Imagine that in Australia. It would be more than horrible. We would survive on BBQ dinners and Wheat Bix for breakfast. In Japan still in winter and with dangerous radioactive air; what are they going to do? Their emergency just goes from bad to worse. Communications are down, power is out and food is scarce. The Australian rescue teams have to walk 10kms even before they can start work on their rescue mission. The US aircraft carrier has had to move north because it was registering radioactivity on its instruments.
The world awaits, with bated breath, a possible nuclear meltdown at Fukushima. The threat of such a meltdown is reverberating around the world. The one country keeping quiet is France which depends up to 80% on nuclear power. They kept quiet during the Chernobyl disaster as well. Yet, just across the border in Germany supermarkets threw away all fresh food and immediately changed the sand in the sandpits at every preschool. With this latest emergency Germany has decided to review its decision to extend the life of their old nuclear reactors. Russia has already said it will continue with its programme. In fact, they are building smaller nuclear reactors that will be able to float or be mobile to be used in remote areas with tundras that are thawing.
The world will find a way around this latest threat. Nuclear scientists around the world will be focusing on the emergency in Japan. In the meantime, any plan to introduce nuclear power into Australia will be put on hold. The PM last night said on Q&A that Australia has plenty of solar, wind, and geo-thermal potential. Maybe the plan is to apply a carbon tax and put the proceeds into subsidizing clean energy. We can but hope.
Uranium stocks are being hammered but they will come back. Our coal and LNG will be in demand once the immediate emergency is over. Japan has 55 nuclear power stations and in any event only relies on nuclear power for 30-35% of its power needs.
Some oil refineries are on fire but other oil refineries inside or outside Japan will take up the slack, at a price, which will rise.
Since last week when I discussed the consequences of a US$200 a barrel oil price. Japan has gone into crisis mode and the situation in Libya has deteriorated. It has 5 old refineries which can not even produce unleaded petrol. Output is mainly for internal consumption. Its biggest refinery at Ras Lanuf (220,000 barrels pa) has just been retaken by Gaddafi’s forces. It will be out of action for some time but its loss will have little impact.
In Saudi Arabia there was to be a day of rage but public servants have been given a 15% pay rise, putting off their grievances. This pay rise will cost the Saudis the equivalent of US$10 a barrel, putting upward pressure on the world price which, in effect, is controlled by the Saudis, who are the world’s second biggest producer (after Russia) but has the world’s largest reserves at 250 billion barrels (good for 125 plus years compared with Russian reserves which will only last about 20 years). Saudi oil production and oil refining is mainly situated in the remote parts of the country. Their biggest oil refinery at Ras Tanura (550,000 barrels pa) is heavily fortified and built on a narrow promontory. Its owner, Saudi Aramco, is the world’s richest company 100% owned by the Saudi government. As an oil producer they have plenty of scope to increase production. Their cost of production is minimal compared with Gulf of Mexico deepwater drilling.
The oil cartel comprising the big oil producing countries (OPEC) would no doubt love to see an oil price of US$200 a barrel but realizes full well that that price will just make it easier for substitutes such as LNG or encourage expensive deepwater drilling. Therefore if the oil price goes up too quickly OPEC will produce more to offset the price rise.
In conclusion, whilst Libya and Japan are national emergencies they should only have short term effects on the oil price, the floorprice of which will move steadily upwards because of inflation but spike with any emergency such as a meltdown in Japan, Heaven forbid.