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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Why isn't Labour putting forward Corbynite candidates?

Despite his successes as a candidate, the organisational victories have gone the way of Corbyn's opponents. 

The contest changes, but the result remains the same: Jeremy Corbyn’s preferred candidate defeated in a parliamentary selection. Afzhal Khan is Labour’s candidate in the Manchester Gorton by-election and the overwhelming favourite to be the seat’s next MP.

Although Khan, an MEP, was one of  the minority of Labour’s European MPs to dissent from a letter from the European parliamentary Labour party calling for Jeremy Corbyn to go in the summer of 2016, he backed Andy Burnham and Tom Watson in 2015, and it is widely believed, fairly or unfairly, that Khan had, as one local activist put it, “the brains to know which way the wind was blowing” rather than being a pukka Corbynite.

For the leader’s office, it was a double defeat;  their preferred candidate, Sam Wheeler, was kept off the longlist, when the party’s Corbynsceptics allied with the party’s BAME leadership to draw up an all ethnic minority shortlist, and Yasmine Dar, their back-up option, was narrowly defeated by Khan among members in Manchester Gorton.

But even when the leadership has got its preferred candidate to the contest, they have been defeated. That even happened in Copeland, where the shortlist was drawn up by Corbynites and designed to advantage Rachel Holliday, the leader’s office preferred candidate.

Why does the Labour left keep losing? Supporters combination of bad luck and bad decisions for the defeat.

In Oldham West, where Michael Meacher, a committed supporter of Jeremy Corbyn’s, was succeeded by Jim McMahon, who voted for Liz Kendall, McMahon was seen to be so far ahead that they had no credible chance of stopping him. Rosena Allin-Khan was a near-perfect candidate to hold the seat of Tooting: a doctor at the local hospital, the seat’s largest employer, with links to both the Polish and Pakistani communities that make up the seat’s biggest minority blocs.  Gillian Troughton, who won the Copeland selection, is a respected local councillor.

But the leadership has also made bad decisions, some claim.  The failure to get a candidate in Manchester Gorton was particularly egregious, as one trade unionist puts it: “We all knew that Gerald was not going to make it [until 2020], they had a local boy with good connections to the trade unions, that contest should have been theirs for the taking”. Instead, they lost control of the selection panel because Jeremy Corbyn missed an NEC meeting – the NEC is hung at present as the Corbynsceptics sacrificed their majority of one to retain the chair – and with it their best chance of taking the seat.

Others close to the leadership point out that for the first year of Corbyn’s leadership, the leader’s office was more preoccupied with the struggle for survival than it was with getting more of its people in. Decisions in by-elections were taken on the hop and often in a way that led to problems later down the line. It made sense to keep Mo Azam, from the party’s left, off the shortlist in Oldham West when Labour MPs were worried for their own seats and about the Ukip effect if Labour selected a minority candidate. But that enraged the party’s minority politicians and led directly to the all-ethnic-minority shortlist in Manchester Gorton.

They also point out that the party's councillor base, from where many candidates are drawn, is still largely Corbynsceptic, though they hope that this will change in the next round of local government selections. (Councillors must go through a reselection process at every election.)

But the biggest shift has very little to do with the Labour leadership. The big victories for the Labour left in internal battles under Ed Miliband were the result of Unite and the GMB working together. Now they are, for various reasons, at odds and the GMB has proven significantly better at working shortlists and campaigning for its members to become MPs.  That helps Corbynsceptics. “The reason why so many of the unions supported Jeremy the first time,” one senior Corbynite argues, “Is they wanted to move the Labour party a little bit to the left. They didn’t want a socialist transformation of the Labour party. And actually if you look at the people getting selected they are not Corbynites, but they are not Blairites either, and that’s what the unions wanted.”

Regardless of why, it means that, two years into Corbyn’s leadership, the Labour left finds itself smaller in parliament than it was at the beginning.  

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.