The Union flag flies at half mast at the Houses of Parliament in London, Monday, in honor of former British Prime Minister Margaret Thatcher. Under Ms. Thatcher, the United Kingdom became a net exporter of oil. (Sang Tan/AP)
How North Sea oil helped Margaret Thatcher
Many people know that former British Prime Minister Margaret Thatcher, who passed away Monday, jump-started a flailing British economy and reshaped it into a more market-driven system. What's far less known is the role that oil played in that turnaround.
When Mrs. Thatcher came to power in 1979, recent offshore discoveries in the North Sea were turning Britain into an energy powerhouse. The surge in oil revenues and her lassez-faire economics provided a mix of resources and policy that softened the oil-price shocks of the 1970s and pulled the country out of economic stagnation.
"North Sea oil rescued Britain from the repeated balance of payments crises of the past and provided a crutch for the public finances at a vital time," writes Jeremy Warner in The Daily Telegraph, "but it also set the stage for a peculiarly unbalanced form of economic growth that dogs the country to this day."
In 1975, Britain was in such dire straits that Henry Kissinger, then US secretary of state, quipped, “Britain is a tragedy – It has sunk to borrowing, begging, stealing until North Sea oil comes in.” ( Continue… )
The Suncor tar sands (or oil sands) plant and tailings pond at their tar sands operation north of Fort McMurray, Alberta, Canada. Some of the concern surrounding the production of oil sands, the type of oil designated for the Keystone XL pipeline, is that it's more carbon intensive to produce than conventional oil, Graeber writes. (Todd Korol/Reuters/File)
Alberta mulls new emissions rules to allay Keystone XL pipeline concerns
The provincial government in Alberta is mulling new rules that would require the oil industry to cut greenhouse gas emissions tied to oil sands production by as much as 40 percent per barrel. The measure may be part of the federal government's push to allay Washington's concerns about the Keystone XL pipeline. Some of the concern surrounding the production of oil sands, the type of oil designated for the controversial pipeline, is that it's more carbon intensive to produce than conventional oil. Alberta's government has expressed concern that it won't be able to meet its emission targets without new rules, though some in the oil industry may be already ahead of the game. While emissions may be part of the debate over the controversial cross-border pipeline, a financial analysis suggests the Canadian government is looking in the wrong direction.
Alberta Premier Alison Redford was in the United States last week trying to shore up support for the Keystone XL oil pipeline. The U.S. government hosts a town hall meeting in Nebraska later this month to vet public comments on a draft environmental assessment from the State Department. That report found that, overall, the environmental threat from oil sands production would remain with or without the pipeline. The Canadian government, however, is under pressure to find ways to allay some of those environmental concerns to move the project forward. (Related article: Enbridge Continues Rise as Canada Seeks Own Energy Road)
A law that went into force in 2007 requires companies exploiting the vast oil sand deposits in the country to cut their emissions by 12 percent of their base level and put around $15 into a technology fund for every ton they go over that limit. Calgary officials say it's important not only for the provincial government, but for the federal government as well, to let Washington know it's serious about the environment. Part of the controversy over Keystone XL is tied to emissions, so it's imperative that Canadian Prime Minister Stephen Harper sets the right tone as the pipeline conversation gains momentum. ( Continue… )
Pipelines at the Zueitina oil terminal in Zueitina, about 120 km west of Benghazi, Libya. For the first time major spending has been committed to test Tunisian oil basins which are arguably equally prolific as those in neighbouring environments with more work performed, such as Libya. (Esam Al-Fetori/Reuters/File)
Is the future of oil in Tunisia?
Until recently Tunisia was considered to be a minor league and relatively underexplored venue in Africa’s rapidly expanding oil & gas scene. This situation has quickly changed with new bid rounds and forced relinquishments creating an opportunity for new companies to come in.
Major American E & P companies like Shell have jumped at the opportunity to acquire ground that had been dominated for decades with little to no work conducted, mostly by European State oil & gas companies in this former French protectorate. For the first time major spending has been committed to test Tunisian basins which are arguably equally prolific as those in neighbouring environments with more work performed, such as Libya.
Tunisia is now in focus for investors because exploration is increasing within the producing Pelagian Basin, which leads us to ask the following questions:
Should Tunisia now be on energy investors watch list?
Is Shell just the start of “big oil” making inroads into the country? And which are the plays that people should be watching? ( Continue… )
Wind turbines of the Smoky Hill Wind Farm dot the countryside near Ellsworth, Kan. Perhaps the simplest way to manage the energy transition we must undergo would be to impose a high and ever rising tax on carbon, Cobb writes. (Orlin Wagner/AP/File)
How US energy policy fails to address climate change
Current U.S. energy policy is, in fact, a hodgepodge of disconnected policies designed for specific constituencies with no coherent goal. The country has subsidies for fossil fuels, subsidies for nuclear power, subsidies for wind and solar, and subsidies for insulating and retrofitting buildings. We also have energy standards for some appliances and miles per gallon standards for automobiles.
What never gets asked and answered definitively in the policy debate is this: What should our ultimate goal be and when should we aim to achieve it? The first part of the question has elicited so many answers from so many constituencies that I may not be able to represent them all here. But here is an attempt to categorize the main lines of thinking concerning the country’s energy goals:
- Seek the cheapest price for energy with the implication that environmental consequences should not be tallied as part of the cost.
- Complete a transition to renewable energy as quickly as possible while drastically reducing the burning of fossil fuels.
- Replace all fossil fuel energy with nuclear power.
- Develop all sources of energy to make sure we have enough at reasonable prices. This is often called the “all-of-the-above strategy.”
Goal 1 is really the argument put forth by the fossil fuel industry and therefore a defense of the status quo. Goal 2 is the dream of every climate change activist and clean-tech executive. Goal 3 seemed to be gaining some momentum before the accident at Japan’s Fukushima Daiichi nuclear plant dashed hopes for a widespread nuclear renaissance.
Goal 4 is being touted by my congressman who heads the U.S. House Committee on Energy and Commerce, and it is the policy of Obama administration. The so-called all-of-the-above strategy is the de facto energy policy of the United States, and the one which I described above as a hodgepodge of disconnected policies designed for specific constituencies with no coherent goal. ( Continue… )
A wind turbine erected in Le Carnet, western France. The uncomfortable truth for Italy is that its high-ranking status as an ambitious installer of renewable energy programs—particularly wind—has been achieved on a significant level in the underworld, Alic writes. (David Vincent/AP/File)
Why is the Mafia investing in renewable energy?
When the Italian authorities seized $1.7 billion in mafia-linked assets this week, many were surprised to see learn that the renewable energy industry is apparently becoming a favorite playground for the underworld.
The assets seized included 43 wind and solar energy companies, along with 66 bank accounts linked to mafiosa Vito Nicastri—also now known as the “Lord of the Wind”.
This came as a surprise only to those who haven’t been following the renewable energy industry in Europe closely. In 2010, Italian authorities froze Nicastri’s assets after an investigation turned up evidence that the Mafia was actually using renewable energy projects to launder money.
Nicastri, 57, is a colorful figure who has been linked to the “godfather” of Cosa Nostra, the Sicilian Mafia, Matteo Messino Denaro. (Related article: Italian Anti-Mafia Police Seize €1.3 Billion from the King of Alternative Energy) ( Continue… )
A wind turbine stands against the Boston skyline. The long awaited rules on how to start project construction for Production-Tax-Credit eligibility still have not been issued, Hinckley writes. (Stephan Savoia/AP/File)
Wind industry in holding pattern, awaiting new tax rules
The IRS issued an important piece of guidance related to clean energy finance this week. It is the annual inflation adjustment for the Production Tax Credit (PTC) and it increased the credit from 2.2 to 2.3 cents per kWh for full qualifying energy property like wind and geothermal, while the partial credit for sources like open-loop biomass and incremental hydro remained at 1.1 cents per kWh (also adjusted were the inflation factors for Indian and refined coal).
PTC Rules
More important is what is still missing – despite widespread expectation for a first quarter release, the long awaited rules on how to determine the start of construction for purposes of determining what projects will be PTC eligible at the end of 2013 still have not been issued.
When the PTC was extended as part of the fiscal cliff deal during the holidays there was an important change in the method for determining whether a project would qualify for the credit. Historically, the qualification of property was based on the date the property was placed in service (and it’s worth noting that this rule is actually somewhat vague and the application sometimes very nuanced). Now, qualification is based on when construction for the facility begins. As long as construction starts before year-end, property is eligible for the credit.
The problem, and the new rules will address this – no one is exactly sure what it means to begin construction. There are some obvious assumptions that can be made, but at the edges, such as where a developer is contracting for facility components, the final vision or location of a project is not completely fixed, or instances where an adequate financial commitment is made to begin construction, the rules for qualification will be vital. Developers, vendors and especially investors are waiting for clarity before making key project decisions. While some projects are moving, this overhanging uncertainty has slowed countless projects. ( Continue… )
The exterior of the Internal Revenue Service building in Washington. Energy-efficient home improvements can save homeowners as much as $500 on their taxes this year. (Susan Walsh/AP/File)
Tax day 2013: Saving energy can save you money on taxes
Energy savings mean savings for tax day 2013.
Congress extended federal tax credits for energy efficiency in early January. That means homeowners can earn as much as $500 per year for investments in energy-saving windows, water heaters, air conditioners, and a host of other home improvements.
"Rest assured, if you’re doing something that’s uniquely beneficial for the environment, there's likely a tax credit there," says Mark Steber, chief tax officer at Jackson Hewitt Tax Service, a tax-return preparation firm headquartered in Parsippany, N.J.
The savings aren't enormous, but they're easy to come by. Energy-efficient appliances are more prevalent than ever, and many homeowners may own more than they even realize. ( Continue… )
A marker welcomes commuters to Cushing, Okla., where the reversal of a pipeline is now allowing more West Texas Intermediate crude to reach Gulf Coast refineries, alleviating a glut in Cushing and allowing prices to rise. (Matt Strasen/The Oklahoman/AP/File)
Watch out: WTI-Brent spread is narrowing
It is said that the market climbs a wall of worries, and there is much to worry about globally: European Bank debt crisis that never seems to be resolved though the Euro higher ups always declare victory after each eruption; the U.S. debt crisis just gets larger every day; the U.S. housing market, is it in recovery mode or exactly how does one define a recovery?; Europe is in recession; U.S. GDP is on life support.
I could go on, as the macro list of worries rolls along, but let's look at the immediate data. Crude supplies rose again this week by 2.7 MM barrels (bbl) higher than analysts expected - 0.2 MM bbl. Gasoline supplies declined less than expected, distillates fell more than expected, and refineries ran a bit more than expected as more refineries return from winter maintenance and begin to gear up for summer gasoline production.
However, gasoline demand has begun to slide from its earlier higher demand in the beginning of the year from last year; over the four-weeks ending in March of this year demand declined slightly from the comparable period last year, and this as the weather begins to moderate.
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More surprising, though it should not be, is that the WTI-Brent differential has collapsed from over $20/bbl as recently as the end of February to between $13.00 and $14.00/bbl. Since the beginning of the year WTI has increased 3% in price while Brent has fallen by a like amount, and the WTI-Brent spread has narrowed by 34%. Why? Well earlier this year Brent production was constrained due to pipeline issues that are now resolved and we are seeing more Brent supplies and that coupled with Europe deepening in recession is weighing on its price. ( Continue… )
The Los Angeles, Calif., downtown skyline is pictured. The mayor of Los Angeles has announced that the city will become the only city in America that won’t get any electricity from coal by the year 2025. (Mario Anzuoni/Reuters/File)
Californians support coal despite LA plan to ban it (Sponsor content)
Clean coal technology enjoys majority support among California voters. It is especially interesting that this support is broad-based, encompassing majorities of Republican, Democratic and voters declining to state a party affiliation. Given that the most important issues to California voters are “jobs and the economy”, voter sentiment that the state’s energy policies have made it less competitive should be a red flag to Sacramento legislators.
In a recent survey of California voters, nearly 57% answered yes when they were asked “Do you support or oppose developing new clean coal power plants in California?”
When asked the question, “Do you think that California’s energy policies have made the state more or less competitive?”, more than 43% answered yes. And particularly telling is the fact that nearly one-quarter of California voters (24.7%) feel that the state’s energy policies have made the state far less competitive.
These numbers are in stark contrast to comments recently made by Los Angeles Mayor Antonio Villaraigosa when he announced that the city will become the only city in America that won’t get any electricity from coal by the year 2025. ( Continue… )
A logo on a British Petroleum petrol station is seen in London. BP has abandoned a strategy of investing in renewables, in favour of a higher focus on oil and gas, Peixe writes. (Toby Melville/Reuters/File)
BP to sell US wind assets, renew focus on petroleum
Before the departure of former Chief Executive Lord Browne in 2007, BP (NYSE: BP) invested heavily in alternative energy projects as part of its ‘Beyond Petroleum’ strategy. Since then the British energy company has abandoned this strategy, in favour of a higher focus on oil and gas, where it believes greater margins exist.
It exited the wind sector in Europe, and then near the end of last year announced that it would also sell its solar business. The final nail in the coffin to their original renewable energy plan is delivered by their announcement to now sell all US wind farm assets.
A company statement read: “BP has decided to market for sale our US wind energy business as part of a continuing effort to become a more focused oil and gas company and re-position the company for sustainable growth into the future. For BP, this effort represents another example of prudent and active management of our global portfolio, consistent with our pledge to unlock more value for shareholders.” (Related article: Has Belgium Cracked the Problem of Storing Wind Power Electricity?)
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Whilst the sale is part of the strategy to focus on the core oil and gas business, it also forms part of the program to raise $38 billion from assets sales in order to cover the costs that BP is facing from the fallout of the 2010 Deepwater Horizon spill in the Gulf of Mexico. ( Continue… )
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