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Brexit and Brent

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Screen Shot 2016-05-30 at 15.37.19By Ed Crooks: June 24, 2016

In the market maelstrom that followed the UK’s referendum vote to leave the EU, the oil price took some collateral damage, with Brent crude dropping below $48 for the first time in a week. As the country sat up to watch the results come in, National Grid had to cope with the largest ever spike in night-time electricity demand.

The longer-term implications of Brexit for energy in the UK and Europe, like most other consequences of the decision, are highly uncertain. Politico and others sketched out some of the main issues, with news outlets taking a range of differing perspectives. Norton Rose Fulbright published an excellent primer, focusing on some of the key legal questions. BusinessGreen rounded up reaction from environmental campaigners and renewable energy businesses. Christiana Figueres, executive secretary of the UN Framework Convention on Climate Change, suggested before the result was known that a vote for Brexit would mean the Paris agreement on tackling global warming would “require recalibration”.

n the US, the most startling news of the week was the move by Elon Musk’s Tesla Motors to buy SolarCity, the residential solar company where he is chairman and has a 22 per cent stake. In characteristic style, news of the offer was announced not with press releases, but in a blog post. Much of the reaction was negative, with Tesla shares slumping and SolarCity dropping back after an initial jump. The FT’s Lex column was particularly harsh, suggesting that the merger plan “may well fail.” The column noted: “of course Tesla does not really need to buy a solar company, and if it did, it could have bought a good one.” 

The MIT Technology Review suggested the success of the deal depends on a battery technology that does not yet exist. The possible exit of SolarCity at a price that is about half its valuation at the end of last year is the latest sign of how although solar power is growing rapidly and has bright prospects, it has too often given a rough ride for investors.

Although exploration of the US Arctic has ground to a halt, oil companies want to keep open the option of drilling there in the 2020s.

US natural gas prices usually benefit from cold weather, but in the past three weeks it is the heat that has driven them higher, as power generators need to burn more to keep the air-con running.

Khalid al-Falih, Saudi Arabia’s new energy minister, said “the oversupply has disappeared” from the oil market, in an interview with the Houston Chronicle.

However, signs that American shale producers are starting to bring DUCs – drilled but uncompleted wells – into production will help to keep a lid on crude prices, even if the industry will need to put more rigs back to work to stop US output falling.

The Solar Impulse solar-powered aircraft landed in Spain after a successful three-day flight from New York. I went to see it leave JFK, and made a video about the flight, including its amazing almost silent take-off, at 2.30 am.

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