Suddenly, energy is hot. Whether it is security of supply or conservation and carbon footprint reduction, or cutting electricity cost impact on the bottom line, it is increasingly a concern for CIOs.
Uncertainty in the Middle East means that oil prices remained volatile during the last year and it is expected stay that way for 2007. In South America, Venezuela continued moves to nationalise its oil industry, and countries like Bolivia are following suit.
Greener but not cheaper
Talk of using bio-fuel (ethanol derived from everything from corn to sugar beet) is spreading from places such as Brazil and is being discussed as a serious alternative to processed crude oil. It is greener, but so far not cheaper, though proponents say this has less to do with the market and more to do with tax breaks received by the traditional oil companies. Exxon recently reported the highest profits in corporate history reaching nearly $40 billion. Royal Dutch Shell turned in profits of $26bn.
January 2006 saw what was generally recognised as the first flexing of Russia’s energy muscles. A dispute with The Ukraine saw Russia turn off the gas, leading to worries that Western Europe might one day face the same threat.
The green agenda has reached CIOs’ desks with IT power consumption hitting the headlines. According to one study the amount of electricity consumed by computer servers has doubled in five years and will increase another 75 per cent by 2010. Jonathan Koomey, a consulting professor at Stanford University and scientist at America’s Lawrence Berkeley National Laboratory, says the world’s servers and their cooling infrastructure consumed as much power as that put out by 141,000-megawatt power stations. The total server electricity bill was about $7.3bn, of which the US made up $2.7bn.
Environmentally friendly IT
Studies such as this prompted IT suppliers to start pushing their green credentials, with many now touting the environmentally friendly aspects of their products. Dual core processors, server virtualisation, datacentre heat exchange systems, hydrogen cell-based battery back up systems are all being pushed as energy saving and green alternative datacentre power solutions.
In the US the federal Environmental Protection Agency is getting ready to deliver its criteria for granting its Energy Star certification for the most power-efficient computers.
With government and regulatory pressures increasingly expected to focus on energy consumption, IT is being forced to address issues that traditionally fell under general business issues. Conferences such as the Energy and Utilities Forum are addressing issues like The Disappearing Boundary Between Information and Energy Technologies.
Despite a glitch in metal commodity prices in August 2006 and a roller coaster ride in the first quarter, the global metal commodity boom continued into 2007, though some industry watchers were forecasting tougher times ahead saying prices had hit a ceiling.
That said, early in 2007 Chinese demand continued to push up copper prices. Political instability in West Africa also threatened a further boost to aluminum prices. Alcoa, which despite a challenge from Russia’s Rusal, remained the world’s largest aluminum producer, announced profits of $2.5bn for 2006 and its CEO predicted a doubling in demand over the next decade.
2006 also saw the creation of the world’s largest steel company through the merger of Arcelor and Mittal Steel. The new company is expected to have revenues of over $70bn and said it plans to increase its production capacity by 9.5 million tonnes per year until 2010. In the UK, April 2007 saw TATA complete its $12bn purchase of steelmaker Corus.
The traditional haven for investors in times of uncertainty, gold prices continued to rise helped by a falling dollar combined with worries associated with the situation in Iraq and potential problems between the US and Iran. Market watchers say gains have.