Isaac threaten "monster" oil price jump

Brent crude jumped to $115 a barrel last week and petrol costs across much of Europe are now at record levels.
Diesel is above the political pain threshold of $4 a gallon in the US, hence reports circulating last week that the International Energy Agency (IEA) is preparing to release strategic reserves.
Barclays Capital expects a “monster” effect this quarter as the crude market tightens by 2.4m barrels a day (bpd), with little extra supply in sight.
Goldman Sachs said the industry is chronically incapable of meeting global needs. “It is only a matter of time before inventories and OPEC spare capacity become effectively exhausted, requiring higher oil prices to restrain demand,” said its oil guru David Greely.
This is a remarkable state of affairs given the world economy is close to a double-dip slump right now, the latest relapse in our contained global depression.
A further risk to oil production has materialized with Tropical Storm Isaac which now looks set to threaten New Orleans and the Gulf. Weather trackers are predicting an increase in intensity given its size and the storm's predicted paths are set to cross straight through the middle of the Gulf's oil production in a replay of the terrible August of Katrina. All major rig operators are evacuating which leaves output notably down already.
24% of oil and 8,2% of natural gas output has been shut down for tropical storm Isaac and markets will be monitoring the situation closely tomorrow.
During Katrina prices rose by 75c and given tight reserves at this moment the situation could get even worst.
Isaac's predicted path (via NOAA)






goes straight through the oilfields... (source: Forbes)

Peak Oil Pain is back!

For anyone interested to understand what is the effect of peak oil on economy I would recommend reading this excellent article on The Telegraph, brief excerpts below:

[Energy costs at 9pc of global GDP] That proved to be the pain barrier in the 1970s and again in 2008, and we are just shy of that level right now. “Oil is already capturing a higher level of European GDP than in 2008,” said Francisco Blanch from Bank of America.

The unpleasant fact we must all face is that the relentless supply crunch - call it `Peak Oil’ if you want, or `Plateau Oil’ - was briefly disguised during the Great Recession and is already back with a vengeance before the West has fully recovered.
The IEA said non-OPEC production stalled in 2010 and 2011. There was no net increase. While there was a boost from Canada’s tar sands, and America’s shale-oil, and Brazil’s offshore rigs, this was offset by the relentless erosion of the North Sea fields and Mexico’s operations, a collapse in the Sudan, and Libya’s woes.
Meanwhile OPEC spare capacity has fallen to 2.5m barrels a day (bpd), compared to 3.7m this time last year during the Arab Spring, the event that caused a comparable spike in crude prices and arguably triggered the sharp global slowdown a few months later.

The issue is not whether Iran has the military kit to close the Straits of Hormuz and cut off 18pc of global oil shipments for more than a few days (probably not), but whether an Israeli/US attack on the regime’s nuclear facilities would later set off an uncontrollable chain of events in the Middle East.
There is clearly danger of a spill-over into Bahrain and the eastern province of Saudi Arabia, home to the Kingdom’s aggrieved Shia and most of its oil. Even so, the Iran risk premium in global crude prices is only $10 to $15. We must still face the overwhelming fact that global energy supply is on a knife-edge regardless of events in the Gulf - with no relief in sight.

The IEA warned in its annual report that energy demand will rise 40pc by 2035. 

China alone will be adding 125m cars to its roads over the next five years, with auto production targets of 30m annually by 2016. India is spending $1 trillion on infrastructure projects over the next five years.
Variants of this are happening across Asia and Latin America. Two billion people in the emerging world are joining the global economy and competing toe-to-toe for scare resources with the West.

Greenhouse gas emissions reach highest point ever

And while the global economy is heading toward a double dip recession if we want to be optimists, the relentless burning of fossil fuels is continuing regardless of the crisis, an interesting new report on global warming:

Greenhouse gas emissions increased by a record amount last year, to the highest carbon output in history, putting an end to hopes of holding global warming to safe levels according to unpublished estimates from the International Energy Agency.

This also shows the most serious global recession in80 years has had only a minimal effect on emissions, contrary to some predictions.

Last year, a record 30.6 gigatonnes of carbon dioxide was poured into the atmosphere, mainly from burning fossil fuel – a rise of 1.6Gt on 2009, according to estimates from the IEA regarded as the gold standard for emissions data.