappointed but bereft, floundering, and probably dead, unless we make some pretty severe readjustments in daily life.

We’ve been papering this problem over by borrowing so much money from the future to cover costs today that eventually it will lose its meaning as money — that is, faith that it is worth anything. That’s what happens when money is just a representation of debt that can’t be paid back.

…click on the above link to read the rest of the article…

The Economy Is Cooked

© Albund | Dreamstime.com

The Economy Is Cooked

The growth cycle has peaked

Hours ago, European Central Bank chief Mario Dragho conceded: “The growth cycle may have peaked”

Of course, those paying attention to the data already knew this. Our politicians and central planers have been peddling to us the fantasy that the global economy is strengthening, finally ready to fire on all cylinders after nearly ten years of dependence on monetary stimulus.

That just ain’t so.

The Federal Reserve of Atlanta’s GDPNow measure, which gives a forecast of Q1 2018’s expected GDP, is currently coming in at 2.0%, down from the much more vigorous 5.4% growth predicted as recently as early February:

Generating this growth, meager as it is, has required a tremendous amount of new debt. So much more so that the US will soon have a worse debt-to-GDP ratio than perennial fiscal basket-case Italy:

U.S. Debt Load Seen Worse Than Italy’s by 2023, IMF Predicts (Bloomberg)

In five years, the U.S. government is forecast to have a bleaker debt profile than Italy, the perennial poor man of the Group of Seven industrial nations.

The U.S. debt-to-GDP ratio is projected widen to 116.9 percent by 2023 while Italy’s is seen narrowing to 116.6 percent, according to the latest data from the International Monetary Fund. The U.S. will also place ahead of both Mozambique and Burundi in terms of the weight of its fiscal burden.

The numbers put renewed focus on the U.S. deteriorating budget after the enactment in December of $1.5 trillion in tax cuts, and the passage more recently of $300 billion in new spending. President Donald Trump’s administration argues that the tax overhaul combined with deregulation will help the economy accelerate, which in turn will generate enough extra revenue to avoid any fiscal fallout.

…click on the above link to read the rest of the article…

Why oil prices can’t rise very high, for very long

Why oil prices can’t rise very high, for very long

Oil prices are now as high as they have been for three years. At this writing, Brent is $74.14 per barrel and West Texas Intermediate is at $68.76. These prices aren’t really very high, if a person looks at the situation from a longer term point of view than the last three years.

Figure 1. EIA chart of weekly average Brent oil prices, through April 13, 2018.

There is always a question of how high oil prices can go, and for how long.

In fact, we have many resources, of many kinds, whose prices of extraction keep rising higher. For example, obtaining fresh water for the world’s population keeps getting more and more expensive. Some parts of the world need to resort to desalination.

The world economy cannot withstand high prices for any of these resources for very long. Certainly, it cannot withstand high prices for a combination of necessary resources, because people need to cut back on other purchases, in order to afford the necessities whose prices are rising. This article is a guest post  by another actuary, who goes by the pseudonym Shunyata. He explains in a different way why high resource prices cannot last, whether they are for oil, or natural gas, water, or even fresh air.

Dear Readers:

As you are no doubt aware, Gail has created a fantastic portfolio of blogs that explore our energy/financial/economic system, blogs that reveal many hidden or misunderstood aspects of our situation. I have found these discussions invaluable and share them wherever I am able; to solve our societal problems we need to develop a societal understanding of these issues.

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Has The World Started To Kick Its Oil Addiction?

Has The World Started To Kick Its Oil Addiction?

Offshore rig

Until a decade ago, most of the world was a captive customer of oil—consumers would pay any price for gasoline and oil demand was soaring regardless of the surging oil prices.

But recently, many countries around the world have started to show more sensitivity to oil prices—oil demand grows as their economies grow, but oil demand is also more susceptible to oil price swings, with the oil price-consumption correlation behaving more like an everyday product, according to data by Washington-based ClearView Energy Partners and research by Bloomberg Gadfly columnist Liam Denning.

Although it’s at least a decade or more too early to call the end of the world’s oil addiction, the research and data suggest that in a growing number of large oil-consuming economies oil demand now correlates negatively with oil prices. In other words, consumption drops when prices rise and vice versa—a common economic concept applicable to almost every other product on the market.

With oil, this has not always been the case.

ClearView Energy and Denning analyzed data for three 10-year periods ending in 2006, 2011, and 2016, respectively.

During the first 10-year period until 2006, countries comprising four-fifths of oil demand, including the United States, India, China, and Russia, showed a positive correlation between oil demand and their gross domestic product (GDP) and between demand and oil prices. In the decade before the financial crisis in 2007-2008, oil demand soared almost everywhere in the world, despite the fact that oil prices were also rallying. This was the period of Chinese industrialization and construction boom which gobbled up oil at any price. In most of the world, the picture was the same—oil demand rose together with rising economies and with rising oil prices, suggesting that those countries were captive customers of oil.

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Saudi Officials Worried About Oil’s Future

Saudi Officials Worried About Oil’s Future

Saudi delegation

Saudi government officials like talking to the media about oil. They invariably come across as upbeat, confident that the OPEC deal will achieve its goal of shrinking the global oversupply, and equally confident that U.S. shale will not seriously eat away at their oil revenues, however fast it grows.

The general message seems to be: We can handle everything. Behind the scenes, however, things look differently, Time reports, citing former and current U.S. government officials with experience in the Kingdom.

Following an interview with Crown Prince Mohammed, in which he anticipated a bright future for crude oil thanks to new strong demand, Time talked to several U.S. officials who shared their concern about how realistic this view of the industry actually is.

In fact, these officials believe Saudi Arabia is still overdependent on crude oil, and this could spell trouble for the barely contained powder keg that is the Middle East—a ripple in crude oil would likely set the region all ablaze. What’s more, they say, Saudi Arabia is still unable to make ends meet, even at the current higher oil prices. If prices fall and its deficit deepens further, the Kingdom would be hard pressed for an urgent change in its heavily subsidized economic model. There is even a danger of the economy crashing, one U.S. official said, and should this happen, chaos will ensue.

It is possible that Saudi officials are downplaying some very real threats to all the ambitious economic reform plans initiated by Mohammed bin Salman. However, it seems difficult to gauge the importance of these threats when Saudi sources are often at opposing ends of the opinion spectrum. Some, U.S. officials say, are adamant that everything around the reforms is proceeding smoothly. Others are equally adamant that the Kingdom is running on fumes that will soon evaporate.

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Trade War Looms Over Oil Markets

Trade War Looms Over Oil Markets

Stock exchanges

Oil prices, along with equities across the board, were dragged down on Monday over fears of a brewing trade war.

China announced $3 billion of tariffs on U.S. goods, including pork and recycled aluminum. The move came as a retaliation to the Trump administration’s 25 percent tariff on steel and aluminum imports. China’s tariff announcement on Monday sent global financial equities careening downwards, and the losses were likely magnified by President Trump’s Twitter attacks on Amazon, which sparked a selloff in tech stocks.

Fears of a global trade war are again on the rise. The worrying thing is that China’s tariff measures on Monday were somewhat narrow, and only came as retaliation to the steel/aluminum tariffs, not the $60 billion in tariffs the Trump administration announced more recently, which specifically targeted China.

Chinese officials reiterated a desire to avoid a trade war, but China might not hold its fire forever, and the government could be preparing a larger set of trade tariffs in response. In other words, there is a decent chance that the trade dispute continues to escalate.

That is bad news for oil prices. The case for oil going higher largely hinges on exceptionally strong demand scenarios for 2018. “Our latest forecast suggests that demand will grow by 1.7 million b/d in 2018, the fifth-highest this century,” WoodMac said in a recent note. A trade war would seriously upend that forecast.

“The retaliation from China is concerning for energy markets,” said Michael Loewen, a commodities strategist at Scotiabank in Toronto, according to Bloomberg. “If a trade war occurs between these countries and it affects demand growth from emerging markets, that could be a big problem.”

…click on the above link to read the rest of the article…

Olduvai II: Exodus
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Olduvai
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Olduvai II: Exodus
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Olduvai III: Cataclysm
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