2. Victor Shih--assistant professor of political science at Northwestern University--has an op ed in the Wall Street Journal which points out that of the four trillion yuan stimulus package, only a quarter is to be financed via the central government's budget. The rest is to be financed by the banks.
"It gets worse. Local governments have announced a further 20 trillion yuan in investment to "supplement" the central package. Assuming both Beijing and the local governments stick to these spending targets, banks will be under enormous pressure to finance trillions in state-sponsored projects in the next two years. With so much money to push out the door, risk management will almost inevitably take a back seat. Banks that had made enormous strides toward global best practices were compelled by central pressure to greatly boost credit in the last two months of this year."At this stage, has the US government recapitalized US banks with big stakes in Chinese banks now set to "voluntarily" finance a Chinese stimulus program? Worth reading in full.
3. Maureen Fan at the Washington Post reports that in a speech to the party today Chinese President Hu Jintao said:
"We must forcefully implement all the measures to further expand domestic demand and promote economic development and properly handle the international financial crisis and other risks rising from the international environment."He also pledged to fight any international interference in Chinese internal affairs and that China "will never copy the Western political system."
4. Alexander Kwiatkowski at Bloomberg reports that Olivier Jakob, managing director of Petromatrix GmbH in Switzerland, suggests that crude prices have yet to react to the recent steep fall in the dollar versus the euro and other world currencies.
5. The Associated Press reports that the Venezuelan Energy Ministry announced today their production allocation cut at OPEC was 189 kb/d. It is not clear if this is from current production or from actual production in September 2008, which was the number which OPEC cut from yesterday. If from September, the number would suggest they have been asked to cut an additional 60 kb/d from the October cut of 129 kb/d to a total production allocation of 2.281 mb/d.
6. Bomi Lim at Bloomberg reports that South Korea plans to set up a fund in January to purchase lenders' preferred stocks and bonds. The government plans to raise 20 trillion won (~ $15 billion) from the central bank and private investors.
7. Arthur Laffer--the dean of supply side economics--has an op ed in the Wall Street Journal which asserts that efforts to make the US oil independent would require new taxes which would cripple the economy. Though I am not prone to agree with Laffer about, well, anything, his points about nuclear power, offshore drilling, and the hollowness of the overall "energy independence" effort are fair, and in my estimation, useful critiques. That said, the best methods which we can pursue toward the worthy goal of reducing our exposure to overseas political vagaries include offshore drilling and nuclear. Worth reading.
8. Susan Wilson at Tech.Blorge asks whether biofuels are economically viable in the current price environment without subsidies and finds that they are not. (h/t naked capitalism.) What she seems to miss is that they will always require policy support unless they can approximate the economies of scale that oil has. And that they will always be vulnerable if they are on a small scale.
For example, the other day there was a story about making biodiesel from coffee grounds. They estimate they can make 340 million gallons of biodiesel from spent grounds. That sounds like a lot. But here is how they got the number: the world produces 16 billion pounds of coffee a year. 15% of that coffee is in fact oil. There are 2204.6 pounds in a metric tonne, so 16 billion pounds means roughly 7,259,528 metric tonnes of coffee. 15% of that is 1,088,929 metric tonnes of oil. There are roughly 6.9-7.8 barrels per metric tonne of diesel, using 7.8 you get 8,493,647 barrels of diesel. There are 42 gallons per barrel, you get 356 million gallons of diesel a year. OK, but the US consumes about 20 million barrels of oil a day, which is 840 million gallons of oil--not diesel--a day. A day. The US consumes a quarter of the world's oil, and I'm not sure, but maybe about the same amount of coffee. So that would be 89 million gallons of diesel a year, which is less than a week's worth of American demand for diesel. Consider, now, that all those coffee grounds are consumed all across the country, and would have to be picked up, and you begin to see the problems with the numbers here. Of course, perhaps coffee retailers might be able to make a small side business off of turning their waste grounds into diesel, and every little bit helps, but the most important part of the economics of this is that it is from a waste product, which is not the case with many plant feedstocks for biofuels.
9. Mriganka Jaipuriyar at Platts has the story that Thailand has dramatically cut its reliance on imports of petroleum products as a result of alternative fuels policy initiatives embarked upon in 2006 or so. From January through October 2008 the country imported 2.6 million barrels (~ 8.5 kb/d) of oil products, down 71% from imports in the same period for 2006. This is a strange story, given that the EIA estimates that Thai refining capacity is about 729 kb/d, total oil production is 348.6 kb/d, and their total oil consumption was 929 kb/d in 2007, which suggests that even with refinery creep oil product imports are at least around 150 kb/d. The story also gives total crude oil imports as 846 kb/d.