It’s the weather stupid

With WTI front-month prices testing US$84/barrel this week, 2010 began on an optimistic note for oil prices. In part the price rise may have been a result of speculative money returning to the oil market but other rationales were readily available. To justify the price rise traders in London and New York had only to look outside. China too is in the midst of a cold snap and with violence again flaring in the Niger Delta a compelling story was building for bulls early in the week.

But oil, it appears, is now trending in a pretty set range of between US$70-85/b (see graph below) testing the waters at the far end of either price before springing back. This is after all the price favoured by OPEC’s largest producer Saudi Arabia. It seems that only a slight nudge is now needed to push the price in either direction. 

That nudge duly came and WTI yesterday dipped below US$80/b. Downward momentum was based on a more benign weather forecast but China also played a role as Beijing moved to reduce lending in an effort to avoid a speculative bubble (of the sort talked about here – subscription required).

Further downward pressure came from the latest American Petroleum Institute (API) report, which showed a build in US crude oil and middle distillate stocks. With warmer weather on the way and the cold unable to dent US distillate stocks, which include heating oil, bears have built up a head of steam. Chartists at banks appear to concur with this view, however, their arguments are void of fundamentals which commentators evoke retrospectively to validate price movements.

 With the EIA revising down its 2010 demand forecasts; OPEC compliance weak (see OPEC stands pat – subscription required); non-OPEC production expected to continue its upward trend in 2010—with Russia (see A sector apart – subscription required), the US (see Rising tide – subscription required) and key central Asian states upping output last year—and stocks full, fundamentals offer little justification for oil to climb much higher. But they appear to matter little in an easily excitable market.

Advertisements

Hottest year on record?

[From The Economist]

The betting is that 2010 will be the hottest year on record. But understanding how the planet’s temperature changes is still a challenge to science.

IT MAY seem implausible at the moment, as northern Europe, Asia and parts of America shiver in the snow, but 2010 may well turn out as the hottest year on record. Those who doubt that greenhouse gases are quite the problem they have been cracked up to be by most of the world’s climatologists have taken comfort from the fact that the Hadley Centre, part of Britain’s Meteorological Office, reckons the warmest year since records began was 1998 (see chart 1). Twelve years without a new record would, the sceptics reckon, be rather a large lull in what is supposed to be a rising trend. Computer modelling by the Met Office, though, gives odds-on chances of the lull being broken.

The fact that no record high happened in the 2000s does not mean that there was no warming over the decade–trends at scales coarser than the annual continued to point upwards, and other authorities suggest there have been record years during the period. Nor was the length of time without an annual record exceptional. Models simulating centuries of warming normally have the occasional decade in which no rise in surface temperatures is observed. This is because heat can be stored in other parts of the system, such as the oceans, for a time, and thus not show up on meteorologists’ thermometers.

Indeed, one reason for thinking that the coming year will be hotter than all known previous ones is that the tropical Pacific is currently dumping heat. This phenomenon, by which heat that has been stored up in the sea over the previous few years is released into the atmosphere, is known as El Niño. A strong Niño contributed to the record temperatures in 1998. In 2007 and 2008 the opposite phenomenon, a cooling Niña, was happening. That goes some way to explaining why those years were chilly by the standards of the 2000s.

And on top of El Niño, there is the sun. The sun’s brightness fluctuates over an 11-year cycle. Though the fluctuation is not vast, it is enough to make a difference from peak to trough. In 2009 the sun was at the bottom of its cycle. Unless it is behaving particularly strangely, it should, over the next 12 months, begin to brighten.

The Met Office’s forecast was made using the Decadal Prediction System, or DePreSys (pronounced “depresses”, which is what it sometimes does to Doug Smith and his colleagues, who run it). Climate models are normally used to show how the climate’s behaviour will respond to changes in things like greenhouse-gas levels. But though a model’s response will, it is hoped, be similar to the real climate’s, models are caricatures, not portraits. Trying to force one into a state that looks exactly like the real climate at a specific time, as prediction requires, will distort it, and it is likely to misbehave as a result.

DePreSys is an attempt to work round this “initialisation” problem–to give the model’s caricature not just an all-purpose resemblance to the way the real climate behaves, but one that captures its pose and expression at a particular moment. In 2007 the first study using DePreSys correctly predicted that there would be a few more years which would set no records. After this, it said, there would be a definite rise in temperature. More recently, Dr Smith and his team have been using clusters of computers around Britain to run multiple models with slightly different initial conditions. Four-fifths of these runs suggest 2010 will be warmer than any previous year–which could be taken as odds of four-to-one on. The techniques are still in their infancy. But they are at least making predictions that can be checked.

Balancing the books

Dr Smith and his colleagues are trying to predict some of the natural variability to come. Kevin Trenberth of America’s National Centre for Atmospheric Research wants to understand in detail the natural variability just seen. His quest gained unexpected prominence when one of his forcefully expressed e-mails on the subject–“The fact is that we can’t account for the lack of warming at the moment and it is a travesty that we can’t”–found its way into the public domain as one of thousands of e-mails from the Climatic Research Unit of the University of East Anglia in the “climategate” furore of November 2009.

Dr Trenberth was not, he has since been at pains to stress, saying that the relatively unwarmed 2000s were particularly out of the ordinary. Instead, he was saying that, given the panoply of satellites and measurement networks that are being installed to monitor the climate, it should now be possible to identify the places and processes that hide energy from the prying eyes of climatologists. That would make it possible to determine what has actually happened to the energy trapped by increasing levels of greenhouse gases.

For the first part of the decade this turns out to be possible. From 1998 to 2003, although surface temperatures were not rising, a lot of energy was mopped up by the oceans (see chart 2). This is borne out by the rise in sea level during the period, which matches (once the additional effects of melting glaciers and ice sheets are taken into account) the expansion of the water in the oceans caused by this heating. Until the middle of the 2000s, therefore, the sums seem to balance.

It is after that that the problem comes. Runoff’s role in the rising sea level increases, meaning the fraction attributable to expansion, and thus the amount of heat taken up by the sea, has fallen (and the chart therefore levels out). The missing heat must therefore be going somewhere else. One possibility is that it is being reflected back into space by changes in cloud cover. The data, however, seem to say no. America’s CERES programme, the result of observations by seven different instruments on six different satellites, suggests the Earth has actually absorbed more energy and reflected away less over the past few years, rather than the other way round. It is all rather mysterious.

Nevertheless, while there is a lot of scepticism in, around and about climate science, none of it is aimed at the first law of thermodynamics, which says that energy cannot be created or destroyed. The energy that the sun delivers to the Earth must therefore be equal to the energy that is reflected back into space, plus that re-emitted as infra-red radiation, plus that stored in some part of the atmosphere, the oceans or the land.

The fact that the books cannot currently be balanced is therefore an admission of ignorance–an ignorance that better, future measurements should help abolish. That, in turn, should allow predictions of what the climate will do next, for good or ill, to become significantly better, and thus deprive climatic bookies of their trade.

Nuclear plans in the Golden State

The announcement by French nuclear power group Areva and Fresno Nuclear Energy Group (FNEG) that they will look at building up to two nuclear reactors in California’s Central Valley, the states agricultural heartland, has raised environmental heckles in a state famed for its ‘green’ credentials. 

The letter of intent signed by Areva and FNEG, a group comprising local business and agricultural interests, will see the pair size up locations for up to two European Pressurised Reactors (EPR). Controversy has dogged the EPR-type reactor, on which Areva has based its foreign growth strategy—none are currently operational and the two under construction, in Finland and France, face delays and cost overruns. Such concerns have already been noted by environmental groups, including the California’s Sierra Club.

 California, which has two operating nuclear facilities, has barred nuclear construction for over three decades. An attempt to overturn the ban in 2007 failed but Areva and FNEG appear to be in bullish mood. The pair may feel they have picked a good time to challenge the state’s legislation (passed in 1976), which FNEG’s chief describes as “archaic”.

 A nuclear renaissance in the US is already well underway—the first new reactor to be built in 30-years is due on stream in 2013 and a further eight reactors could come online by 2018 according to the World Nuclear Association. However, no applications to build any further reactors in California have been lodged with the US Nuclear Regulatory Committee (NRC).

 If California does soften its stance it would signal a major shift in attitudes towards nuclear power. But, as others point-out, much wrangling is likely before construction can start.

Gazprom threats, to music

Moscow Military District Glee Club sings of gas squeeze

It’s that time of year again when all across Europe — particularly in the east — people start fretting about gas supplies from the energy superpower next door.

Traditionally, it all kicks off with a pay dispute between Russia and Ukraine, though that looks like it might be averted this year. However, there’s a new mismatch on the cards: Russia v Belarus. It’s hard to predict whether this will turn out to be the usual hardball haggling and get resolved before its consequences spread; or, like last year’s set-to with the Ukraine, it escalates and has severe consequences for several countries when the taps are turned off.

In any case, it is good to know that the Russians have a sense of humour about it all, albeit a dark one. I guess this winning song from the Moscow Military District’s glee club is their satirical equivalent of something like Mel Brooks singing Springtime for Hitler…but with an edge as those are real soldiers in real uniforms.