No Hot Air

The China as energy bull story: soon to be bull?

We've remarked before on how common, yet outdated, perceptions of China's energy demand and resultant carbon emissions are used by a variety of energy market participants to talk up their own book at the expense of end-users and or tax payers. The basic approach of the various actors is to talk up China as some sort of bottomless energy pit, but the results depend on who is talking up the bull market.

Energy consultants, oil traders, peak oil theorists, CCS developers, climate change deniers are among those who in general want to talk up energy as a big problem.  Some have political axes to grind. Others are only in it for the money;  for describing the big problem, they can offer a solution with a fee relative to the size. A big part of the problem is to have an alarmist, hysterical and unrealistic view of China which describes a narrative of China as bottomless energy pit.  

China is often used for example, as an excuse not to act on carbon reductions at the  company, local and/or national level.  Similarly, those who want to push up prices, or finagle end users into fixing long term,  or bullish traders on oil and gas markets often use China as a threat to scare people into acting emotionally instead of rationally.

Those who expected me to mention shale gas in China, will be disappointed here.  China seems to be doing just fine on the supply/demand balance even before any shale gas comes into play.

China's domestic gas production will increase 50% in 2010 according to Sinopec's Xie Dan.  Most of that is due to the Puguang gas field coming on line.  China seems to have not exhausted any possibilities yet on conventional natural gas, as a recent discovery in Chonqing is allegedly three times the size of Pugang.

Where does this leave China in a few years?

China's natural gas consumption has been growing at double-digit rates for the past few years, but industry officials said the growth is likely to slow in the next few years.

"With a number of LNG projects, the second West-to-East gas pipeline, the volume of imported natural gas will grow quickly in the next few years," Xie told the conference, adding that the annual supply of natural gas is expected to increase by 2 bcm a year.

Demand from industrial users may weaken due to rising prices and the introduction of alternative energy forms, Xie said.

"Some regions may see an oversupply of natural gas," he said

Where will that leave us?  Without China sucking up every spare molecule on the planet, it means simply there will be more for everyone else.  Which means less for those pushing China as a problem.

The Gas Oil Link

In UK natural gas prices,  2009 has seen a paradigm shift, a game changer and a revolution.

The paradigm shift has been the drop in energy consumption.  Although the recession had a big part in this, energy consumption of oil, gas and electricity started to go down in 2005 in what are called "developed" economies which signifies that the "recovery" if it ever shows up, does not mean a return to the bad old days.

The revolution has been shale.

The game changer is the globalisation of natural gas prices, primarily  deriving from the sudden emergence of shale reserves  pointing toward a future permanence of prices divorced from a link to oil prices.

The gas oil link has always been controversial among UK end-users but had been considered permanent due to the power of the link's big fans at Gazprom and Algeria's Sonatrach among others.

The link is over 50 years old and in Europe started out in the Netherlands. At the time, natural gas was a disappointment; the real prize was oil. Natural gas didn't have anywhere near the infrastructure or popularity it does today and gas had to compete with oil. Gas was naturally cheaper than oil, but had to remain priced in comparison to oil.  This made sense when comparing gas versus oil in fuel switching at generators or as feedstock in chemicals or for very large end users.  It wasn't very rational in pricing at small users - no one we know has dual fuel central heating. The link was logical in the days when oil was plentiful and carbon was a non-issue. Today, gas has two major advantages to oil: it has 31% less carbon content and doesn't have any of the supply issues, actual or imagined, that surround oil.

This year the link seems to have cracked as in May as this comparison of UK NBP gas and Brent Crude shows:

Is this permanent?  Via the FT's Energy Source Blog, we asked Fatih Birol, chief economist of the International Energy Agency the following.  I've highlighted  some key points:

The link between oil and natural gas prices is getting very frayed. Do you see it breaking permanently?

A. Dear Nick Grealy, in Europe and Asia-Pacific, gas is imported mainly under long-term contracts, which, in most cases, link the price of the gas to changes in the prices of oil under what are called indexation formulae. The original logic behind this arrangement is that gas competes against oil products, though increasingly gas competes more against other fuels, including coal and electricity. For now, the exporters and many importers are happy to stick with oil indexation. But the glut of gas that is building up does could put increasing pressure on both sides to adjust their pricing terms and even move towards an alternative pricing system, the most obvious of which would be direct indexation to spot or future gas prices. Russia’s Gazprom and Algeria’s Sonatrach – the two biggest external suppliers to Europe – have lost market share over the past year to cheaper spot LNG. They may decide at some point that enough is enough, and opt to move away form oil indexation, though they have made it absolutely clear that they have no intention of doing so for the time being. And the big importers may also start asking for it, as the gap between the price of cheaper spot gas and the price of gas under their long-term contracts widens. For now they don’t want to upset the status quo, but again that could change – especially if their confidence in pricing on the basis of spot markets increase. Certainly, the gas glut proves a window of opportunity for Europe and Asia to move to a more rational system of market-based pricing

Geography and natural gas

Back in the old days, or at least the last century days of drill, baby, drill gas and oil were considered to be so rare that nowhere was too far away to find it, and wherever that was no self respecting oil or gas company would let polar bears, newts or indigenous people stop them extracting it.

But shale gas is so abundant that we can see the rise of a new phenomenon:  the choosy gas driller. We remarked on that recently when Chesapeake Oil walked away from drilling in the NYC watershed part of the Marcellus Shale in upstate New York.  Aubrey McLendon said simply that "we don't need the brain damage".

I was reminded of this by news out of Canada, where the emergence of shale plays in the Eastern US and Canada has led to choosy buyers.

emergent economic forces don’t care about the mountains and are progressively challenging the traditional west-to-east flow of natural gas. In fact, the whole character of where North Americans get their natural gas is undergoing realignment of seismic proportion. Recent events provide indications of how the dynamics are changing

Alberta has traditionally been the Canadian Oil and Gas patch.  But the emergence of the Marcellus Shale has changed a lot:  Gas from the Marcellus Shale doesn't have to pay 3000 miles of transport fees to reach markets that are next door.  Marcellus drillers can charge a premium over Barnett or Haynesville gas but the customers make money anyway.

Everyone's a winner.  Apart from some gas transporters.  Which may explain why National Grid is eager to join in as the final link in CCS, transporting CO2 from power station to depleted gas field.   In the UK, if there were significant shale finds, National Grid might even get shut out of transporting them since the local grids were sold off.  Local grids could  transport shale finds the short distance to generators, CHP or larger end users.

In Europe, if shale is produced in Poland or Northern Germany  why generate electricity in Berlin, Hamburg or Warsaw with gas imported from Russia, Norway or Nigeria?  Shale is so abundant that it may well be under most people's feet.  Not only will this make energy security risk meaningless or disrupt capital flows, it will make energy simultaneously cheaper and more precious.

The background to disaster

UK energy policy seems to actually relish a disaster and this year the press including people who should really know better like the Economist and the BBC, are acting as cheerleaders for doom in promoting the risible idea of electricity shortages in 2016.  I predict that as reality intrudes, we'll see those stories disappear, but the basic narrative of ever rising power prices is based on anecdotal, but not fact based, assumptions, of constrained gas and rising environmental costs that will echo for years. One reason it will is that there is a lot of money to be made in promoting energy as a problem. Energy consultants, especially the 3PIs (Third Party Introducers) and switching sites, have a huge vested interest in making customers fearful so that they take a longer term price which is inevitably a higher price. The up to 10% commission 3PIs receive from suppliers is the underlying incentive for them push the "energy risk" narrative, even when that story no longer applies.

3PIs have  unwitting, or is that witless, enablers within Ofgem, who  seem to promote unhealthy behaviour that actually undermines the UK economy. Ofgem feels perhaps that promoting risks,even where they are unlikely or impossible makes them more indispensable.  Is this for their own short term needs?  Ofgem is in fact the largest energy consultancy in the UK. It promotes the doubtful benefits of competition while having a sacred belief in the value of "choice" even where the choice is fairly empty, often only laying the framework for consumer confusion which costs far more than the choice saves. Suppliers are a stranger bunch. Some I+C suppliers are smart, progressive and provide good value. Other suppliers have mixed feeling about 3PIs where they both shovel millions of pounds their way while trying to escape doing so. 3PIs are basically outsourced marketing arms, with most suppliers politely having mixed feelings about the sums they spend with the 3PIs. Customer capture is difficult, with the utility market being very sticky. Suppliers need to be either very expensive or very incompetent to lose business. But it's also hard to gain new business.The other reality is that most retail arms are happy with the business they have. It costs money to find new business and the existing business is rarely profitable enough to fund seeking any.

Let's think about "competition". Does choice and value in a market like petrol/gasoline?  Of course it doesn't. Petrol prices are within a pence per liter in any one area.  The vast majority of drivers make the "choice" of where to fill up based on need or convenience.

At least in a petrol station, pricing is transparent, unlike the confusopoly pricing of the big six domestic energy firms, where tiered rates in randomly metered arcane units of measurement mean a true choice providing true value simply isn't provided.

In domestic supply, pay by monthly direct debit and the standard rate between the six is essentially the same. It's the same for the the same reasons as petrol, in that they are priced against a wholesale market.

In the UK, only the largest end-users can access wholesale prices because of the lack of monthly meter reads for almost everyone. The level at which you can use index prices is falling, but not far enough.  The difference of day ahead index prices compared to long term prices is stunning, with 70% savings common over the past year. In fact there has only been one month,January 2009,in the past eighteen  where the day ahead index price was not lower than any price available in advance of the month of use.

For example for November 2009 things looked like this:

 

A fixed price is basically the projected monthly volume multiplied by the monthly price.  November is roughly 10% of an annual heating load.  If one fixed a price in September 2008 for one year, November was £1 a therm.  The lowest possible price one could pay for November in advance was on 32.05 in early September.  But the wholesale index price for System Average Price has been below 25 this month.

In English:  Consultants cannot beat the default price, the price of doing nothing. So what are people paying them for?

ENI on gas prices

Italy's ENI is the biggest oil and gas company most people have never heard of. although it's bigger than most companies who share it's heritage of national oil and gas champion such as Statoil, Pemex, Petrobras, PDVSA etc.

ENI has always been bigger in gas than most energy companies, going back to being one of the Soviet Unions first gas customers, followed by  gas links to Norway and Algeria. In the European space, what CEO Paolo Scaroni says about gas prices should be listened to.

Crude oil prices may be showing signs of a recovery, but natural gas prices will stay depressed for years to come, the head of Italian energy company ENI SpA said in an interview on Tuesday—and the grim price outlook could force energy companies to rethink some investments in new gas projects.

Given ENI's long links to oil indexed Russian gas, we should listen up to this:

The price of gas has traditionally tended to take its cue from crude prices. But while oil has more than doubled since its lows of late 2008, the price of gas has lagged far behind...

Whatever the long-term outlook for gas is, some experts note a fundamental change in the market—a "decoupling" of oil and gas prices, particularly in the U.S....Oil now costs more than $75 a barrel, while the equivalent amount of natural gas costs just $25. "I don't see that gap closing any time soon," Mr. Scaroni said.

But there is now a big disparity between the long-term contract price of gas and the spot price.

Mr. Scaroni said that 18 months ago, he would have said the European market for natural gas would grow by 2% a year, as domestic production fell and demand for the clean-burning fuel rose. At that time, LNG cargoes were selling in the Far East for $20 per million BTUs, he said.

Since then, the demand outlook has changed dramatically. Germany is poised to backtrack on its decision to phase out nuclear power, meaning less demand for gas in Europe's largest economy, he said. Meanwhile, it is likely that the same technology that has been used to open up shale gas in the U.S. could now be used to develop unconventional gas resources in Europe, meaning more supply.

And of course ENI is buying up shale technology via it's holding in Quicksilver Resources Barnett Shale interests.

Let's go back to "the big disparity between the long-term contract price of gas and the spot price".

We've said here from day one, before even NHO had heard of shale that buying gas or power on a long-term contract is the surest way to a) pay way over the odds and b) enrich any energy consultant who advised it.

And the market is still at it.  October day ahead gas is having a modest revival as it usually does this time of year on the back of slightly cold weather in the UK and early US snow.  Q4 is traditionally the most volatile based on the misanthropic hope of gas traders that we'll freeze to death. By Q1 2010, reality usually intrudes and we see massive sell offs even when winter really bites.  A fixed price today for one year from November would mean for example paying 46.41 for next October when this October is only 23.3 so far. 

Whatever uncertainty there is about future gas prices, any idea of a 100% increase by next October is a) unlikely b) ludicrous c) disingenuous or d) fraudulent.  Or all of the above?

Gas drillers stop praying, gas traders start praying

US shale producer Southwestern Energy are typically agile in dealing with the changes in shale.  Shale production started out as unconventional and expensive.  It''s rapidly becoming the new normal, and drill enough wells and learn from mistakes and last year's expensive $6 gas price that was given as the cost of new gas is adjusting to market realities.

Steven Mueller, chief executive of Southwestern Energy, said in an interview that natural-gas producers are on a steep learning curve not unlike the early days of the oil boom, when wildcatters discovered huge new deposits of hydrocarbons. "You have to keep fine-tuning to learn how to get the most production," Mr. Mueller said.

Southwestern, which celebrated the five-year anniversary of its first production from the Fayetteville Shale last week, began by drilling straight down into the rock formation and over time improved its technique. It now drills more than three-quarters of a mile in distance laterally through layers of rock, which it says has allowed the company to triple its average output per well.

The time it takes to drill a well has also declined to 11 days from 17 days over the past few years. The company can now keep up its drilling pace with fewer rigs, while keeping the cost of drilling more intricate wells relatively flat.

Other natural-gas producers have had similar results. Devon Energy Corp. reported that it drilled a well in nine days in Texas's Barnett Shale during the second quarter, a feat that used to take weeks.

The conventional wisdom indicator that natural gas bulls were pointing to earlier this year was the Baker Hughes Drill Count.  Declining drill counts were signs, so the theory went, that production would fall and prices would rise.  There goes that theory when drills do in days what used to take weeks, drills cover more area, well output triples and the hit rate approaches 100%. 

Using various technologies that goes over our heads, but is far more effective,  gas drillers are losing religion:

In the shale plays, the traditional technique was characterized as ‘pump and pray.’ This meant that operators often made their best picks for likely perforating targets based on less than scientific methods—to put it politely

Meanwhile at Seeking Alpha, the Masters of the Universe traders are conceding defeat:

Natural Gas: Worst Investment Ever?

And in the comment section

Virtually all natural gas storage facilities in the country are either full or locked up by hedge funds, and it is impossible to export the stuff. Many shareholders have recently found religion, praying for a cold winter to balance out supply and demand. 

And if we get a warm and wet winter as the UK Met Office predicts?  No matter.  Gas will still be in just as massive a glut coming out of the winter as entering it. 

When will gas run out?

A question that Aubrey McLendon of Chesapeake can answer, and does in the WSJ

Asked recently when output from North America's prolific shale-gas resources would peak, Chesapeake Energy's chief executive, Aubrey McClendon, quipped: "With all due respect to you and to me, we'll both be dead."

Barring sudden discovery of the elixir of life, he is surely correct: Navigant Consulting puts recoverable resources at 118 years of supply.

Don't depend on generation or electric vehicles to have a long term impact either:

But U.S. energy officials expect electricity-demand growth to average 0.8% a year to 2020, down from 1.3% over the past decade. Crowding into this is an expected 267 gigawatts of renewable capacity like windmills, which, Barclays Capital points out, might obviate the need for any growth in gas-fired electricity output. Energy-efficiency initiatives, which McKinsey reckons could cut projected 2020 electricity consumption by about a quarter, represent another game-changing threat.

In reality, intermittent renewable-electricity generation requires backup fossil-fuel capacity, for which flexible gas-fired plants are well-suited. Vehicles represent another opportunity, although more likely via causing more demand for electricity rather than a mass conversion to natural-gas-powered cars. Still, energy consultancy GSW Strategy Group estimates even if a fifth of vehicles were plug-ins by 2020, this would add only a few percentage points of demand to the grid.....The risk is that a combination of huge shale-gas resources and low demand growth weighs on prices for years to come.

More on US LNG Exports...

Following on from what we think is unprecedented news that the US is considering exporting LNG from the Gulf of Mexico , a link here to the Conoco Philips request to the US DOE to do just that:

The Office of Fossil Energy (FE) of the Department of Energy (DOE) gives notice of receipt of an application filed on August 31, 2009 by ConocoPhillips Company (ConocoPhillips), requesting blanket authorization to export liquefied natural gas (LNG) that previously had been imported from foreign sources on their own behalf or as agent for others on a short-term or spot market basis from existing facilities on Quintana Island, Texas in an amount up to the equivalent of 500 Billion cubic feet (Bcf) of natural gas to the United Kingdom, Belgium, Spain, Portugal, Turkey, Brazil, Argentina, Chile, Mexico, the Dominican Republic, Japan, South Korea, India, China, Taiwan, France, and/or Italy, as well as any country with the capacity to import ocean-going LNG, with which trade is not prohibited by U.S. law or policy. ConocoPhillips seeks to export the LNG over a two year period commencing on the date of the authorization.

Just because it's unprecedented,  and the mere whisper of it would have led to men in white coats being called only a few months ago,  doesn't mean it doesn't make economic sense.

In support of its application, ConocoPhillips states that there is no domestic reliance on the LNG that it seeks to export. Due to global LNG Market conditions,U.S. natural gas demand and prices do not currently support the importation of LNG into the U.S, and export authorization is needed in order to enable the applicant to economically import LNG should U.S. market conditions change.
ConocoPhillips also states in its application that local natural gas supplies will not be reduced. The applicant states that it intends to export only foreign sourced LNG, and does not intend to export domestically produced natural gas. Additionally, ConocoPhillips states that granting the requested authorization would make the importation of LNG into the U.S. more attractive because, once imported, ConocoPhillips will have the option of either selling into U.S. markets or exporting to other markets based upon prevailing market conditions.

The US is approaching 100% storage capacity, another event that was considered impossible last year (although we said it would happen in  a post in Spring 09). When  capacity is reached, physical barriers kick in: Producers and Traders would scream, but you cannae argue with the laws of physics.  If storage is full, gas cannot be produced. And if it's not produced, instead of a low price, producers get even worse: no price at all.  By the way, the statement that Conoco-Phillips don't want to export domestic gas doesn't really matter. Mix up the molecules and domestic and imported is a meaningless concept.

Many Nat Gas newbies don't understand this. If no one buys gas, uses it or exports it, then some people make nothing at all. Natural Gas contracts can't be rolled over month after month.  Someone has to burn it.  We won't scare people about how using past, if short-lived,  UK experience, natural gas could go negative: You have to literally pay people to take it off your hands. 

So even if LNG gets exported for nearly nothing, it beats nothing at all. Economics differ from location to location, but US LNG exports could still make some money on $1MMBTU, just as much LNG coming into the UK would still be profitable at less than 10 pence per therm.

US LNG export prices would be unpalatable, but some money is better than no money.  It may make sense, and as we see from the above,  people are covering all bases.

Six reasons why gas will go up. And five (of the same) reasons why it won't

One really has to look hard for a bullish gas story these days, but with a lot of amateurs in the market poring over the charts, or is that tea leaves,  some still hope.

The discussion here is about North American gas, but with Henry Hub setting  the price for LNG imports to the UK, we've got to take all opinion on board.  Even when it's wrong as in this article from Canada's National  Post,which asks Natural Gas Time  to Buy?

With all the supply side issues, why would I be bullish on Natural gas?  Well there are a few reasons - read on:

i) The economy is picking up: Demand is showing signs of life and the manufacturing sector is demonstrating its first signs of growth. One can expect gas demands from gas-fired power plants to rise accordingly.

Demand is falling and falling permanently. Just today we see that US Steel demand, closely allied  to the automotive sector is down 33% this year, and the UK is no different. National Grid Transco sees flat or  declining demand for the next 20 years in it's long term outlooks. Demand does not bounce back by double digits, especially when the  recovery,if it even exists, will  be a jobless one.

ii) The oil to gas price ratio: Eventually, I do believe that the relation between the price of oil and gas will resurrect. The recent spike in the oil to gas price ratio to 25x will likely return back to normal in the long run. With the economy picking up and oil futures pointing upwards, one can expect that the gap in this ratio will close.

The oil/gas link is permanently broken with the gas glut from shale, LNG and permanent structural demand drops. Looking at the past is not a way to predict this future, since the present is undergoing a  transformational paradigm shift.

iii) The weather: We are heading into Q4 which means that winter is approaching! Gas demand typically picks up in the winter months and gas prices historically have done well during this time of the year. Further, as we are at the height of the hurricane season it is quite feasible to see a gulf-based storm emerge in the coming weeks creating a short term supply shortage, allowing inventories to come down.

Apart from which hurricane season is that, it being the quietest in years and only has 6 weeks to run,  hoping for a cold winter to raise gas prices sounds as desperate as it is cynical. And markets always factor in risk of cold weather:  that's why January is 37.20 and October is 22 odd today. On this day last year we saw the same  spreads for winter. When the coldest winter in 18 years met another Ukrainian fiasco, January 2009  gas still ended up 50% lower day ahead prices than September forwards.  And it happens almost ever year like clockwork.

iv) Environmental policy: The Obama administration is pushing ahead with climate change initiatives that will cut green house gas emissions over the coming decades. Although the plan is not centred on gas-fired energy production at the moment, there is almost no feasible alternative to the power plan that would allow the U.S. to reach its targets in its given timeframes. Most of the power in the U.S. is generated from coal-powered power plants which are a key contributor to the green house gas problem. Getting off of coal and onto emision friendlier power substitutes like wind, solar, and nuclear is a long term project which will likely require a mid-term solution. Gas-fired plants do produce green house gases but much less than their coal-fired counterparts - it would be much quicker and cheaper to substitute coal-fired plants for gas powered ones. This would allow for an interim step in achieving the green house gas emissions reduction time frames.

Just as big a fear in the UK, just as unlikely. Facts, as opposed to anecdote are that environmental costs are small portion of  the total  bill. Sure those costs will  go up by 7%, but that's 7% of  less than 10% of the final price -  not very much. Environmental costs have minimal impact on the actual commodity price or demand short term, and especially so this winter.

v) Demand from Emerging Economies: It's a known fact that India and China are consuming more oil, but they are also consuming more natural gas. With gas liquefying techniques improving, the transportation of natural gas across our oceans, as is done with oil, is likely to become more feasible in the future. More accessible gas transportation = more demand from emerging economies = increased prices.

The bull's favourite reason. Which part of gas glut doesn't he believe? There is so much gas in the US that it pushes down world prices, i.e ours. And there is so much LNG available from new sources that Asian prices have never been lower. Finally, we have said from day one here, China is using more gas, but the rate of growth is slowing and world supply will reflect this new balance between supply and demand.   China as smog ridden energy hog is a peak oil story, not reality.

vi) Have an opposing view to the market: One of my key takeaways from my Ivey MBA, specifically from sitting in Steven Forester's Portfolio Management class, is that you are more likely to drive above normal returns by formulating views that oppose the overall market view. The majority of the market believes that the natural gas market faces long term supply issues that will suppress prices for years to come - I oppose this view and think that gas prices are a great play over the next 24 months.

We have an MBA from the University of Hard Knocks Upside Your Head. Which naturally makes us  agree that the contrary view should be respected and expected. If we could accurately predict the outcome of numbers as random as gas prices, we'd invest in Lotto tickets. A contrary view should always be respected. But not listened to on principle alone.

Structures, not cycles

On the energy supply side we have the revolution in gas production combining with the game changer of oil/gas decoupling and globalisation to create all good news in energy supply. 

Energy bulls at wholesale and energy risk merchants at retail clutch at straws and search for energy tea leaves by saying that recovering demand will cause prices to rise. Quite apart from how difficult it would be to counteract a doubling, tripling or nine fold increase in supply with a demand rise, the big problem to that theory is: demand is not rising.  Energy has been cyclical up to now. From now on it will be structural, much more interesting, much less volatile and  far cheaper in the cost per unit.

The bull/risk story depends a lot on oil and gas prices acting as they have in the past:  A boom and bust cycle in prices has similar impacts in the demand cycle. But on the demand side, we have certainly passed the peak in developed economies and see a precipitous decline in the rate of growth of developing economies. Why?

Those seeking simple answers, please look away. But the simple overall answer is that people are no longer energy obese. And just like losing a few kilos of weight, losing the fat surrounding energy isn't the same as cutting off ten pounds of ugly fat (your head as any ten year old can tell you), but a whole suite of little things that end up adding up to if not a lot, at least to a trend significant enough to start having an impact on markets.

This time will be different for a variety of reasons. Energy markets can blame themselves a lot by pushing up prices so far last year. Energy producers thought that as in the past demand is inelastic and that all levels of customer simply pony up however outrageous prices became. But this time, price sticker shock combined with efficiency gains,conservation measures and the rising number of alternatives to carbon fuels to cause a drop in demand across all industries and sectors.  Sure we see collapsing industrial demand (Iron and Steel 30% down year on year), but even assuming a big if of a rising economy,  structural changes are replacing cyclical ones. One of our favourite stats is how UK domestic gas use fell by 4% in January 2009 despite weather 40% colder than Jan 2008. 

Price had a lot to do  with that, but it's not  all of it.  Perhaps people lagged their attics, or put on a cardie.  But a more prosaic explanation is that one can reasonably expect 5% of gas central heating boilers to be replaced naturally every year. And any GCH boiler today is going to be at anywhere from 25 to 60% more efficient than the one it replaced. 

Similar savings come from anything else: A consumer may be of the  opinion that  carbon change is one big con, but however much they try, it is impossible for them to buy a light bulb that uses more energy than the one it replaced. They would have to replace one 60 watt bulb with four CFL bulbs and would  still be using less energy.

We've been meaning to  thank, as we have before, Peter Tertzakian of the Calgary Herald.  Energy books are not generally delivered in a clear, witty and understandable way as in The End Of Energy Obesity, a book we commend, or is that channel, to everyone. The best energy book of the year for sure.