ODAC Newsletter - 31 October 2008
Welcome to the ODAC Newsletter, a weekly roundup from the Oil Depletion Analysis Centre, the UK registered charity dedicated to raising awareness of peak oil.
Given the gravity of the news this week you would expect that the front page of every newspaper would be screaming EMERGENCY!
On Wednesday the Financial Times revealed the leaked findings of the upcoming International Energy Agency IEA World Energy Outlook - see our Guest Commentary from Mark Griffiths for a deeper exploration of the findings of the article. The news that output from existing fields is now decreasing by at least 6.4% per year (the IEA has not confirmed the figures that were leaked) surely demands that the peak oil debate urgently moves from the discussion of ‘whether’ to ‘what to do and how quickly can we get there?’.
With precipitous timing Wednesday also saw the release of a report The Oil Crunch:Securing the UK's energy future from the new UK Industry Taskforce on Peak Oil & Energy Security. The release of this report demonstrates the concern that is growing in the mainstream about oil supply, something that surely the government can no longer ignore.
Yet another report in the news this week, the WWFs Living Planet report, compared global resource depletion with the credit crunch and predicted an ecological crunch if urgent steps are not taken.
While these stories were picked up in many of the UK papers front pages were mostly wasted on celebrity phone pranksters. In the meantime the government’s outrage was spent on oil companies with misguided demands by the Prime Minister and the Chancellor for petrol prices to come down in the light of the latest bloated profit figures from Shell and BP. See David Strahan’s article You're wrong, PM. We need higher oil prices.
Since to date the UK government’s denial of peak oil has been built on the platform of previous IEA reports, one can only hope that the official release of the World Energy Outlook 2008 in November, will lead to an urgent revision of this position and a coordinated energy and climate policy based on the increasingly harsh realities.
We are hitting resource peaks and have no choice but to live through changes. Managing those changes rather than waiting for them to hit is the choice we have left.
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Output from the world’s oilfields is declining faster than previously thought, the first authoritative public study of the biggest fields shows.
Without extra investment to raise production, the natural annual rate of output decline is 9.1 per cent, the International Energy Agency says in its annual report, the World Energy Outlook, a draft of which has been obtained by the Financial Times.
The findings suggest the world will struggle to produce enough oil to make up for steep declines in existing fields, such as those in the North Sea, Russia and Alaska, and meet long-term demand. The effort will become even more acute as prices fall and investment decisions are delayed.
The IEA, the oil watchdog, forecasts that China, India and other developing countries’ demand will require investments of $360bn each year until 2030.
The agency says even with investment, the annual rate of output decline is 6.4 per cent.
The decline will not necessarily be felt in the next few years because demand is slowing down, but with the expected slowdown in investment the eventual effect will be magnified, oil executives say.
“The future rate of decline in output from producing oilfields as they mature is the single most important determinant of the amount of new capacity that will need to be built globally to meet demand,” the IEA says.
The watchdog warned that the world needed to make a “significant increase in future investments just to maintain the current level of production”.
The battle to replace mature oilfields’ output could even offset the decline in demand growth, which has given the industry – already struggling to find enough supply to meet needs, especially from China – a reprieve in the past few months.
The IEA predicted in its draft report, due to be published next month, that demand would be damped, “reflecting the impact of much higher oil prices and slightly slower economic growth”.
It expects oil consumption in 2030 to reach 106.4m barrels a day, down from last year’s forecast of 116.3m b/d.
The projections could yet be revised lower because the draft report was written a month ago, before the global financial crisis deepened after the collapse of Lehman Brothers.
All the increase in oil demand until 2030 comes from emerging countries, while consumption in developed countries declines.
As a result, the share of rich countries in global demand will drop from last year’s 59 per cent to less than half of the total in 2030.
This is the clearest indication yet that the focus of the industry on the demand – not just the supply – side is moving away from the US, Europe and Japan, towards emerging nations.
The Financial Times has run two important articles today on global oil supplies, one of which was the lead story on the front page running under the title of "World will struggle to meet oil demand".
These articles stem from the fact that the FT has obtained a draft of the much awaited International Energy Agency's 2008 World Energy Outlook report which involves an in depth analysis of the production data from the world's largest 500 oil fields, the first authoritative public study of its kind. The conclusion is that the average rate of production decline is proving much faster than previously thought.
The FT says that "Without extra investment to raise production, the natural annual rate of output decline is 9.1 per cent....even with investment, the annual rate of output decline is 6.4 per cent."
After speaking to one of the FT journalists concerned it seems this figure relates to the average depletion rate of those fields which are at plateau or in decline, if I have understood the situation correctly (i.e. it seems to exclude fields that are currently 'ramping up' production - but this should be clarified once the document is published next month).
The second article is entitled "Investment is the key" and includes three useful graphs (in the print edition). The overall conclusions from these two articles, as far as I can see with some interpretation, would seem to be:
Projected world oil production to 2030
- Conventional oil production is projected to grow from barrels 70.4 m/d in 2007 to only 75.2m/d in 2030. This very limited growth is because nearly all new production is off-set by declines in older fields.
- Total production by 2030 is projected to be 106.4 m/d by 2030. This total, in addition to conventional oil (currently producing fields, yet to be developed fields, and fields yet to be found), is also made up of:
- 'natural gas liquids' - NGL (looks to be roughly about 20 m/d from the relevant graph, but not specifically stated)
- 'non-conventional oil' (8.8 m/d specified, of which 4 is specified as Canadian Tar Sands - presumably biofuels also feature in this category)
- 'enhanced oil recovery' (looks to be roughly about 7 m/d from the graph, but not specifically stated)
- (note the above produce a total of more than 106 million, so the scaling off the graph has probably been too crude, or perhaps involves some double counting somewhere)
- The total figure of 106.4 m/d is now much more in line with previous forecasts by Total, Conoco Philips, PFC Energy etc, even if they have viewed (pre-September banking collapse) that figure as likely to be reached at much earlier date (2020 or sooner)
- This figure is well below the 130 m/d previously forecast by CERA
Net change in oil production by country/region 2007-2030
The four most significant countries with production increasing during this period are (these figures are not stated, but are read off the relevant graph):
- Canada - increase of approx 5.1 m/d - mostly tars sands, but also some NGL
- E.Europe/Eurasia (presumably mainly Caspian sea region, as it does not include Russia) - increase of approx 4.6 m/d - nearly all conventional production, but some NGL
- Iraq - increase of approx 4.9 m/d - nearly all conventional production, but a slither of NGL
- Saudi Arabia - increase of approx 3.7 m/d - surprisingly, nearly all from NGL (only around half a million from conventional crude)
Therefore Iraq and the Caspian (basically those areas in whose vicinity most of the 'war on terror' is taking place) are responsible for the vast bulk of the growth in the cheaper to produce conventional crude output to 2030 (there is also some much smaller conventional production growth in Brazil, Kuwait, and Venezuela - but almost none in United Arab Emirates, really only NGL growth)
The FT cites separate figures from the IEA apparently projecting Saudi production climbing from 10.2m b/d in 2007 to 15.7m in 2030. Nonetheless, the IEA seems to hint at possible doubts that the necessary investment will occur. Others have previously challenged such a high figures in any case claiming that 12.5 million is a more likely ceiling and even that will be a challenge (see Business Week, 10 July 2008). Some believe the Saudis may have been cool about more investment (the King said earlier this year that some oil must stay in the ground for future generations - but is this prudent management or just a fig-leaf for an inability to raise production?) because their oil reserves may not be as large as previously stated (a hot potato - but perhaps consistent with the high NGL figure given above).
Major producers which are shown as having falling conventional production during this period include Norway, UK, Russia, Mexico, India, United States, China, Nigeria, and Iran. The last four, however, have their conventional losses more than fully counter-balanced by increases in non-conventionals and/or NGL (how this now applies to China is unclear as they have recently announced that they are largely abandoning coal-to-liquids technology because of water resource limitations - that may have occurred since this IEA draft was prepared).
Estimated cost of alternative oil production technologies
The IEA's projection of 106.4 m/d by 2030 is dependent on sufficient investment being made. The IEA provides a graph of costs per barrel associated with producing various categories of oil - including unconventional oil, and natural gas liquids, much of which lies at the heart of the IEA's projections for production growth.
Although the costs used are substantially less than some of those recently cited in the press by oil companies (more in the range of $70 to $100), those categories on the IEA graph which have development costs lying above $60 per barrel for at least some of their remaining resource base include:
- CO2 and non-CO2 driven enhanced oil recovery (EOR)
- Ultra deep water
- Heavy oil/Bitumen
- Oil shales
- Gas to liquid
- Coal to liquid
It is not stated whether the IEA is placing tar sands in the heavy oil/bitumen category, or amongst oil shales. However, the FT says it is unclear how much of the "increase in expensive non-conventional oil, particularly in Canada, will become reality, as the draft report was written before the worst of the financial crisis".
What Conclusions Can We Draw From This?
Taking into account the report as described, and what we have also learnt about the investment impact of the credit crunch, the following seems to be the overall scenario:
- Oil demand is now easing, but for all the wrong reasons - credit log jam, economic recession etc.
- Existing fields (or at least those which are at, or past, peak) are now averaging a depletion decline of 9.1% per annum - this is a seriously challenging development, particularly given that back in 1999 current US Vice President Dick Cheney was worried about a total depletion rate for existing fields of a mere 3%.
The IEA now seems to be in line with others who say oil production in the period to 2030 will not reach much more than 100 million barrels per day (either due to geological, investment, or political constraints, or a mixture of these) - even if others think that limit (at least before the onset of the currently emerging recession) would come much sooner than 2030.
Even this figure for the most 'hopeful' scenario is dependent on major new investment, but investment is now being cut back because of the banking crisis.
If the credit crunch is resolved, but the price of oil stays at $60 or less, then much of that investment will still not happen.
- In the absence of such investment, and in the context of unexpectedly high levels of depletion in existing fields, we could even start to see global oil production fall in the next few years (the FT says "the IEA warned that the world needed to make a 'significant increase in future investments just to maintain the current level of production'. The battle to replace mature oilfields' output could even offset the decline in demand growth, which has given the industry – already struggling to find enough supply to meet needs, especially from China – a reprieve in the past few months". )
- If the world economy emerges from recession and energy demand returns (i.e. there are not serious shifts towards energy conservation/efficiency and alternative energy development) it seems highly likely that oil prices will start to rise steeply again, particularly if investment in new capacity turns out to be low during the downturn - as currently seems likely. In short, the days of economic growth based on cheap oil seem to be already over and an alternative economic model will have to be developed.
More than a little symbolically, the article on the front page of the print edition of the FT is accompanied by a picture of Russian Prime Minister Vladimir Putin accompanying Chinese premier Wen Jiabao at an economic forum in Moscow yesterday, where the two countries agreed to extend an oil pipeline from Siberia to the Chinese border and discussed a package of Chinese loans. Russia's top energy official said oil companies could receive 'considerable' loans from China in return for increased supplies (so that seems to be just one more interface between the credit crunch and the global energy crisis - Russia's oil companies are currently struggling to raise credit for development projects).
If a queue for falling global oil supplies develops China is clearly aiming to be at the front.
Mark Griffiths is a Chartered Surveyor with property consultants Dreweatt Neate and a spokesman on energy for the Royal Institution of Chartered Surveyors. The views expressed in this commentary are his own."
As crude prices surged to an all-time high of almost $150 a barrel this summer, the warnings from those who believe the world is about to run out of oil reached fever pitch. Even members of the oil establishment began to agree with one of their main tenets: that the industry would have to invest huge amounts of money just to counter the steep production declines in existing oil fields.
In short, the industry had to run faster and faster just to stand still.
The anxiety about rapidly falling production increased as key oil regions such as the North Sea, Mexico and Alaska suffered large and unexpected production falls late last year and early this year as their old fields matured.
It was in response to these concerns – exacerbated by the fact that many Opec and non-Opec countries keep their decline rate data secret – that the International Energy Agency, the world’s oil watchdog, for the first time focused its flagship World Energy Outlook on the rate at which global oil output is declining.
The findings are critical because, as the IEA says, “future [oil] supply is far more sensitive to [production] decline rates than to the rate of growth in oil demand”.
The draft report has found that the planet is far from running out of oil, as some so-called “peak oil” theorists argued. But it also finds that output from the world’s oil fields, some of them discovered more than 30 years ago, is declining much faster than previously thought. That means the oil industry will need to invest more than expected.
“A detailed field-by-field analysis of historical trends and the prospect of a shift in the sources of oil point to a significant increase in future investments just to maintain the current level of production,” the IEA says.
The agency, using data for the 500 largest fields and extrapolating its findings to smaller fields, estimates the annual decline rate is 9.1 per cent, a figure that drops to 6.4 per cent when companies invest in more wells and techniques.
“More investment over the projection period [from 2007 to 2030] will be needed to offset the loss of capacity from existing fields as they mature,” the report says.
For example, it says the UK’s oil production from the North Sea will plunge from today’s 1.7m barrels a day to just 500,000 by 2030.
For that reason the IEA believes oil companies and oil-producing countries will need to invest a total of about $360bn a year until 2030 to replace falling oil production and increase supply by enough to satisfy the demands of emerging countries such as China.
Investment decisions by Opec will be critical, the study argues, adding that the share of world oil production from members of the cartel, particularly in the Middle East, will grow significantly, from 44 per cent in 2007 to 51 per cent in 2030.
“Saudi Arabia remains the world’s largest oil producer throughout the projection period, its production climbing from 10.2m b/d in 2007 to 15.7m b/d in 2030,” the report says. “Its willingness and ability to make timely investments in oil production capacity will be a key determinant of future oil price trends.”
This is a stark assessment given that the kingdom has just agreed to cut its current production as part of last week’s Opec agreement to shore up prices.
Worldwide, conventional crude oil production alone barely increases, from 70.4m b/d in 2007 to 75.2m b/d in 2030, as almost all the additional capacity from new oilfields is offset by declines in output at existing fields, says the report.
Non-conventional oil, such as that produced from Canada’s oil sands or Venezuela’s extra heavy oil, is expected to play “an important role in counterbalancing the decline in production from existing fields”.
The global supply of non-conventional oil is projected to increase from 1.7m b/d in 2007 to 8.8m b/d in 2030. Canadian oil sands projects make by far the largest contribution, totalling 4m b/d.
But it is unclear how much of that increase in expensive non-conventional oil, particularly in Canada, will become reality, as the draft report was written before the worst of the financial crisis.
“There is considerable uncertainty about future cost, the level of oil prices to make a new investment attractive, changes in regulatory and fiscal regimes and the depletion policies of resource-rich countries to support new investments,” it says.
Once again Gordon Brown has got energy policy all wrong. Even before Opec announced an output cut of 1.5 million barrels per day, the Prime Minister had denounced the move as "absolutely scandalous", fearing it would force the oil price higher just as the world slides into recession.
He needn't have worried, since the cost of crude continued to fall on Friday to just under $63. But what Mr Brown fails to grasp is that the recent collapse is as damaging in its way as the previous spike, and that had Opec managed to boost the oil price it would have done us all a favour.
A falling oil price has real short-term benefits. Petrol has dropped below £1 per litre for the first time in almost a year; domestic heat and power bills should eventually follow; food prices and inflation should also ease, giving the monetary authorities greater freedom to cut interest rates.
But these benefits may prove fleeting because the collapsing oil price is bad for supply in the medium term. The cost of building new oil production capacity has soared in recent years, and many planned projects that were viable just a couple of months ago are uneconomic today. Christophe de Margerie, chief executive of Total, recently warned that if the oil price settles at $60, "a lot of new projects would be delayed".
Others put the investment bar much higher, and that means the oil supply could soon fall short of demand, forcing the oil price sharply upwards. A recent research note from Barclays Capital argues that if oil prices stay below $90, large amounts of expected oil production capacity will not be built, and "the world faces a serious supply-side crunch as little as two years away".
The oil price collapse also threatens renewable energy projects as their viability is judged against the cost of electricity produced from natural gas, which is itself determined by oil. So wind farms face yet another hurdle, just as Ed Miliband, the Secretary of State at the Department of Energy and Climate Change, has raised Britain's commitment to cut emissions by 80 per cent by 2050.
Like low oil prices, high oil prices are a mixed blessing. On the one hand they spur conservation: America is now consuming almost a million barrels per day less than a year ago. On the other, they cause recessions: oil price spikes have precipitated every major downturn since the Second World War. What's needed, then, is a "Goldilocks" oil price – say $100 per barrel – high enough to sustain capacity and moderate consumption, but not so high that the economy tanks.
But Opec, for all its fearsome reputation, has never had the discipline to keep oil prices high for long. Even if the cartel cuts enough officially to compensate for falling demand, its members always cheat on their quotas. What is more certain is that whenever the economy revives, Opec will again struggle to raise output – the cause of the recent spike to $157.
Non-Opec oil production is expected to peak around 2010, and the cartel is likely to reach its geological limits soon after. We are condemned to a sickening rollercoaster of oil price spikes and economic slumps until we finally rid ourselves of our dependence on petroleum.
Gordon Brown has just shelled out £500bn to bail out some dodgy bankers. Surely we can afford whatever it takes to get off the black stuff?
David Strahan is the author of 'The Last Oil Shock: A Survival Guide to the Imminent Extinction of Petroleum Man', published by John Murray
The International Energy Agency sought to play down a report that it believes global oil production is falling at a faster rate than previously thought.
The Financial Times said a draft of the IEA's annual World Energy Outlook calculated world production would fall at a natural annual rate of 9.1% without extra investment.
The report came amid suggestions that a number of oil producing countries were finding it harder to finance new projects because of the recent sharp fall in the oil price.
"The future rate of decline in output from producing oil fields as they mature is the single most important determinant of the amount of new capacity that will need to be built globally to meet demand," the FT quoted the draft report as saying, adding that the IEA believed it would require a "significant increase in future investments just to maintain the current level of production."
The WEO is due to be published next month. The IEA said the FT article "appeared to be based on an early version of a draft from several months ago that was subsequently revised and updated."
It added: "The numbers in the article can be misleading and should not be quoted or considered to be official IEA results," the IEA said.
The oil price peaked at $147 (£90) a barrel in July but has since slumped to less than half that figure on fears of lower demand as global output slows, putting pressure on new investment.
"I'm seeing a lot of projects being postponed because the finance is no longer there," Qatar's oil minister, Abdullah al-Attiyah, told a conference in London earlier this week. "This is my concern – how to build capacity to cope with future demand."
Members of the Organisation of Petroleum Exporting Countries (Opec) have plans to invest $160bn (£98bn) in the next few years on projects to expand capacity. "If prices decline, most of our projects will be either delayed or cancelled," Opec secretary general, Abdullah al-Badri, said.
The risk to the UK from falling oil production in coming years is greater than the threat posed by terrorism, according to an industry taskforce report published today.
The report, from the Peak Oil group, warns that the problem of declining availability of oil will hit the UK earlier than generally expected - possibly within the next five years and as early as 2011.
Oil supply could then rapidly decline, or even collapse, the report warns, with potentially devastating implications for the UK economy.
The report was issued today by the recently established UK industry taskforce on peak oil and energy security, a group of eight companies including transport firms Virgin, Stagecoach and FirstGroup, engineers Arup, architects Foster and Partners, and energy giant Scottish and Southern.
Entitled The Oil Crunch, the report argues that the risk of an early peak in oil production poses a bigger threat to UK society than tightening gas supplies, terrorism or the short-term impacts of climate change.
The "peak oil" debate has raged for many years. Some governments and oil companies believe that crude oil production will meet rising demand for decades to come. But an increasingly vocal group - including many experts from within the oil industry - claim that a production peak is imminent.
The new report marks the first time a group of businesses has weighed into this debate. At its core are two newly commissioned assessments of future oil production: one from Chris Skrebowski, consulting editor of Petroleum Review, and one from Shell.
Skrebowski predicts that global oil production will peak in the period 2011-2013 and then decline steadily, with non-conventional sources such as tar sands failing to fill the gap in time to avoid a serious energy crunch. He also warns that supplies could collapse if a handful of huge, long-established oil fields go into terminal decline simultaneously.
Shell, by contrast, foresees oil production rising until 2015, and then remaining on a plateau until the 2020s, with unconventional sources balancing out a decline in regular crude extraction.
Having examined the evidence, the taskforce considers that Skrebowski's peak-and-fall scenario is the "highly probable" outcome, with the collapse scenario also possible.
This view contrasts starkly with the position of the British government. A statement from the new Department of Energy and Climate Change reiterates the government's established view on this issue.
"The government's assessment is that global proven reserves are larger than the cumulative production needed to meet rising demand until at least 2030," the statement says. "This is consistent with the assessment made by the International Energy Agency in its 2007 World Energy Outlook that lead to the conclusion that global oil resources are adequate for the foreseeable future."
If eight companies across a broad spectrum of UK industry had warned, five years ago, that a ruinous credit crunch would hit the global economy this year, might the government have taken the warning seriously? Might UK leadership in damage limitation have been proactive, rather than reactive? Could a softer landing and a faster recovery have been possible as a result?
Today, eight British companies are warning of a ruinous oil crunch five years from now. We warn that the global peak of oil production will arrive unexpectedly early, resulting in not just a global energy crisis, but potentially the withholding of exports by oil producers and energy famine in oil-importing countries. Previously unimaginable policy interventions in financial markets have suddenly become imperative, and similar interventions in energy markets today may be worth their weight in gold tomorrow, in terms of economic and social damage avoided, especially as this would also help tackle climate change.
The prevailing oil industry view, echoed by the government, is that there are well over a trillion barrels of proved reserves, and several trillions more in tar sands. In a world burning just over 30bn barrels a year, that means decades of supply before we need worry. But peak oil happens when flow-rate capacity coming onstream from oil discoveries fails to exceed declining flow-rate capacity from depletion of existing reserves. Peak oil is as much a problem of flow rates as it is of reserves. In our report, the consulting editor of Petroleum Review – a flagship oil-industry journal – shows how the flow rates from reported discoveries will drop below depletion rates no later than 2013, and possibly a good deal earlier.
As for tar sands, operators have to melt the tar. This is far from easy, and is far slower than lifting liquid crude out of the ground. Easy oil is being depleted by at least 3.5m barrels a day of capacity each year, and seven years from now the oil industry won't be able to squeeze more than 2.5m barrels of capacity from the tar sands, even if all goes to plan and the industry isn't reined in because mining tar sands creates huge greenhouse gas emissions. Think of global oil reserves as a water tank: if the tap is faulty, you won't get enough water out. We fear the oil tap is faulty.
But, some will say, demand has been falling fast since oil hit $147, and that will head off the problem. It is true that the transport sector is changing, and it shows the scope we have for cutting global energy demand and changing supply if we try. But there are problems with relying on this market mechanism.
First, continuing growth in demand in China and India is likely to drown out any reduction in demand from structural changes in the west. Second, the oil industry has – almost incomprehensibly – been investing less in exploration in recent years. Too much of the vast profit we saw from BP earlier this week goes on share buybacks. Third, the industry is relying on aged oilfields, aged infrastructure and an aged workforce just at the time when oilfields are becoming more difficult to find and are taking ever longer — sometimes more than a decade — to bring onstream even when found. Fourth, the oil- and gas-producing nations have massive and growing infrastructure programmes that increasingly cut into their scope for export. Fifth, we worry that Opec has been subject to the same irrational exuberance about delivery capacity as the international oil companies have been.
If we accelerate the green industrial revolution, we believe we can soften the blow of the oil crunch, set up the recovery and get out of oil dependence surprisingly quickly. We hope industry and government can plan for an industrial green new deal, starting now.
The oil volumes and money offered to state companies Rosneft, Russia's biggest oil producer, and Transneft, its oil pipeline monopoly, will depend on individual projects, Mr. Sechin, a deputy prime minister and chairman of Rosneft, told reporters.
"It's still early to speak of the credit agreement but work will be spread over production, refining, sales and transportation," he said, adding that the details would be hammered out by Nov. 25.
His comments came after a signing ceremony in Moscow for a pipeline carrying oil from East Siberia to China. In attendance were Prime Minister Vladimir Putin and his Chinese counterpart, Wen Jiabao.
Under the pipeline deal, Transneft and China's CNPC will build a link between both countries' trunk pipelines from next year, which will carry up to 15 million tons a year, or 300,000 barrels per day.
The extra supplies would meet 4 per cent of China's current annual demand, without relying on importing Middle East oil by tanker.
Under the cash-for-oil swap, Rosneft and Transneft could together receive up to $20 million to $25 billion in loans from the Chinese in return, Reuters reported, citing industry sources.
The deal "would provide a very welcome, and very large, dollop of liquidity to both companies amid a deep global liquidity crisis,"
analysts at Alfa Bank, a Moscow-based investment bank, wrote in a note to investors yesterday.
Rosneft has debts of more than $21 billion, while Transneft owes nearly $8 billion.
Russian oil companies are currently being caught in a tax trap popularly known as "Kudrin's scissors," named after Finance Minister Alexei Kudrin, who has insisted on retaining hefty export duties on crude oil even as oil prices have plummet to just above $60 per barrel, down from their high of $147 in July. The Russian government sets the export duty every two months in a mechanism that this year has been frequently left behind by extreme volatility in prices, often leaving Russian companies exporting oil at a loss.
Nikolai Manvelov, a spokesman for Rosneft, declined to speculate about the sum being offered and said no definitive deal would be signed this week.
"We are now in talks with our Chinese partners," he said, without elaborating.
The oil giant said it made $10.9 billion (£6.55 billion) profit between July and September. It attributed the figure, which is 71 per cent higher than last year, to record crude oil prices. In July, the price of a barrel of oil reached an unprecedented $147.
Following Shell's announcement, the chancellor, Alistair Darling, called on oil companies to pass on savings to consumers by cutting the cost of petrol at the pump.
"I want to see that reduction passed on to the pumps as quickly as possible, because people are entitled to see the benefit of that falling price reflected in what they actually pay when they fill up the car," Mr Darling told GMTV.
The company's report comes two days after BP, its nearest European rival, said its profits had increased by 148 per cent to £6.4 billion, prompting fresh calls for a windfall tax from MPs, trade unions and pressure groups.
Oil prices have fallen to less than half their summer peak, now sitting around the 70-dollar mark, as international demand slumps due to the global financial crisis.
Gordon Brown has said repeatedly that oil companies must be as quick to pass on savings from lower costs to customers as they were quick to pass on higher costs earlier in the year. He has threatened that competition authorities could intervene if they do not act.
Jeroen van der Veer, Shell's chief executive, said the results were "satisfactory" and inisted the company was "robust across a wide range of oil prices" as it prepared to deal with a further slowdown. "We are watching the world economic situation closely," he said.
The company's report disclosed that despite the large profits, its oil and gas output fell by 6.6 per cent and dropped to below 3 million barrels of oil a day for the first time in 17 years.
The firm suffered attacks on its production operations in Nigeria as well as closures due to hurricanes in the Gulf of Mexico.
It is thought by analysts that Exxon Mobil, the world's biggest energy company, may report a world record third-quarter profit of about $12 billion (£7.2 billion) later on Thursday.
Crude oil rose for a second day on speculation interest rate cuts in the U.S. and China may spur a global economic recovery and increase demand for fuels.
Oil is set for its biggest two-day gain in more than a month after the U.S. and China, the world's top two energy users, reduced rates yesterday. Asian stocks and U.S. equity futures rallied after the rate cuts, aimed at boosting bank lending and economic growth.
``The tight credit situation has made it hard for even good companies to fund their plans and the rate cuts could help to address that,'' said Anthony Nunan, assistant general manager for risk management at Mitsubishi Corp. in Tokyo. ``Equities are rebounding and that's filtering through to other markets. Governments are taking great efforts to avoid a hard landing.''
Crude oil for December delivery climbed as much as $3.10, or 4.6 percent, to $70.60 a barrel on the New York Mercantile Exchange, and was at $69.09 at 4:13 p.m. Singapore time. Yesterday, crude oil jumped $4.77, or 7.6 percent, to settle at $67.50 a barrel. That was the biggest gain since Sept. 22, bringing the two-day increase to 10 percent.
Oil prices, which have tumbled 53 percent since reaching a record $147.27 on July 11, are down 24 percent from a year ago.
Crude prices also climbed as the dollar extended yesterday's decline, falling to a one-week low against the euro. The dollar fell to $1.3183 per euro, the lowest since Oct. 21, and traded at $1.3244 as of 1:51 p.m. in Singapore from $1.2963 late yesterday. The yen weakened to 98.40 per dollar from 97.39.
Investors often purchase crude oil and other dollar-priced commodities when the U.S. currency drops because of their use as an inflation hedge.
``The Fed delivered their expected rate cut and that's another boost for the economy,'' said Toby Hassall, an analyst with Commodity Warrants Australia in Sydney. ``The rate cut in China also provided a bit of a stimulus.''
Asian stocks, bonds and currencies surged after the interest rate cuts. The MSCI Asia Pacific Index headed for the biggest three-day gain in 16 years.
Futures on the U.S. Standard & Poor's 500 Index rose 1.3 percent today. U.S. stocks declined yesterday, with the benchmark index erasing a 3.1 percent advance in the final 12 minutes, on concern lower interest rates won't stem a recession.
Commodities such as gold and corn were buoyed by a drop in the U.S. dollar and a rebound in equities after borrowing costs were reduced to alleviate a credit freeze and spur growth.
Brent crude oil for December settlement rose as much as $2.88, or 4.4 percent, to $68.35 a barrel on London's ICE Futures Europe exchange, and traded at $66.95 at 4:14 p.m. Singapore time. The contract yesterday gained $5.18, or 8.6 percent, to $65.47 a barrel.
The Organization of Petroleum Exporting Countries will ``probably'' cut crude-output quotas a second time to avoid the growth of inventories, Venezuelan Oil Minister Rafael Ramirez said in an interview on state television.
OPEC reduced its production target by 1.5 million barrels a day after meeting Oct. 24. Ramirez said the group would analyze the reaction of the oil market between that cut and a planned Dec. 17 meeting.
``OPEC's cut would probably be felt in the next few weeks and they would probably wait until the next meeting unless prices drop back again rapidly,'' Mitsubishi's Nunan said.
U.S. inventories of crude oil and distillate fuel, a category that includes heating oil and diesel, rose last week, an Energy Department report yesterday showed.
Crude oil stockpiles climbed 493,000 barrels to 311.9 million barrels in the week ended Oct. 24, the department said. A 1.55 million-barrel gain was forecast, according to the median of 12 analyst estimates before the report.
Gordon Brown’s proposed international energy summit in London has been cancelled after Opec threatened to boycott it, The Times has learnt.
Mr Brown called for the meeting of heads of state of oil producing and consuming countries to be held in London on December 19 as a follow-up to a meeting held in Jedda, Saudi Arabia, in June.
However, in an interview with The Times, Abdullah al-Badri, the Opec Secretary-General, said that the cartel of 13 nations, which between them produce 40 per cent of the world’s oil, had threatened to boycott the event unless an invitation was extended to all the heads of state of individual Opec member countries.
These include President Ahmadinejad of Iran, as well as President Chávez of Venezuela and Colonel Muammar Gaddafi, the Libyan leader.
It was unclear yesterday if such an invitation was ever offered, but a spokesman for the Department for Energy and Climate Change confirmed that plans for the summit had been dropped. Instead, he said that Ed Miliband, the newly appointed Energy and Climate Change Secretary, would host a ministerial-level meeting to discuss energy matters in London around the same date.
The spokesman claimed that the decision to abandon the summit had been taken because world leaders were too busy dealing with the fallout from the financial crisis to attend. But it was no secret that the proposed meeting, which Mr Brown had said he hoped would form part of a new initiative designed to improve the level of dialogue between oil producers and consumers, was proving to be a diplomatic minefield to organise.
While he declined to identify which, Mr al-Badri said that some member countries had informed Opec that their heads of state had not been invited. The British government spokesman declined to comment on which Opec leaders had received invitations, although he said that some had been sent out in August.
Mr al-Badri said that the Opec secretariat, which he heads, would not participate unless all the heads of state were invited. “The meeting [in Jedda] was called because prices went out of control but, in my opinion, there should be no follow-up,” he said.
He added that an alternative organisation already existed for dialogue between oil producers and consumers, the International Energy Forum based in Saudi Arabia.
The Prime Minister did not endear himself to Opec this month when he said that it would be “absolutely scandalous” for the organisation to consider a production cut to support global oil prices at a time when the global economy was rapidly weakening.
On Friday Opec did exactly that and slashed production by 1.5 million barrels per day in an effort to reverse the fall by more than half in crude prices since July 11, when they touched a record high of $147 a barrel.
The cut has so far failed to arrest the rapid fall in prices. Yesterday crude prices slumped to fresh 17-month lows below $62 a barrel.
The AA said yesterday that average petrol prices had dropped below the £1-a-litre level over the weekend for the first time in almost a year.
In Sunday trading the cost of petrol fell to 98.63p per litre, with diesel 111p, taking the price of petrol back to where it was around October 30 last year. Compared with the record high price of 119.7p per litre in mid-July, this has put about £45 a month back into the budget of a family with two petrol-driven cars.
A Churchillian effort will be needed if Britain is to meet its target of getting 15 per cent of its energy needs from renewable sources by 2020, Peers have warned.
And it will require a massive shake-up of how power is produced and distributed across the energy industry, the European Union Committee says in a new report.
Britain gets only about two per cent of its energy from renewable sources, mostly from wind farms and will be hard-pressed to meet the 15 per cent target imposed by the EU, the report concludes.
Much will depend on the Government being able to persuade the public to use less power and to begin thinking about producing their own electricity at home - so called micro generation.
To achieve this planning laws will have to be shunted aside and Ministers given more powers to drive through renewable energy schemes even when there is local opposition.
The Committee chairman, Lord Freeman, said: "The target is achievable but only through a tremendous national effort on a Churchillian scale.
"Priorities will have to be changed and will involve everybody from the consumer producing electricity at home to the big power companies."
The Government is criticised in the report for not tackling energy efficiency in its Renewable Energy Strategy and it calls for a 20 per cent energy reduction target by 2020.
The report claims 41 per cent of the UK's energy use is for heating and cooling and says renewable heat technologies and micro-electricity generation should form a key part of the strategy.
It calls for bigger grants to give homeowners the incentive to install the new technology needed to start generating their own electricity.
The committee warns that the rush to meet the 2020 target through wind farms might lead to more cost-effective technologies - such as wave and tidal energy - being ignored and it says a 2030 target should also be set to give alternative technologies more time to develop.
It says the Government should not rely on the proposed Severn Barrage to provide enough energy to meet its targets as, assuming it is approved, it won't be operational until 2022. And it says the length of time that will be needed to make a decision on the Barrage cannot be repeated in future projects if it hopes to meet its targets.
It agrees that renewable energy produced abroad should be bought in to help the UK meet its target subject to a limit of 10-15 per cent, and as long as it did not hamper the development of the renewables industry.
Lord Freeman added: "The 15 per cent target is laudable but is an enormous challenge for the UK, particularly given our current levels of renewable generation.
"Urgent and drastic action will need to be taken in terms of planning, the supply chain and the electricity grid. Energy efficiency and energy saving must be the starting points for meeting the target and policies to encourage reductions in energy use will need to be introduced as part of a comprehensive package of measures aimed at meeting the target.
"If we fail to meet this goal, the UK will become increasingly reliant on nuclear and fossil fuel power."
Friends of the Earth's climate campaigner Robin Webster said: "The House of Lords has recognised the need for urgent Government action to meet our target for boosting renewable energy.
"Ministers must stop trying to wriggle out of their commitments and get on with the job of harnessing Britain's huge potential for green power.
"This will help cut emissions, create many thousands of jobs and secure a safe energy supply - leading Britain to a cleaner and more prosperous future."
OSLO (Reuters) - The world could eliminate fossil fuel use by 2090 by spending trillions of dollars on a renewable energy revolution, the European Renewable Energy Council (EREC) and environmental group Greenpeace said on Monday.
The 210-page study is one of few reports -- even by lobby groups -- to look in detail at how energy use would have to be overhauled to meet the toughest scenarios for curbing greenhouse gases outlined by the U.N. Climate Panel.
"Renewable energy could provide all global energy needs by 2090," according to the study, entitled "Energy (R)evolution." EREC represents renewable energy industries and trade and research associations in Europe.
A more radical scenario could eliminate coal use by 2050 if new power generation plants shifted quickly to renewables.
Solar power, biomass such as biofuels or wood, geothermal energy and wind could be the leading energies by 2090 in a shift from fossil fuels blamed by the U.N. Climate Panel for stoking global warming.
Needed energy investments until 2030, the main period studied, would total $14.7 trillion, according to the study. By contrast, the International Energy Agency (IEA), which advises rich nations, foresees energy investments of just $11.3 trillion to 2030, with a bigger stress on fossil fuels and nuclear power.
Rajendra Pachauri, head of the U.N. Climate Panel which shared the 2007 Nobel Peace Prize with ex-U.S. Vice President Al Gore, called Monday's study "comprehensive and rigorous."
"Even those who may not agree with the analysis presented would, perhaps, benefit from a deep study of the underlying assumptions," he wrote in a foreword to the report.
EREC and Greenpeace said a big energy shift was needed to avoid "dangerous" climate change, defined by the European Union and many environmental groups as a temperature rise of 2 degrees Celsius (3.6 Fahrenheit) since before the Industrial Revolution.
The report urged measures such as a phase-out of subsidies for fossil fuels and nuclear energy, "cap and trade" systems for greenhouse gas emissions, legally binging targets for renewable energies and tough efficiency standards for buildings and vehicles.
The report said renewable energy markets were booming with turnover almost doubling in 2007 from 2006 to more than $70 billion. It said renewables could more than double their share of world energy supplies to 30 percent by 2030 and reach 50 percent by 2050.
The projections are far more optimistic for renewables than the IEA, which foresees just 13 percent of energy from renewables in 2030 with fossil fuels staying dominant.
Sven Teske, Greenpeace's leading author of the report, said the recommendations would involve big job-creating investments that could help counter the worst financial crisis since the 1930s.
"The current unstable market situation is a strong argument for our energyevolution concept," he told Reuters in an e-mail. He said investments would be repaid by savings in fuel costs.
"We had a 'dot.com bubble' and a 'finance bubble' - but I'm confident that we will not have a renewables bubble - as the need for energy is real - and growing especially in developing nations," he said.
The planet is headed for an ecological "credit crunch", according to a report issued by conservation groups.
The document contends that our demands on natural resources overreach what the Earth can sustain by almost a third.
The Living Planet Report is the work of WWF, the Zoological Society of London and the Global Footprint Network.
It says that more than three quarters of the world's population lives in countries where consumption levels are outstripping environmental renewal.
This makes them "ecological debtors", meaning that they are drawing - and often overdrawing - on the agricultural land, forests, seas and resources of other countries to sustain them.
The report concludes that the reckless consumption of "natural capital" is endangering the world's future prosperity, with clear economic impacts including high costs for food, water and energy.
Dr Dan Barlow, head of policy at the conservation group's Scotland arm, added: "While the media headlines continue to be dominated by the economic turmoil, the world is hurtling further into an ecological credit crunch."
The countries with the biggest impact on the planet are the US and China, together accounting for some 40% of the global footprint.
The report shows the US and United Arab Emirates have the largest ecological footprint per person, while Malawi and Afghanistan have the smallest.
"If our demands on the planet continue to increase at the same rate, by the mid-2030s we would need the equivalent of two planets to maintain our lifestyles," said WWF International director-general James Leape.
In the UK, the "ecological footprint" - the amount of the Earth's land and sea needed to provide the resources we use and absorb our waste - is 5.3 hectares per person.
This is more than twice the 2.1 hectares per person actually available for the global population.
The UK's national ecological footprint is the 15th biggest in the world, and is the same size as that of 33 African countries put together, WWF said.
"The events in the last few months have served to show us how it's foolish in the extreme to live beyond our means," said WWF's international president, Chief Emeka Anyaoku.
"Devastating though the financial credit crunch has been, it's nothing as compared to the ecological recession that we are facing."
He said the more than $2 trillion (£1.2 trillion) lost on stocks and shares was dwarfed by the up to $4.5 trillion worth of resources destroyed forever each year.
The report's Living Planet Index, which is an attempt to measure the health of worldwide biodiversity, showed an average decline of about 30% from 1970 to 2005 in 3,309 populations of 1,235 species.
An index for the tropics shows an average 51% decline over the same period in 1,333 populations of 585 species.
A new index for water consumption showed that for countries such as the UK, the average "water footprint" was far greater than people realised, with thousands of litres used to produce goods such as beef, sugar and cotton shirts.
"In Britain, almost two thirds [62%] of the average water footprint comes from use abroad to produce goods we consume," said Mr Leape.
China, poised to be the world's biggest emitter of carbon dioxide, urged developed countries to spend more on curbing greenhouse gases by following an international accord aimed at cutting global emissions.
Developed nations should adhere to a United Nations commitment to spend 0.7 percent of gross domestic product, Xie Zhenhua, vice chairman of the National Development and Reform Commission, said today at a press conference in Beijing.
``So far, it seems most developed countries have failed to meet this target,'' Xie said. ``If developed countries can share the many climate-friendly technologies in their hands with developing countries, they'll play a very important role in promoting industrial and technological upgrades to help us meet emissions-cutting goals.''
China will increase output of the pollutants blamed for rising temperatures by 11 percent a year, as developed countries have pledged to cut emissions under the Kyoto Protocol, according to the United Nations. The country has called on richer nations to aid its development of cleaner energy sources and help cut its reliance on coal.
``If developing countries keep using traditional and outdated technologies, they may not be able to meet targets,'' Xie said. ``In our efforts to establish a technology-transfer regime, governments should play major roles, and we should have the private sector on board.''
The transfers can help China to develop renewable energies such as wind power, where the country currently lacks two key technologies for turbines, which makes them more expensive to build, Xie said. China plans 2 trillion yuan ($293 billion) of spending to boost renewable-energy usage to 15 percent of the total by 2020 from the current 8.3 percent, he added.
Developing countries such as China may be required to reduce their own greenhouse-gas emissions by as much as 30 percent compared with levels expected under current trends, according to a recommendation earlier this month by European Union environment ministers.
Europe aims to bind poorer countries into a global accord to succeed the Kyoto Protocol on cutting greenhouse gases after it expires in 2012. The EU aims to reduce its own emissions by at least a fifth in 2020 from 1990 levels.
China, as a developing nation, is not bound to reduction targets under the Kyoto Protocol, which forces the EU to cut emissions 8 percent by 2012 compared with 1990. The U.S., the other major emitter of greenhouse gases, opposes Kyoto on the grounds that it is too costly for American companies to take part in a system that spares developing countries.
Europe will make ``very ambitious decisions'' by the end of this year and is considering how the region can cooperate with Asia on climate change, French President Nicolas Sarkozy said last week at a meeting of heads of state in Beijing.
Gross domestic product, or GDP, is the total market value of all final goods and services produced in a country in a given year, equal to total consumer, investment and government spending, plus the value of exports, minus the value of imports.
The government is to announce tomorrow that it will include rapidly growing aviation and shipping emissions in Britain's commitment to curb its carbon footprint by 80% by 2050.
Ed Miliband, the energy and climate change secretary, will bow to pressure from environmentalists and rebel Labour MPs by announcing he will accept an amendment to include these emission sources in the climate change bill which is due to become law next month.
The decision not to include aviation and shipping, which account for 7.5% of all emissions, was seen as a gaping hole in the government's legislation, which is the first measure of its kind in the world. Up to 86 MPs threatened to back an amendment in the Commons tomorrow, tabled by Elliot Morley, a former environment minister, to include these sources.
The government has not been able to calculate exactly which emissions from international flights and shipping lanes will be attributable to Britain's carbon footprint. But even if an international agreement is not reached, acceptance of the amendment will force Miliband to explain where Britain stands on curbing aviation and shipping emissions.
Environmentalists were delighted with the decision. Friends of the Earth executive director Andy Atkins said: "The final piece of the jigsaw is in place. The world's first climate change law will also be a world-class climate change law.
"The climate change law is a victory in the fight against climate change and a victory for the hundreds of thousands of people who have campaigned to make this happen. People from right around the UK demanded a strong law. The government have listened."
Thom Yorke, Radiohead frontman and supporter of The Big Ask, a campaign to urge the government to take the strongest line possible on climate change, said: "It is a massive step forward for us all, as now we can engage in trying to fight climate change directly as a nation. And it came about simply because hundreds of thousands of people on the ground hassled their MP, who in turn hassled the government. Amazing."
An attempt to kickstart the green motoring industry by spending millions of pounds of public money on environmentally friendly vehicles is also to be unveiled tomorrow. Geoff Hoon, the transport secretary, will announce that some local councils and other public bodies will be given £20m to buy and run electric vans.
He will also provide details of a full-scale trial of electric cars and convenient charging points, first announced by Gordon Brown in the summer. The prime minister has championed electric cars but so far take-up has been tiny - just 0.1% of vehicles on the roads.
Signs are growing that China’s economy could be cooling quicker than expected, with a string of big industrial companies announcing production cuts over the past week.
The cuts have come as anecdotal evidence from other companies suggests a surprising weakening of demand in October amid the global financial crisis and a local housing market slowdown.
Aluminium Corporation of China, the country’s biggest producer, said last week it would cut production by 18 per cent and a senior executive was quoted in local media on Monday saying further cutbacks were possible.
Jinchuan, China’s biggest nickel producer, said on Tuesday it was cutting its production target for this year by 17 per cent, while several copper smelters have made large cutbacks over the past two weeks.
Metals and mining companies around the world have had to rethink production in recent months because of falling prices and weakening global demand. However, companies in China have also faced reduced orders from construction companies as house prices have dropped.
Analysts from Macquarie Securities said that in Tangshan, a big steel-making centre in north China, most mills were running at 30-50 per cent of normal capacity and many small iron ore mines had ceased production.
“Orders for cars and home appliances have already begun to shrink,” Xu Lejiang, chairman of Baosteel, China’s biggest steelmaker, said last week.
Zhou Xizeng, analyst with Citic Securities, said steelmakers were trying to adjust rapidly to uncertainty about demand and an inventory build-up. “The recent drop in production is a sort of psychological panic,” he said.
Executives in a number of other industries also said demand had been unusually weak in recent weeks.
But some executives said the slowdown could also reflect shorter-term factors such as customers reducing their inventories because of global uncertainties.
“We had been expecting this to pick up a bit after the end of Olympics restrictions on factories, but things have been very quiet,” said the chief executive of the China operations of a large paints company. “We are trying to work out how much is due to weak demand and how much to destocking.”
Economists are predicting growth next year of 8-9 per cent, down from nearly 12 per cent in 2007. Several have downgraded their numbers in recent weeks and more cuts are expected.
“In September and October, there has been an acceleration in the slowdown in consumption and in exports that has not yet showed up in the official data,” said Stephen Green, economist at Standard Chartered in Shanghai.
Despite fears of a sharp slowdown, a number of companies remain upbeat about growth prospects in China. “I do not see this as the start of a significant decline,” said Nick Reilly, president of General Motors Asia.
Paul French, a retail industry consultant in Shanghai, said the holiday week in early October had been strong for retailers.
“For now, things seem to be all right for retailers but when the market does slow, it does so very quickly,” he said.
Local sentiment may be boosted by the central bank’s willingness to trim interest rates repeatedly, as demonstrated by Wednesday's move to cut the benchmark one-year deposit rate from 3.87 per cent to 3.60.
Additional reporting by Patti Waldmeir in Shanghai and Mure Dickie in Beijing
The Prime Minister appealed to China and the Gulf states yesterday to pour hundreds of billions of pounds into the International Monetary Fund, as he warned that the organisation's $250bn (£160bn) reserves "may not be enough" to bail out countries hit by the global economic crisis.
Gordon Brown insisted immediate action was needed to boost IMF coffers, saying it was vital to prevent the "contagion" of financial crisis spreading to Eastern European economies. Earlier this week, the IMF said that it was offering a £10.4bn loan to Ukraine and financial help to Hungary to maintain stability in the face of crumbling confidence in banks and stock markets.
Mr Brown said that he would fly to the Gulf at the weekend to hold talks with the leaders of the oil-rich states. He will also speak to the Chinese Premier Wen Jiabao before the end of the week to press his case for billions to be pumped into the IMF to allow it to support faltering economies.
The Prime Minister defended soaring levels of borrowing in Britain, insisting that the Government was right to break its fiscal rules to allow spending to continue to counteract the effects of the downturn. He declared: "We are in unique times. In these circumstances what you have to do is what is right for the economy, and what is right for hard-working families and for businesses and for home-owners to get the economy moving again."
Today, the Chancellor Alistair Darling will lay the groundwork for the Treasury to relax its self-imposed limits on borrowing, using his annual Mais lecture to argue that borrowing can rise in the short term to fund the Government's three-year spending plans.
Global passenger car sales fell by about 1m – or 6 per cent – to 16.2m in the third quarter, General Motors said on Wednesday, as it reported a drop nearly twice that level in its own quarterly sales.
America’s largest automaker, which narrowly outsold Toyota worldwide last year, said it had sold more than 2.1 m vehicles globally during the third quarter, down 11.4 per cent on the third quarter of 2007. This brought its total sales in January to end-September to around 7m, down 5.8 per cent on a year ago.
GM’s quarterly sales updates, which report industry-wide numbers, are one of the best sources of data on the auto sector as it weathers its worst crisis in more than a decade. The financial crisis has caused consumers to postpone purchases of new cars and companies have had to cut the size of their work force.
Michael DiGiovanni, GM’s head of global marketing and industry analysis, spoke of the “tremendous snowballing effect around the world from financial turmoil” in the third quarter.
However, he said that he thought actions taken by the US government to stabilise financial markets would lay the groundwork for recovery. “We believe the US is probably in the trough of its downturn right now,” he said.
GM mentioned the strengthening dollar, falling oil and commodity prices and rising housing starts as “positives” for the generally grim US car market.
Carmakers, including GM, have scrambled to cut their costs and reduce inventories in the face of the slowdown. Mr DiGiovanni said: “Once we start growing again, productivity will be greatly enhanced.”
GM reported higher sales in Brazil, Russia, India and China, but said growth in emerging markets was slowing. The rise in sales in the most previous quarter did not make up for the slump in its US business.
Globally, GM said that about 67 per cent of the 1m drop in cars sold by the entire industry came in the US, the world’s largest car market. Total car sales in emerging markets rose 4.7 per cent on a year ago.
Total car sales fell by 1.2 m in the third quarter in North America, Europe and Japan, which still account for more than half of global car sales, the US carmaker said.
GM’s own sales in North America fell by by 18.9 per cent in the third quarter, and by 12.3 per cent in Europe. Opel and Vauxhall, the carmaker’s biggest European marques, reported a 16.3 per cent slump in third-quarter sales.
Jonathan Browning, the company’s vice president responsible for global sales, service and marketing, attributed the slide to the two brands’ large presence in the UK and Spain, two of Europe’s weakest markets this year.
In America, Mr DiGiovanni said that slumping car sales were “more an issue of consumer confidence than credit availability” as consumers reined in spending in response to the housing crisis and rising petrol prices.
GM is burning through about $1bn a month as it reels from the weak US economy and this year’s spike in petrol prices, which together caused a collapse in demand for its biggest and most profitable vehicles. The company is talking to Chrysler about a possible merging of their businesses, and to the US government about possible financial aid.
GM’s sales in Latin America rose by 3.4 per cent, and were up 2.6 per cent in Asia in the third quarter.
The company made 63 per cent of its sales outside the US in the third quarter, compared with 58 per cent last year.
New initiatives to turn motoring greener and create thousands of jobs were announced today by the Government.
Transport Secretary Geoff Hoon invited car companies to bid for the opportunity to participate in a £10m project to run electric car and ultra-low carbon vehicle demonstration projects, overseen by the Technology Strategy Board.
The project will also see around 100 electric cars provided to various towns and cities to allow families and other motorists the opportunity to give feedback on the practical steps needed to make greener motoring an everyday reality.
Building on an announcement made by Prime Minister Gordon Brown in July this year, today's plans could lead to the creation of 10,000 new British jobs and help preserve many thousands more.
The green-motoring initiative is part of a wider Government plan to make the most of the low-carbon economy, with estimates that around a million green jobs could be generated by 2030.
The Government also said today that up to £20m had been dedicated to UK research into improving technology that could make electric and other green cars more practical and affordable.
This follows the publication of new research which concludes that, correctly managed, the UK power system could support widespread use of electric cars and their charging needs without requiring large numbers of new power stations.
The Government has already committed to removing the barriers that could slow a changeover to greener motoring.
This includes a commitment to facilitate the roll-out of charging infrastructure through the planning system and to collaborating with other countries to develop international standards and consider how best to encourage the right consumer market to promote electric and other low carbon vehicles.
Work also continues with energy companies and the National Grid to assess the impact on the electricity system of the widespread use of electric-drive vehicles.
To encourage the mass production of green vans for the first time, the Department for Transport also announced today that a number of companies have been shortlisted to bid to provide electric and low-carbon vans to some councils and other public sector bodies, like the Royal Mail, as part of a £20m programme to ensure all road transport emissions are reduced.
Liverpool, Newcastle, Gateshead, Coventry, Glasgow and Leeds will be among the first councils to trial green vans on their streets.
The companies are:
* Ford Motor Company
* Mercedes-Benz UK
* LDV Group
* Citroen UK
* Nissan UK
* Allied Vehicles
* Land Rover
* Smith Electric Vehicles
Biofuel-powered aircraft could be carrying millions of passengers around the world within three years, according to Boeing.
Darrin Morgan, an environmental expert at the US jet manufacturer, said the group was expecting official approval of biofuel use in the near future.
"The certification will happen much sooner than anybody thought," he said. "We are thinking that within three to five years we are going to see approval for commercial use of biofuels - and possibly sooner."
Morgan added that aircraft will not require modification to operate on a blend of biofuel and kerosene. However, harvesting enough plant material to meet the industry's needs is the biggest barrier to mass use of biofuels, according to Boeing. Fuelling the world's 13,000 commercial planes with soya bean-based fuel, for example, would require setting aside the equivalent of the entire land mass of Europe for soya bean production.
"No technology change is needed from an engine or airframe point of view," Morgan said. "It's about availability of the biomass."
Boeing expects planes to operate on a 30% blend of biofuel. It also believes they could operate on a 100% blend, but says there would not be enough biofuel to supply an industry that consumes 85bn gallons of kerosene a year.
Airlines are staging biofuel trials, as well as Boeing and its close rival Airbus, with the support of engine manufacturers including Rolls-Royce.
A recent trial by Virgin Atlantic and Boeing was dismissed as a "PR stunt" by Willie Walsh, the British Airways chief executive. That drew a sharp response from Virgin Atlantic founder Sir Richard Branson, who warned that the airline industry would go "backwards" if Walsh's attitude prevailed. BA has subsequently teamed up with Rolls-Royce to conduct an in-depth study of alternative fuels. Air France-KLM, the world's largest airline by revenue, has also given its backing to biofuels.
Friends of the Earth said the aviation industry should limit flights first before turning to biofuels and warned that doubts over the ecological benefits of alternative fuels had not been answered.
"There are real doubts over whether biofuels are sustainable and make a real contribution to cutting climate-change emissions," said Tony Bosworth, a transport campaigner at FoE. "Second-generation biofuels are also, as yet, unproven."
According to their backers, biofuels are good for the environment because their ingredients absorb carbon dioxide from the atmosphere while they are grown, which balances out the carbon dioxide that is released when the fuel is burned.
Detractors argue that mass production of biofuel pushes up food prices by using land that would otherwise be dedicated to producing food crops and also causes increased deforestation.
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