The Weekly Wrap: September 10, 2010

Happy birthday, OPEC! The Organization of Petroleum Exporting Countries celebrates its fiftieth anniversary this coming Monday. Responding to a unilateral cut in the price of oil by the major Western oil companies, oil ministers from Saudi Arabia, Kuwait, Iraq, Iran, and Venezuela met in Baghdad for four days beginning on September 10, 1960. The result was OPEC, which was to forever change the oil industry by redefining the relationship between the oil companies and the exporting countries. Previously, oil-producing countries had granted concessions to the major oil companies, sharing in revenues but allowing the companies to determine the rate of production. The founding of OPEC marked the beginning of a shift in power towards the countries themselves, which reached its apogee in the 1970s with the 1973 oil embargo. OPEC has expanded its membership to twelve countries since its founding, and with the decline of oil supplies outside its member countries, it remains arguably as important and influential as ever. That importance also ensures that it will continue to be a lightning rod for criticism.

U.S. steelworkers cry foul over Chinese clean energy subsidies. The United Steelworkers union is filing a trade suit against China, accusing Beijing of maintaining illegal subsidies on its clean energy industries. The union alleges that the subsidies are giving Chinese exporters of solar panels and wind turbines an unfair advantage, violating World Trade Organization regulations. The trade dispute comes as China has rapidly become a hotspot for green energy investment and production, and follows Beijing’s announcement earlier today of a $20 billion trade surplus for August 2010. As the White House decides whether or not to press forward with the case, the debate over China’s trade policies once again returns to center stage, with Keith Bradsher of the New York Times examining in depth the country’s "aggressive government policies" in the clean energy sector. Dissenting from the accusations towards Beijing is UCLA environmental economist Matthew Kahn, who points out in a blog post that Chinese prowess and innovation in clean energy will ultimately benefit both U.S. consumers and producers.

Kuwait’s nuclear energy push. Kuwait unveiled plans on Thursday to construct four nuclear reactors for power generation by 2022. The decision to move into nuclear energy stems from burgeoning electricity demand — expected to grow by 7 percent per year up to 2030 — as well as expectations of oil prices above $50, which makes Kuwait’s oil more valuable as an export than as an energy source. Kuwait’s nuclear energy committee is expected to issue a "roadmap" for its nuclear development by January, and it has just signed a cooperative agreement with Japan to help it gain expertise in nuclear energy. The Gulf state joins a broader push into civilian nuclear energy in the Middle East, as Saudi Arabia, Jordan, and the United Arab Emirates begin to develop their first nuclear power plants.

The dive into deepwater continues. Chevron and BP have been approved by the Chinese government to take operating stakes in new deepwater drilling projects in the South China Sea. The two majors will operate alongside China National Offshore Oil Corporation to develop any oil found in the deep-sea blocks, which range from depths of 980 to 6500 feet. BP’s damaged reputation after the Gulf of Mexico oil spill has evidently remained intact in China, and CNOOC executives have welcomed the addition of the Chevron and BP teams to the South China Sea projects.

Rewarding, rather than picking, winners. Ugo Bardi, a chemistry professor at the University of Florence and peak oil theorist, argued on the Oil Drum this week that it might make more sense for governments to award prizes, rather than research grants, to spark innovation in renewable energy. In the case of research grants, the government decides the themes on which the research should focus before any funds have been allocated, and this narrowing of the parameters may do little to actually achieve a marketable result from the research. But if prizes are awarded for innovations in green energy and energy efficiency research, the funds go to the accomplishment itself, and not the promise that it may or may not happen. Using the example of Europe’s feed-in tariff system, Bardi claims that prizes are more effective in stimulating developments in green energy because they reward success and not failures.

Oil rallies to its highest levels in a month. Oil prices climbed above the $75 mark for the first time since August 11 this week, ending the week at $76.49 a barrel in New York. A variety of factors contributed to the rally. Chinese imports of crude climbed 10 percent in August from July levels, while the International Energy Agency revised its 2010 oil demand forecast upward by 50,000 barrels per day. Reports from the American Petroleum Institute revealed a decline in U.S. oil stockpiles, sparking expectations of increased future demand. And the dollar weakened slightly, driving traders back into oil. A final contributor to the 3 percent price surge today was the shutdown of a major pipeline from Canada, which sprung a leak near Chicago. Still there remains a generally unchanging view among analysts that the economic fundamentals of oil demand are weak, and some models show oil hitting $50 a barrel this winter.

Would you like a wind turbine with that inexpensive and fashionably Scandinavian-looking bookshelf? Furniture giant Ikea announced on Wednesday that it will acquire six German wind farms in order to keep up its company goals of generating its complete electricity needs from renewable energy sources. It’s unlikely that this move towards electricity self-sufficiency will make the jump to other retailers, but the image-conscious Swedish company is hoping to be a trend-setter.