Bio Diesels making a comeback?

Are bio diesels making a comeback? The recent initiatives around energy efficiency are leading to a renewed focus on rail transportation of goods (see Berkshire Hathaway's recent investment) and diesel in general.
At least one company thinks so: Valero has just made a big investment in jatropha. We had heard of this plant a few years ago when it was going to the solution to the world's fuel problems followed by a couple of years of silence and unkept promises.

This plant is also partly causing the issue of land grabbing in Africa for both cultivable land as well as waste lands. Other reasons being dearth of cultivable land in the Middle East, desperate measures to support burgeoning populations in developing countries and opportunism.

Wind and Corruption

A recent article from the NY Times explores the growing risk of corruption and fraud in the highly subsidized but lightly regulated wind business:

NY Times | With Wind Energy, Opportunity for Corruption

European Gas : End of the Summer-Winter Cycle ?

An interesting article on talks about how there is a perception of a glut in supply in the European gas markets, which is leading to almost no difference between summer and winter gas prices for 2010. The low gas prices (coupled with the low carbon prices) also mean that owners of gas-fired power plants are laughing all the way to the bank.

A large contributor to the glut is the emergence of shale gas as a viable option in the US and ,in the future, in Europe.

Seems a far cry from last year's fears of European dependence on Russian gas and being held hostage by a great angry bear.

For more go to the link (free sign-in required)

TriplePoint wins

TPT has announced a few recent wins in November. Wins include Unilever, Tennessee Valley Authority (TVA), and Peabody.

Press Releases: Unilever | TVA | Peabody

Correlating Recessions and Oil Prices

GDP and Oil Price over time

I was reading another POV on peak oil and found this graph in the discussion which I thought was well presented. You can find the article – which feels like a relatively even handed “peakist” view – here: Time and the Latest CERA Report. The actual article where this chart originated is more specifically geared to the relationship oil price has with recessions and can be found here: Further Evidence of the Influence of Energy on the US Economy. In this latter article, take a look at the comments from some not so moderate “peakists.”

World Energy Outlook released … concerns over it’s legitimacy raised

IEA's WEO for 2009

As we approach the release of the annual World Energy Outlook (released today) report from the IEA there are new reports coming out that suggest that the US Government has been putting pressure on the IEA to inflate the rate of flow through the supply chain from today’s 83m barrels/day to 105m by 2030. This new criticism has not been responded to yet by the IEA but apparently they have said they will respond to it soon.

Article Reference: Key Oil Figures Were Distorted by US Pressure | Guardian

How should we respond to this type of information? My suggestion is that we don’t react yet; this “finding” is really just in the rumour stage and unless the story develops we will likely be at the whim of two large “global storylines” promoted by very well capitalised interest groups or highly passionate people who both believe that the ends justify the means when it comes to mass media manipulation (or at least obfuscation). As a result these stories hit the press relatively frequently and the press – either unwittingly or through influence – promotes the stories as news more than as rumour. This in turn further entrenches most people into the camp that they were already in (a la, “the echo chamber” effect) and on occasion – typically when prices are directly effecting the end customer’s lifestyle – helps to create movement of public opinion in the debate. To be completely clear … I am not suggesting that this most recent rumour is incorrect, simply that there is no way to know at this stage.

Why Smart Meters are not a silver bullet

A dose of real world analysis in the midst of the smart meter euphoria... this article talks about how utilities need to do more than just install smart meters for them to be an effective tool in reducing our energy usage...

Smart Meters: Not So Sharp For Consumers (from

MPs demand inquiry into great energy 'swindle'

Article: Great Energy Swindle | The Independent

Unfortunately the 'big six' supply companies may have some defence in their argument. It is quite likely that most of them do hedge forward their demand estimates as much as three years in advance; if they didn't their risk would really be too high and this would severely knock their share price. Ok, they will not have hedged their full volume in the first part of 2008, when prices were soaring, however, a large portion of their demand would have been covered at higher prices than we are seeing now.

This leads to many questions with two of the more interesting ones being:
- who did benefit from the higher prices locked in by the big six supply companies?
- When will we see some drop in prices on the back of recent lower wholesale markets?

The answer to the first question may depend on who the supply companies acquired their hedge from, which is probably a mix of their own internal trading company or the commodity trading banks, who by the way are all having massive years! A point to realise is that the integrated utilities do not really care about the electricity price but more about the generation margin (i.e. the difference between power and the fuel price - the so called 'spark spread' or 'dark spread'), which will not have seen such big gains because fuel prices were also high. This being said, we might expect the nuclear generators to be the big winners for once as their fuel price is less impacted by emission prices or other highly volatile energy markets.

The second question is harder and really depends on the hedging strategy in each company but certainly the retail prices ought to start looking lower from now. However, we should not expect the benefit to be a big hit though as the impact will be spread over the price we pay during the next three years or so.

Of course, if prices in the wholesale market start firming again then this benefit will be diluted; with commodity price induced inflation not far around the corner, because the supply/demand situation hasn't improved much of late, do not hold your breath!

BP’s new Chairman

Rumblings from up high in BP …

BP’s New Chairman to Lead Shakeup | Reuters

Wireless Power (nearly) a Reality

I am sure many readers of this blog have the daily annoyance of needing to carry around multiple charging adapters and plugs (Laptop, iPod, Mobile, GPS). The lack of standards across devices (no one charger to rule them all) and having to carry around long, self knotting wires make this an exercise in minor frustration.

Because of this I have been following the research and development effort on wireless device charging for some time now. There seems to be a few players out there with slightly differing technologies, but recently PowerMat has announced it is about to release a product which uses magnetic induction to distribute power. Key features include charging multiple devices simultaneously and the same or faster recharge speeds (not sure how that works?).

What's the catch? Well currently it seems to be aimed at small devices (phones but not laptops) and product support is, as is to be expected, limited. Currently there seems to be two options – product specific back panel receivers (which are slightly bulky) or a receiver with USB and other adapters. If popular, I hope product manufacturers will adopt.

I wonder if this is a ‘green’ solution or is always drawing power from the mains and distributing into the Ether.

Check it out.

Blame the speculators.. or is it currency movements. Why not just listen to the market?

If it is not the options traders causing higher oil prices then maybe OPEC are correct that the speculators are to blame, at least according to Abdullah al-Badri (the secretary-general of OPEC).

Speaking at the same conference, Tony Hayward (chief executive of BP) also said that the recent rise in oil prices was related to currency movements; are the currency traders to blame then?

So why is anyone to blame? My understanding is that prices go up because there are more buyers than sellers (economics 101). I just wonder why it isn't simply that the market thinks current prices are too low; somebody is clearly willing to take delivery of oil at these levels and so called speculators only buy because they believe prices are going up; oh and they also sell when they think prices are going down.

The only thing that we can be sure of is that nobody knows...isn't that why markets exist and why there is risk!

The Impact of Options on the Oil Price

An interesting article in the FT today about potential upward pressure on the Oil price if it surpasses $80 as sellers of Calls need to cover their position with futures.

Options-driven rally likely if oil prices move above $80 | FT, 20 Oct

Energy Regulation Goes International?


There’s a new group in town … ICER is a group of 12 regional energy regulatory associations that are trying to talk about regulation on a bigger stage. Looks pretty EU-centred on first blush but may represent a reasonable first step.

International Energy Regulator Launched | Energy Risk, 19 Oct 2009

I will say, however, that based on the “google scale of relevancy” – a term I just came up with –this organisation needs to work on getting more press (or at least hire some SEO folks to get their website higher in the search results).

Risk Management no longer does what it says on the tin

There has been a trend recently that suggests Risk Management no longer does what it says on the tin; so much so that nowadays it appears risk management and optimisation drive business decisions even less than accounting, as identified in my earlier comment (

Over the last year in particular, Risk Managers have become more like Risk Controllers (to bash the trader) and Risk Reporters (more for regulatory reasons rather than business reasons). The days that good risk management was a tool to help the business make positive contributions rather than just limit innovation may now be part of history. Good risk analysis, information and advice can improve performance, help traders use their risk capital more efficiently and highlight scenarios that their position is exposed to; it is also reasonable to expect that new profit opportunities will be identified as a consequence.

Risk Managers, whether they are the trader as the first line of risk management, an independent group or both, need to spend more time looking forward at how risk can impact and change performance rather than looking back.

The timeliness of this information is also important and more often than not it is almost a day behind, by the time it has been usefully interpreted! Providing the data for analysis and reporting the results of standard metrics can often be outsourced and provided in a timely manner for interpretation. This requires a different skill set to the real expertise of understanding what risk can do and how to utilise it in order to benefit the business.

Let’s look forward to the days when highly skilled and experienced Risk Managers start thinking about managing risk again, rather than spending their time preparing cushions of reports at ridiculous levels of confidence, precision and complexity.

OpenLink closes Petrobas

Petrobas, the Brazilian energy giant, announced that they will use OpenLink’s Endur platform as well as the cMotion suite for their refined products business.


Petrobras Selects OpenLink's Endur for its Crude Oil and Refined Products Business

| Bobsguide

3 becomes 1: welcome to the US Power grid


Many of you have probably been reading about the benefits of a High-Temperature Superconductor (HTS) in the media recently. Apparently it was announced today by the American Superconductor Corporation (AMSC) that they have been chosen for the Tres Amigas Project which will connect all three major electricity grids in the US as well as provide pipe to bring in new non-dispatchable renewables onto the newly formed national grid.

Apparently scheduled for completion in 2014, it sounds like a pretty exciting prospect that should bring greater reliability and competition to the grid as well as provide a more effective environment for renewable sources to sell intermittent power into. Looking at AMSC’s chart, however, it appears this news was not a surprise as there was effectively no movement in the stock price today although maybe we’ll see a jump tomorrow as the announcement was late in the day.



Superconductor Electricity Pipelines to be Adopted for America's First Renewable Energy Market Hub | Yahoo Finance

American Superconductor to Provide Hardware for Tres Amigas Project | Green Energy Reporter

The Tres Amigas Project: America's Renewable Energy Hub? | Fast Company

An interesting investment or a foolish gamble

If you like to try your luck at the casinos in Vegas and also secretly hope to see a major green revolution take place in the near term you can take a position on both today. How? Buy ZENN stock (ZNNMF). ZENN, for those of you who don’t know, has been in the business of making zero-emissions vehicles but recently decided to change tact and now is focusing exclusively on an electric drive train that they plan on selling to Ford, Toyota and other major manufacturers. The ace up their sleeve? Their intimate relationship with EEStor a company that few know well but who is making some fairly audacious claims in the ultra-capacitor marketplace.

An “ultra-capacitor” is similar to battery technology in that it stores energy but rather than using a chemical process it stores electricity on it’s surface. A capacitor (even an ultra-capacitor) is typically characterised as possessing very high power-density (aka, power can be moved into and deployed out of very quickly) but very low energy-density (aka, stored energy on a per mass or per volume basis is very low). See the chart below to see this historic relationship with other technologies. It’s true that ultra capacitors are gaining greater energy density through nano-technologies but what EEStor is claiming would be a huge jump from anything else in the market. If believed, the EEStor technology would not only revolutionise motive transport but also the whole power industry (peak shaving, reduced spinning reserve, more economic and new power switching and quality devices, etc.)


EEStor’s ownership structure is not completely clear but it appears the two biggest holders are Kleiner Perkins (20%) and ZENN (12%). Even without the ownership stake it appears ZENN’s fate is highly correlated with EEStor’s. Admittedly I’d prefer to take the gamble directly with EEStor but as that option isn’t available to the public I think I’ll take a punt on ZENN. What do you think? Smart bet? Interesting gamble? Easy way to lose money?

Here’s a few links to help you decide:

[a few over-enthusiastic investors]  [news on ZENN’s April run-up on prices]

[more news on ZENN]  [more news on EEStor]

Gary Gensler - CFTC gets some teeth

Looks like the CFTC, for long seen as a country cousin of the SEC, may finally be getting some teeth with Gary Gensler...

Go to Story

Debating Peak Oil

The Oil Drum blog today posted a rebuttal to both a NYTimes article and Scientific American article that it feels painted a far too optimistic picture about our proximity to “peak oil”, in particular pointing to physical possibilities that have a questionable economic reality. It’s an interesting debate which you can find at:

Peak Oil Not a Problem According to NY Times; Scientific American - Our Response on the Financial Aspects

I will warn, however, that this blog tends to be a bit of an echo chamber of “oil peakers” but it’s always worth reading a different point of view if you’re used to the more tame views available in mainstream press.

Without risk-taking there is no banking industry

Bob Diamond, the chief executive of Barclays Capital, said recently in a radio interview that without risk-taking there is no banking industry (link to radio interview).

This is correct, though may be a concern for those who believe the traders who take the risk are to blame for the banking crisis. Of course, traders should be rewarded for successfully making money from the active use of risk though the real question is whether the risks are properly understood and therefore whether the returns are sufficient and rewards appropriate.

Actually, what this highlights is the need to properly measure, manage and report the risk being utilised in a relevant way, perhaps pointing the finger at the accounting and audit practices; do they expose the risk sufficiently to help its management or just to meet fiduciary and regulatory requirements?

Another outstanding question, emanating from the same underlying issue, is why did the Lehman Bros' published and audited accounts not give a proper warning of their impending and sudden failure; surely it wasn’t due to new trades after the accounts were published but a consequence of risk in the books not being recognised.

A further side effect of the existing accounting policies is that they potentially put incentives in the wrong place, particularly those for companies that actively manage the market risk of their own assets. For example, trading decisions driven primarily by hedge accounting policies, rather than for risk management, could result in the diversion of P&L from assets to trading groups while leaving some unmanaged risk with the asset. Interestingly, recent results published by a leading utility with an active trading group show huge trading P&L and weak asset results; leaving the investment analysts questioning the organisational set up.

The common factor is that accountants and auditors are really only reporting a snapshot of the financial state rather than the real risk in the business that can impact future performance; this could be an underlying reason for the recent problems. These accounting driven decisions are also the reason many organisations are structured in such a way that helps to satisfy accounting standards rather than to best manage the asset's profitability and risk. This is not a matter of MTM or accrual accounting but how to represent the state of the business risk.

In the rush to blame the traders and their bonuses, the regulators and the industry commentators appear to have completely missed that the current accounting rules are a significant contributor to the crisis we have seen in the markets!

A “non-electric” plug-in hybrid?

Kleiner Perkins hints at plug-in car launch this week and they have said it “it is not an electric vehicle” and then said “do not think batteries”. My guess? It IS an electric car but it doesn’t use batteries. I mean what other kind of propulsion system would the car run on? It’s really annoying but modern vernacular confuses automotive propulsion with energy storage with regularity. For instance, a “hydrogen fuel cell” car IS an electric car … it just uses H2 as is energy storage and a fuel cell to convert it to electricity.

My guess is that this car in fact does use a fuel cell technology -- possibly hydrogen fuel cell -- and the real breakthrough is that they’ve come up with a more efficient way of using on-board electrolysis to make hydrogen gas (or whatever gas the fuel cell consumes). If that is true and the economics of this storage system compete with battery technology that could have a huge impact on the automotive field.

Regulator influences the oil market or an unintended consequence?

It is perceived wisdom now that the activity of investors in the commodity market during recent years may have inflated prices, particularly oil, via the inflow of significant investment capital to indexed based long-only commodity funds and ETFs.

Essentially, if the premise is correct, the investment funds swamped physical supply/demand fundamentals pushing up prices, above some undefined ‘appropriate’ level. The view expressed being that commodity markets were under invested and higher prices would result; in fact that higher prices would be required if future supply is to meet potential demand requirements. In truth nobody really knows and that is the nature of risk.

Why this investment activity, often described derogatively in terms of speculation, is considered different to investment flows in to other markets may not be entirely clear; surely investors have as much right to put their money in commodities as equities. Some might say it is no coincidence that most non-professional players in other markets are happy to see higher prices as it benefits the economy and their pensions. Does this make the ‘positive’ benefit of investor speculation in the non-commodity markets more acceptable, whereas increases in commodity prices come straight out of our pockets? The answer should be no, as should any action that unduly influences the price down as well; short sellers should not be vilified for this either as they are really only the messenger expressing nervousness of over valuation.

Interestingly, few commentators have uttered any scepticism about last week’s reasonably significant (>6.5%) drop in the entire oil forward curve. However, one of the strongest rumours in the market is that it was due to the action of a large player, in fact a nameless FED15 bank, who was unwinding a sizeable portion of a long oil position. The talk amongst the trading community is that the bank’s compliance department was concerned about the impending increase in regulatory reporting and a potential knock-on impact on capital requirements.

Currently the market consensus is that fundamentals in the oil market are reasonably supportive. Without any exogenous factors the trend could be back on the ‘up’, though one of the main risks to sharp downside is the uncertainty whether more of the FED15, particularly the larger commodity players, will also feel it necessary to unload their investment in long index strategies and ETFs.

Is this undue influence or an unintended consequence of the regulators’ involvement in the commodity market?

Floating Wind Turbines

One of the key issues with offshore wind turbines has always been that they need to be pretty close to shore. However, the wind is much stronger far out to sea. Bit of a Catch-22. Well, not any more - thanks to the floating wind turbine which will hopefully allow much more efficient wind power...

Commodities a focus at Standard Chartered

Standard Chartered has seen growth in their commodities business for several years but there continue to be signs that they are bringing the senior talent -- including Paul Gregg as COO and now Ashish Mittal taking over as Global Head of Commodities Sales (see related article from AutomatedTrader) -- as well as starting to make the necessary budgeting on the IT side for significant growth and penetration into the physical markets.

Reference: AutomatedTrader, Standard Chartered makes senior management changes

DOE Loan Guaranty Solicitations

The U.S. Department of Energy announced on July 29, two loan guaranty solicitations, the first to support loans for renewable energy and electric power transmission projects and cutting edge biofuel projects that employ a new or significantly improved technology that is not a commercial technology, and the second to support loans for large transmission infrastructure projects in the US that use commercial technologies and begin construction by September 30, 2011.

The lending authority under the solicitations includes up to $2B in subsidy costs to support loans for renewable energy and electric power transmission projects, up to $500MM in subsidy costs for cutting-edge biofuel projects, and up to $750MM in subsidy costs for large transmission infrastructure projects in the US. Funding to cover subsidy costs for the loan guaranties is provided by the American Recovery and Reinvestment Act. The first application due date under each solicitation is September 14, 2009.

More subsidies, is that what we need to kick start infrastructure changes?

US Considers Limits on Energy Trading

Yesterday’s AP wire brought with it a surprising article about a push to establish trading limits on energy futures contracts. See below:

US considers limits on Energy Trading
US regulator says limits on energy futures trading must be weighed due to hurtful price swings
By Marcy Gordon, AP Business Writer, Tuesday July 28, 2009.

I am not sure this will fly.

Unregulated energy markets are terribly efficient today.
Prior to the futures exchanges and otc markets it was far easier for a company or group of companies or OPEC to stockpile physical oil; squeezing the market and bagging the windfall. Today yes, the price can be bid up on speculation but it cuts both ways; someone's bluff can be called and/or the market produces more supply, higher mileage vehicles become vogue, and the consumer crushes demand. These non-physical markets took OPEC out of the drivers seat and have kept them out.

Since 1972 (and probably before that) every time the government, or quasi-government agency, has attempted to rescue the general public from the evil oil & gas companies (including the trading community) they have created unnatural and inefficient "rules" inconsistent with a free market economy. Example: the price controls following the 1979 second oil crisis led to unnecessary regional shortages of gasoline and a boom for oil producers; i.e. "new" oil vs "old" oil. Prices remained artificially high for a number of years. Finally  Regan decontrolled the oil & gas prices in 1986 letting the natural state of supply and demand take over dropping the price to the floor along with his critics.

If indeed limits on energy trading are set, look for it to be short-lived. New rules create new games and the trade will out fox the regulators every time.

FERC develops smart grid transmission system

FERC took a step yesterday regarding the development of a smart electric transmission system. The Smart Grid Policy Statement sets priorities for work on development of standards that could help make such a system more reliable.

FERC set out policy for recovery of costs by utilities that act early to adopt smart grid technology. FERC got lots of comments from interested groups (70) that shows broad support for a smart grid policy.

FERC wants these early development standards: (a) ensure the cyber-security of the grid; (b) provide two-way communications among regional market operators, utilities, service providers and consumers; (c) ensure that power system operators have equipment that allows them to operate reliably by monitoring their own systems as well as neighboring systems that affect them; and (d) coordinate the integration into the power system of emerging technologies such as renewable resources, demand response resources, electricity storage facilities and electric transportation systems.

One interesting side note, FERC said that it will not interfere with any state's ability to adopt whatever advanced metering or demand response program it chooses.

This policy will take effect 60 days after publication in the Federal Register. I can send the entire policy if people want to read it just let me know.

So my question is what group emerges as smart grid leaders? Will it be the technology companies or will it be utility/energy companies? Here are some of the smart grid stocks I am currently following: CSCO, IBM, GOOG, COMV, DGII, ELON, ESE, GE, ITRI, TLVT, and RUGGF.

Morgan Stanley’s Matrix

If you want to see a cool example of RIA used in the trading space take a look at Morgan Stanley’s Matrix “microsite”:

The retail facing applications are definitely seeing value in upping the visual game. How long before this is required for in-house trading apps too?

A silly view on Demand Destruction

Recently Tony Hayward – BP’s CEO – was interviewed for an article in the UK’s Times newspaper where he claimed that Peak Oil was not a concern due to decreasing oil demand. You can refer to the original article here:

TIMES Online | BP's Tony Hayward warns of dwindling demand for oil

Here’s why I think Tony Hayward is wrong:

  • The Economy. Energy demand (and oil demand) are highly sensitive to the economic climate and this being a global recession it is natural that energy use would go down . Also, current events and dipping world demand is not unique to 2008/9 and it is a short term effect. If anything, it is remarkable that demand only decreased by 1.6% when every country in the world is reeling from the current economic gloom. For instance, it is expected that the US economy will shrink this year by at least 3%. Most European countries will be similarly hit.
  • The World. The last time the economy slowed down in a significant way the “emerging markets” were called “the third world” if you catch my drift. Not only will the Western economies come back the rest of the world is ready to consume significantly more per capita than ever before.
  • The Efficiency Myth. While it may seem a misnomer at first, energy efficiency leads to greater consumption not less! If you want to consult history for some indication just look at the 20th century ... all forms of major energy use (aka, transport, heating, industrial, etc.) are MUCH MUCH more efficient than in the past and yet the demand curve is completely inverted. Why? Efficiency leads to lower energy costs (at least typically) and that combined with technological innovation lead to more and more ways to use energy. It is true that efficiency programs can have a short term effect on demand but even then they are often given too much credit as they are typically in fashion when the economy is in the proverbial toilet. Look at the 1970’s ... the whole “negawatts” movement spurred lots of positive movement toward energy efficiency (double glazed windows, maximum speed limits, incentives to insulate homes, etc.) but the downturn in demand was a flash in the pan.

Why would Tony say this?

  • BP is an “oil company”. For almost all of BP’s storied history BP stood for “British Petroleum” and then for a brief moment they decided to change it to “Beyond Petroleum” which was a sneaky way of saying “we provide energy in any form”, “we’re greener than you think”, and “don’t hate us”. Tony Hayward was the person who made it clear that BP now stands for “Back to Petroleum”. In any event, the point is Oil companies are in the business of selling oil to the exclusion of very little else. Conspiracy theories aside, having marketing messages that help you make more money are not unusual in business and Tony is just doing what any CEO would do ... looking for messages that help his business prosper.
  • Kill the Alternative. BP is ok with gradual investments into alternative/sustainable forms of energy and even participates in these markets but as an Oil  company it benefits from doubts surrounding the potential of alternatives. The message about reducing demand is not a direct assault on alternatives but indirectly it weakens the economic argument for alternatives and takes some urgency away from switching away from fossil fuels (although the ecological/environmental urgency remains intact).
  • Don’t Panic. Volatility is bad for most companies (trading companies excluded if they’re any good) and Peak Oil has the potential to create massive volatility through panic buying. Obviously panic would drive up the prices of oil (at least in spurts) which might seem like a not entirely bad thing for an oil company. However, the problem is the damaging impact it would have on the economy (and consequently consumption), and as history and current events have shown,  the economy suffers much more through severe price volatility than it does when oil prices are high (look at Japan or even EU versus US as case studies on how sustained high energy prices can be absorbed into a healthy economy).

The one thing I think may be interesting over the next 5-10 years is the electrification of personal transport and heating (via heat pump technology). Especially the former could have a significant impact on the refined products market and I have no idea what that would look like but I’m sure it’s something that oil companies and refiners would rather not find out about. If there truly is a wholesale shift toward electrical transport and heating then potentially Tony will be right about oil demand (although it says a lot less about overall energy demand) however his rationale for demand destruction makes no sense to me.

This is just my opinion, happy to hear others’.

Triplepoint Strategy in Europe

Interesting article - one key takeaway is about TriplePoint's strategy of teaming up with SAP to make inroads into the European utilities market. The article points out that this may be a way for them to break OLF's hold on this market.

Shell Oil Staff Reductions

Global staff reductions through attrition and layoffs for 2009 are targeted at 15%. This will not impact Shell Trading which has already exceeded its 2009 budget and at current pace will easily surpass target by 150%.

Can physical energy contracts ever be classed as derivatives?

Wikipedia says:

"Derivatives are financial contracts, or financial instruments, whose values are derived from the value of something else (known as the underlying). The underlying value on which a derivative is based can be an asset (e.g., commodities, equities (stocks), residential mortgages, commercial real estate, loans, bonds), an index (e.g., interest rates, exchange rates, stock market indices, consumer price index (CPI) — see inflation derivatives), weather conditions, or other items. Credit derivatives are based on loans, bonds or other forms of credit."

The reason this might be important is Tim Geithner's recent statements around the regulation and reporting of OTC derivative trading that he, through the Commodity Futures Trading Commission (CFTC); the Securities and Exchange Commission (SEC); and through amendments to the Commodity Exchange Act (CEA); wants to see implemented in the US

The major banks already fimiliar with this sort of requirement. They already have central trade warehouses for credit and other OTC derivatives. And they already understand the impact and benefits they can expect from a similar setup for commodities. But I am not sure it is as obvious for the major energy companies. Hence the question about physical derivatives.

How much will this regulation effect energy companies and if it does, are they ready?