Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

CO2 In The Cuckoo's Nest

Commodities / Climate Change Nov 29, 2009 - 09:39 PM GMT

By: Andrew_McKillop

Commodities

Best Financial Markets Analysis ArticleITS A GAS
Climategate has come and gone, like Dubai World, with only ripples in the agonizing V-shaped, W-shaped or X-shaped recession and recovery sequence. Recession and recovery of hopes and fears that COP15 will be a success or failure have also rippled.


For the global economy there is a new, X-shape recovery outlook. Global Warming finance, like Keynesian recovery finance might cross out the risks of double dip, with a big new raft of funny money channelled to the right hands. Like the cash needed to cancel out "troubled assets" and bankrupt banks, it can be printed, borrowed and guaranteed in extreme high amounts but in full media view with full media support. Public opinion, as for the Keynesian recovery trillions, will matter little "because this is a complex and urgent affair". The media can be counted on to give all sides of the story, plus additional sides they invented to amuse the crowd.

Global Warming itself is one of these complex topology facets. Granted that global average surface temperatures have been falling for about 10 years, but Al Gore and Rajendra Pachauri, and a lot of other people, including most OECD leaders will vigorously tell you this is only a statistical quirk. Manhattan could or might suffer more damage from rising sea levels than it did from air pirates in 2001, within a 100 years or so. Within 200 years the globe could be nearly uninhabitable. Everything bad is possible, if we dont spend now.

GAS AND OIL
We can add coal, uranium, windpower, solar energy, methane biogas and other things to what is really an Energy & Finance summit that never, ever states the basic driver: high oil prices and oil reserve depletion right now. Despite the coming, massive bulge of cheap natural gas supplies, depletion will also be biting into world gas output and supplies by 2015-2020. Gas prices could or might recover rather fast, probably through producer pressure.

Coal has no reserve problems but transport infrastructure shortage and a bad press; uranium supplies face serious limits and nuclear power like coal has a bad press. None of this applies to windpower and solar energy. Green Recovery featuring wind and solar energy could or might generate enough jobs to take some of the heat out of car making cutbacks in the OECD countries. Some of the renewables are economical with oil at less than $75 a barrel. Potential expansion for some, like windpower, could rival US budget deficit growth but real world data cools the warming.

Using data for December 2008, record-growing windpower in China delivered about 0.4% of China's electricity, and 78% came from coal. China's car market is now in permanent overdrive at close to 1 million-a-month sales through 2009. To be sure, 99.9% of these cars run on oil, LPG or compressed natural gas. India's car sector is way behind China's, but growing just as fast. Headline data on US oil demand shows how hard it fell in late 2008-early 2009, but with the green shoots of recovery the brown oil slide has bottomed. When or if US oil demand starts growing again, and keeps growing oil prices can cruise through successive 'pain ceilings' like $85 and $95 a barrel with little sweat. Anyplace else, inside the OECD or outside, faster economic growth will drive increased oil demand. As we saw in 2007-2008, oil prices well above $100 a barrel are needed to seriously cap economic growth and shrink oil demand.

Capping CO2 is the nice way out. Energy saving is a 'low hanging fruit', to some, and could or might trim oil demand growth despite the economy growing. Obama's 17% CO2 cut by 2020 along with Europe's 20% cut, and China's flexible target cut in CO2 linked to economic growth, possibly reducing growth of Chinese emissions by one-half for each 1% rise in GDP, all send a message that energy crisis is being fought. All of them give a read out of slowed oil demand growth and less additional oil needed for each 1% rise in GDP.

THE BOTTOM LINE - WHO PAYS ?
Nobody knows. Carbon taxes are so tiny, so unpopular, so complex to apply here, waive there, record and monitor that carbon taxation has a bad press to rival coal or nuclear power. CO2 emissions trading might offer prospects of generating slabs of green energy finance, especially if the Clean Development Mechanism for 'low carbon' energy and development in low income developing countries was multiplied 5 or 10 times from current levels. The IMF might come along with an SDR-CO2 Bancor, a sort-of new world money, emitted from the same thin, CO2-lean air from which SDR emissions are being robustly cranked up, in view of a (nother) dollar crisis. This new climate friendly Bancor would grease the emissions trading game tables, inspire confidence, take the heat off the dollar - and speed green energy growth.

A much cited, little read report to the 2009 Davos Forum estimated 'clean energy and climate finance' spending needs and turnover as attaining an average $ 515 billion a year through 2010-2020. This only slightly outpaced Lord Stern's present upward revisions of his early, 2006, estimates that the world will have to spend about $ 200 to $ 220 billion a year on a mix of green energy, carbon capture, agriculture and land use change, and other favorites of Global Warming fighters. As his own little read, or hard-to-read marathon report said, on occasions, world GDP will attain at least $ 250 000 billion a year, 2006 dollar value, by the time Manhattan will have been saved from a watery fate. Climate change abatement spending totalling lets say $ 50 000 billion over the decades was a nice investment, we will find out.

If we cut from these not-so-serious financing ideas for alternate energy sources that do not yet exist, and move to real world oil and gas we have another shock coming. The IEA regularly publishes estimates for world oil & gas sector spending needs. These are slated to hit $ 1000 billion a year by 2016, close to 3 times current recession-impacted levels. Electric power spending will also have to grow like never before, in part due to massive challenges for integrating variable, but fast increasing quantities of wind source electricity, along with other green electricity sources.

The first bottom line is that under any scenario energy prices will rise. The second bottom line is that high oil prices and low gas prices will find endless ways to combine and interfere in energy markets. These will be also hit by green energy feed-in tariffs, tax breaks, grants and non-market factors, as energy demand shifts and squirms with the global economy's struggle against left-over debt and FX instability from the 2008-2009 recession.

Who pays and how, are going to be long-term pressures able to hit fever pitch on a recurring basis.

By Andrew McKillop

gsoassociates.com

Project Director, GSO Consulting Associates

Former chief policy analyst, Division A Policy, DG XVII Energy, European Commission. Andrew McKillop Biographic Highlights

© 2009 Copyright Andrew McKillop - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in