Japan’s energy needs post-earthquake aren’t a worry yet

A spike in Japanese demand for LNG can easily be met, but futures markets should calm themselves.

As Japan struggles to cope with the aftermath of the 11 March earthquake, issues of energy security are becoming more prevalent not only in Japan, but across the world.

Five nuclear power plants were affected by the Sendai earthquake, and of those, one has suffered a partial meltdown – the Fukushima Daiichi plant. Three major oil refineries were also closed. Amid scrambled attempts to avert a full-scale, Chernobyl-style disaster, fears are now rising about how the shortfall in Japan's energy production – which Société Générale estimates to be roughly 11.3 gigawatts, enough to power as many as 11 million households – will be managed for the foreseeable future.

Consumption of electricity generated from nuclear power stands at 30 per cent of Japan's total usage. The government had previously planned to increase this to 40 per cent by 2017, and then 50 per cent by 2030.

Whether or not these plans will now be halted or contested as a result of the disaster at Fukushima I remains to be seen. What is certain, though, is that Japan will have to meet the demand for energy somehow, despite a large impairment in production facilities.

Japan's energy mix still heavily relies on oil, which accounted for 45 per cent of national energy consumption in 2009, but it is also the world's largest importer of liquefied natural gas (LNG) – in 2010 the Japanese shipped over 70 million tonnes of it. The biggest suppliers of oil and LNG to Japan are Saudi Arabia and Qatar, respectively, with the United Arab Emirates the second-largest supplier of both commodities.

With revolutions still raging across the Middle East, the markets have already been pushing up prices, particularly for oil, in fear of an energy crisis, and the increased demand on the region that Japan's predicament may spur could make the problem even more acute. Due to the shortfall in Libyan supply and worries about Saudi Arabia's stability, prices continue to rise. Today Brent crude spot prices increased to $113.99 per barrel, and LNG futures for April 2015 delivery rose $0.22 per MMBtu on the week to $6.08 according to NYMEX.

If Japan does make up its shortfall with LNG, the UK would bear the brunt of this shift in supplies, as LNG accounts for almost 33 per cent of winter demand, and contracts for next year have risen between 10 and 15 per cent on speculation of increased demand. This follows already high gas prices and a particularly cold winter that added roughly £44 to British domestic gas bills.

This chart, taken from Kiran Stacey's Financial Times blog shows how much LNG Japan needed to make up for an energy shortfall after the 2007quake:

PFC Energy made a prediction based on these figures that, with 9.7 gigawatts of capacity lost (estimates vary, as with the Société Générale figure above), this could lead to at least a 500-600 megaton per month leap in Japanese LNG purchases. PFC believes the price for Asian spot will remain around $8-$9 MMBtu.

There are a few factors to consider in support of this conservative estimate. A global gas glut, including Qatar's huge increase in LNG production capacity, will certainly be able to alleviate Japan's demands. In fact, Qatar has already promised to divert more supplies there if necessary, which it would not have been able to do so easily back in 2007. Further, Japan is still able to use supplies from futures contracts at the moment to meet its energy needs, so its demand is lower than expected.

These factors explain the lack of a significant spike in demand so far, but fears driving the rise in futures prices (as opposed to the relatively stable spot prices) bode less well for the long term.

Liam McLaughlin is a freelance journalist who has also written for Prospect and the Huffington Post. He tweets irregularly @LiamMc108.

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Donald Trump vs Barack Obama: How the inauguration speeches compared

We compared the two presidents on trade, foreign affairs and climate change – so you (really, really) don't have to.

After watching Donald Trump's inaugural address, what better way to get rid of the last few dregs of hope than by comparing what he said with Barack Obama's address from 2009? 

Both thanked the previous President, with Trump calling the Obamas "magnificent", and pledged to reform Washington, but the comparison ended there. 

Here is what each of them said: 

On American jobs

Obama:

The state of our economy calls for action, bold and swift.  And we will act, not only to create new jobs, but to lay a new foundation for growth.  We will build the roads and bridges, the electric grids and digital lines that feed our commerce and bind us together.  We'll restore science to its rightful place, and wield technology's wonders to raise health care's quality and lower its cost.  We will harness the sun and the winds and the soil to fuel our cars and run our factories.  And we will transform our schools and colleges and universities to meet the demands of a new age.

Trump:

For many decades we've enriched foreign industry at the expense of American industry, subsidized the armies of other countries while allowing for the very sad depletion of our military.

One by one, the factories shuttered and left our shores with not even a thought about the millions and millions of American workers that were left behind.

Obama had a plan for growth. Trump just blames the rest of the world...

On global warming

Obama:

With old friends and former foes, we'll work tirelessly to lessen the nuclear threat, and roll back the specter of a warming planet.

Trump:

On the Middle East:

Obama:

To the Muslim world, we seek a new way forward, based on mutual interest and mutual respect. To those leaders around the globe who seek to sow conflict, or blame their society's ills on the West, know that your people will judge you on what you can build, not what you destroy. 

Trump:

We will re-enforce old alliances and form new ones and unite the civilized world against radical Islamic terrorism, which we will eradicate completely from the face of the earth.

On “greatness”

Obama:

In reaffirming the greatness of our nation we understand that greatness is never a given. It must be earned.

Trump:

America will start winning again, winning like never before.

 

On trade

Obama:

This is the journey we continue today.  We remain the most prosperous, powerful nation on Earth.  Our workers are no less productive than when this crisis began.  Our minds are no less inventive, our goods and services no less needed than they were last week, or last month, or last year.  Our capacity remains undiminished.  

Trump:

We must protect our borders from the ravages of other countries making our product, stealing our companies and destroying our jobs.

Protection will lead to great prosperity and strength. I will fight for you with every breath in my body, and I will never ever let you down.

Stephanie Boland is digital assistant at the New Statesman. She tweets at @stephanieboland