View From The Couch - 07/Aug/2022

Six Problems Over Which To Lose Sleep 

As the war drags on in Ukraine, we're starting to see all kinds of problems poking their heads over the horizon. These problems were latent problems of the world, but thanks to the war, they have become blatant problems of the world. 

No.1 with a bullet for the Europeans is what they're going to do for heating in winter. Too many European countries are dependent on natural gas from Russia. This used to be a vague hypothetical problem, but this northern winter, it's going to be very real, front and centre. There are no easy answers for this because it's not like there are substitute sources, and it's not like there's an alternative fuel to replace it. 

No.2 is the grain export problem. Both Russia and Ukraine were major exporters of grains. Now those exports have been hampered by the war. The last time there were major issues with food in North Africa, it brought about the Arab Spring. That is to say, if you're a dictator in North Africa and your country is dependent on imported grains for food, then this is not a good situation at al. 

No.3 on the list is fertilisers. Russia is the biggest exporter of potash and now that's off the market. Agricultural inputs are pretty unforgiving so growers the world over will make changes to what they plant next year which means globally speaking, we might not have enough food sometime soon. China would be in the shit if that happens because, they are major food importers. And as with the dictators sitting on a hungry population in No.2 above, Xi Jinping's China stands to be in trouble the most over this problem, when it has the problems of its own (more on that below at No.6). 

No.4 is crude oil. We've already seen the oil prices sky rocket and with it inflation. While the immediate peak has passed, oil is going to remain high because Russia was the largest exporter of crude just before the Ukraine invasion. now with sanctions, Russia theoretically can't sell their oil. In practical terms, they're probably keeping their pipelines open to North Korea, but if they stop the oil pipelines, that's it. The pipeline is dead. Meanwhile the world without oil can try and accelerate towards alternative fuel sources but are we geared towards accomplishing that? If we're relying on China to produce the cheap solar panels going into the future, we might be in for a rude shock. 

No.5 is the new model of war that America seems to be trialling in Ukraine. After spending 20 years fighting in Afghanistan, trying to bolster any kind of state there only to see it fall in a week, it is clear the Americans were leery of fighting anywhere to bolster any state. If you add in the chances of a nuclear war, America has had the best reason not to engage in direct fire with the Russians. That said, unlike the Afghans, the Ukrainians have fought hard to keep their state and sovereignty, which has given the world a window to operate. What the Americans have opted to do is give arms to the Ukrainians to fight their war, but have decidedly kept their troops out. This may work well for Ukraine and in the end if they do defeat Russia, it will have worked very well with America. Because success in this model means America will have a new way of managing their wars - they don't send troops and ships, they just send the weapons. It signals a retreat from Pax Americana. 

No.6 is China. China probably deserves an entry all of its own but it can be broken down into three components. The first is political. The concentration of power Xi Jinping has managed to accrue makes China a dictatorship with no checks or balances. China might make the unfortunate call to invade Taiwan and if they do, it would be because one person wanted it, and not necessarily the polity of China. The second is its management of Covid where it is still in the Zero Covid method that was more common before there was the vaccine. China is still doing these because their Sinovax doesn't work. The third component is the property bubble bursting. It's so bad there have been bank runs. China is not going to be the growth engine of the world economy as it has been for the last 30 years. It's probably not even going to stay as the underpants factory of the world. Globalisation is retreating and the combination of the above three component problems mean it is leaving from China the fastest. In this global context, the rise of Xi Jinping, unreformed-Maoist-Totalitarian, is most unfortunate.  

There's Something About Donald

On The Eve of Trumpageddon

Nothing about a world given over to billionaires is all that comforting or comfortable. We underestimate just much the 0.1% enrol the wealth of the world and by extension the media and information flow. In most instances we choose not to look into it because in most cases a misguided sense of modesty forbids us to compare ourselves to the stupendously wealthy. but then of course Donald Trump comes along an pecan't but help compare our commons sense against the man and find him wanting. And so it is with his choices for education secretary and chief of EPA and so on. The amazing thing is that the trump Presidency hasn't yet begun as of this writing and already it is feeling like a tired, failed administration.

In that spirit, I'd like to show you a small paper trail on the internet that's been bothering me for the last fortnight.

Here's the first link, sent to me by somebody who reads Russian. I know it's all in Russian, but one can resort to Google Translate and thesis what we get:

Взятка на 10,5 млрд. евро? Путин и Сечин подарили Трампу 19,5% акций «Роснефти»? 

Google Translate: Bribe to 10.5 billion. Euro? Putin and Sechin gave Trump 19.5% of shares of "Rosneft"?

The other entries go:

Доклад отдела разведки, 2016/134, 18 октября 2016, с. 30:
2. Что касается содержания разговоров, то помощник СЕЧИНа сообщил, что президент «Роснефти» настолько заинтересован в снятии западных личных и корпоративных санкций, наложенных на компанию, что он предложил помощникам ПЕЙДЖа/ТРАМПа в обмен брокеридж на 19 процентов (приватизированного) пакета акций в Роснефти. ПЕЙДЖ выразил интерес и подтвердил, что если ТРАМП будет избран президентом США, то тогда антироссийские санкции будут сняты.

Google Translate: The report of the Intelligence Department, 2016/134, 18 October 2016, p. thirty:
2. With regard to the content of conversations, the assistant Sechin said that the president of "Rosneft" is so interested in the removal of personal and corporate Western sanctions imposed on the company, he suggested assistants Paige / Trump exchange brokerage by 19 percent (privatized) stake in Rosneft. PAGE expressed interest and confirmed that if TRUMP will be elected president of the United States, then the anti-Russian sanctions are lifted.

Company Intelligence Report 2016/134, 18 October 2016, p.30:
2. In terms of the substance of their discussions, SECHIN’s associate said that the Rosneft president was so keen to lift personal and corporate western sanctions imposed on the company, that he offered PAGE/TRUMP’s associates the brokerage of up to a 19 per cent (privatised) stake in Rosneft in return. PAGE has expressed interest and confirmed that were TRUMP elected US president, then sanctions on Russia would be lifted.

https://www.documentcloud.org/documents/3259984-Trump-Intelligence-Allegations.html

If that's not interesting, here's another block:

Москва, Кремль, 7 декабря 2016 г., 22:00:
В.Путин: Игорь Иванович, хочу Вас поздравить с завершением приватизационной сделки по реализации крупного пакета нашей ведущей нефтегазовой компании «Роснефть» – 19,5 процента. Сделка совершена на восходящем тренде стоимости нефти, соответственно, это отражается на стоимости самой компании.
В этом смысле время очень удачное, да и общий объём сделки значительный – 10,5 миллиарда евро. ...это крупнейшая приватизационная сделка, крупнейшая продажа и приобретение в нефтегазовом секторе в мире за уходящий, 2016 год.
Очень рассчитываю на то, что приход новых инвесторов... приход в органы управления будет улучшать корпоративные процедуры, прозрачность компании и, соответственно, в конечном итоге будет приводить к росту капитализации.
В целом это очень хороший результат. Хочу вас всех, ваших коллег, которые работали по этому направлению, поздравить с этим результатом…
Мы с Вами знаем, что у компании «Роснефтегаз», которая в конечном итоге и должна перечислять деньги в бюджет, есть значительные ресурсы в рублях.
В.Путин: И наших инвесторов, новых участников и акционеров компании «Роснефть», пригласите в Россию, мы их примем на высоком правительственном уровне.
<…>
http://www.kremlin.ru/events/president/news/53431

Google Translate: The Kremlin, Moscow, December 7, 2016 22:00:
Vladimir Putin: Mr Sechin, I want to congratulate you on the completion of the privatization process for the implementation of a large block of our leading oil and gas company "Rosneft" - 19.5 percent. The transaction was executed on the upward trend in oil prices, respectively, is reflected in the value of the company.
In this sense, time is very good, and the total amount of the transaction significantly - to 10.5 billion euros. ... It is the largest privatization deal, the largest sale and purchase of oil and gas sector in the world in the outgoing year 2016.
I very much hope that the arrival of new investors in the coming ... controls will improve corporate procedures, transparency of the company and, accordingly, will ultimately lead to an increase in capitalization.
In general this is a very good result. I want all of you, your colleagues, who have worked in this area, congratulations with this result ...
We both know that the company "Rosneftegas", which ultimately must transfer the money to the budget, there are significant resources in rubles.
Vladimir Putin: And our investors, new members and shareholders of the company "Rosneft", was invited to Russia, we will take them to the highest levels of government.
<...>
http://www.kremlin.ru/events/president/news/53431

Anyway, the fragments are leaks from inside the Kremlin according to this journalist Andrey Illarionov:

On 3 January 2005 Illarionov resigned from his position as presidential representative to the G8.[2] On 21 December 2005, Illarionov declared "This year Russia has become a different country. It is no longer a democratic country. It is no longer a free country". The Washington Post reported that he had cited a recent report by the U.S.-based and government sponsored Freedom House.[3] On 27 December 2005, Illarionov offered his resignation in protest against the government course, saying that Russia was no longer politically free, but ran by an authoritarian elite. "It is one thing to work in a country that is partly free. It is another thing when the political system has changed, and the country has stopped being free and democratic," he said.[4] He also claimed that he had no more ability to influence the government's course and that Kremlin put limits on him expressing his point of view. Illarionov was openly critical to such elements of the Russian economic policy as the Yukosaffair, increasing influence of government officials on large companies such as Gazprom and Rosneft, and at last the Russia-Ukraine gas dispute and the energy policy of Russia in general.[1] Illarionov has also been a proponent of secession of Chechnya.[5]

You get the feeling he's trying to get all this stuff out. According to the original person who sent me the Russian link, Illarionov's contention is that based on the leaks, the Kremlin has had Donald Trump as an asset going back 5 years. It may not have been purely Donald Trump's sea to run for President, and that the 19.5% stake in Rosneft is ear-marked for the Trump family business should he succeed in lifting sanctions on Russia - a sanction designed to hit Putin and his cronies.

Since the new year, this business Trump's dossier has grown, but what seems to have gathered the most traction is not that Trump might be in the control of the Kremlin but that he is being blackmailed by a bit of video showing him participating in Golden showers with Russian prostitutes. Vladimir Putin himself has dismissed the dossier (and also told us that Russian prostitutes are undoubtedly the best in the world) which further muddies the already murky puddle.

All the same, there's a carrot (10.5billion euros from the 19.5% sale of Rosneft); there's stick (the KGB have something on Donald Trump); and the likely cui bono of Putin getting his sanctions lifted. In other words, this is serious boys and girls. Now, maybe Trump was coerced into running, but didn't want to win -which would explain the bizarre flip flops on all the things that would have killed other candidates' chances like the support of the KKK or denigrating a disabled journalist on nationwide TV. They're not things a candidate wants to win goes about doing. but the purpose was not to win, then it makes more sense.

I ran all of the above past somebody else who has Russian links, and they came back with this link which is a compendium of various links that seems to point at shady dealings surrounding Rosneft.

Even with all the conflict of interests going on and the likelihood of early impeachment (what an amazing phrase to be typing I tell you!) Donald Trump may go full steam ahead with lifting sanctions on Putin and his mates in order to collect that 10.5billion euros, just waiting to be paid into Trump Corporation's Swiss bank accounts or wherever he has a tax haven bank account.

I'm telling you, we've never seen anything like this. The world will not end with a bang but amidst laughter from all the gallows humour this man will beget.

View From The Couch - 9/Jan/2017

"The Government Totally Sucks"

Song of the day (again)!



Yeah I know it sounds totally gratuitous to say that the government totally sucks, but hey, we actually have a government that's stinking it up pretty badly.

Here's something from Pleiades as a followup, coming off the pages of Crikey:

The latest global economic news is mostly excellent, though better for some countries. We now have figures on most of the world’s economies for the last quarter of the 2015-16 financial year. This enables comparisons with earlier periods, including Australia’s last three years (almost) of Coalition rule with the previous administration.
For the entire period 2009 to 2013 Australia’s economy was the best performed in the Organisation for Economic Co-operation and Development. Alone in that club of 34 wealthy democracies, Australia maintained positive growth, kept most workers employed and increased productivity, incomes and wealth. Australia was the toast of the economic world. 

Three years later, Australia is the stand-out economy again, but for the opposite reason. Australia is the only OECD member not to record improvement over the last three years in any of the six key indicators of economic health.

And the article tells us our jobs are down; our wages are rising the weakest of the group; our trade is in a disastrous slump thanks to the commodities tanking; the budget deficit is ballooning; our gross debt is climbing when other nations are cutting theirs; and our GDP growth is merely okay.

That leads us to this bit:

Of the 34 developed OECD countries, no fewer than seven have advanced on all six variables. Leading the pack are Germany, Ireland, Hungary, the Czech Republic, Poland, the Netherlands and New Zealand. Another six have gained in five areas — Denmark, Iceland, Luxembourg, Sweden, Italy and, surprisingly, Greece. Seventeen economies have improved in three or four areas, bringing to 30 the countries enjoying the fruits of the current sturdy global recovery.
That leaves just four laggers. Three nations have advanced on only two of the six variables — Chile, Finland and, perhaps another surprise, Canada. Just one country — Australia — has failed to advance on any indicator, keeping GDP growth steady and declining in the other five.
The conclusion thus seems highly probable: Australians have swapped the best economic administrators in the developed world for the worst.
Perhaps the one success the Coalition can claim is that the mainstream media has no desire to report what is actually happening.

So when I say the government sucks, I actually mean, the idiots in power who brought about this dismal, pathetic turn of performance. We always knew this bunch of conservatives were talentless, unprincipled hacks, but when you see their handiwork in numbers, it sure puts the bleak future into sharper focus.

Bromancing The Oil

When it gets down to the cui bono of the alleged Russian tampering of the US elections, and the subsequent good will between Donald Trump and Vladimir Putin, you would have to say Vladimir got his man, because his man Trump is the most likely to ignore climate science and give Putin's Russia a break from all the sanctions.

Let's face it, Russia's main export is oil. Without it, there's really just arms exports with Russia, something President Obama pointed to. These sanctions are hurting Russia, and so one shouldn't underestimate the motivation to get out from under these sanctions. A Trump Presidency essentially puts it on the table.

It's a scary thought because if Trump lifts the sanctions, then Russia effectively gets away with the Crimea annexation as well as the odd bit of military adventurism into Ukraine. Whatever one thinks of those places, it remains true that Russia simply grabbed hold of those places without contest. If Trump sells out the sanctions, he's effectively selling out NATO - and this would be disturbing in the extreme because it would mean he's at least rolling back America's commitment to keeping security in Europe.

One can indeed conjecture a whole lot about how all this plays out in say, eastern Europe, but the more compelling point might be that for Trump, it's all about money. Effectively the United States has just elected a President who may be willing to sell out on its most important strategic positions - gained over decades of hardworking and sacrifice - just to enrich his own billionaire coffers. It's actually a sick kind of joke that things have turned out the way they have. So, uh, their government is going to totally suck as well.

The Mathematics Of History

There was this interesting article in Wired.

Turchin — a professor at the University of Connecticut — is the driving force behind a field called “cliodynamics,” where scientists and mathematicians analyze history in the hopes of finding patterns they can then use to predict the future. It’s named after Clio, the Greek muse of history. 

These academics have the same goals as other historians — “We start with questions that historians have asked for all of history,” Turchin says. “For example: Why do civilizations collapse?” — but they seek to answer these questions quite differently. They use math rather than mere language, and according to Turchin, the prognosis isn’t that far removed from the empire-crushing predictions laid down by Hari Seldon in the Foundation saga. Unless something changes, he says, we’re due for a wave of widespread violence in about 2020, including riots and terrorism.

You could'a fooled me. Cyclical theories of history are interesting heuristics that come and go. I think the one I read recently - and this is a decade ago - was by a guy called Harry S. Dent Jr. who wrote an extensive book about how the market behaves in different cycles of economic expansion and debt accumulation. In as much as it was empirical in that a whole lot of data went into it, you still had to take it with a grain of salt because even as Dent was predicting all kinds of things, there was the calamitous GFC going on. You could easily argue the events of 2007-2008 were a cyclical thing or a total breakdown of an old system or a restructuring we had to have.

So in that light, let's have a look at what Turchin is offering:

In the simplest of terms, Turchin and his colleagues will build a mathematical model using one data set and then test that model against other historical data sets they’re unfamiliar with. That way, they can see if the model holds. This isn’t exactly the psychohistory described by Isaac Asimov. “For the most part, we don’t predict the future. It’s too far. We can’t wait 200 years to see if something’s right,” Turchin says. “I’m not a prophet.” But cliodynamics moves in that direction — and it’s not science fiction. Though traditional historians are often wary of the practice, others very much see the value. 

“It’s very important to do. It should force traditional historians to respond,” says Yale historian Joseph Manning. “Most people in my field just publish documents and don’t go behind them.”

What Turchin and his colleagues have found is a pattern of social instability. It applies to all agrarian states for which records are available, including Ancient Rome, Dynastic China, Medieval England, France, Russia, and, yes, the United States. Basically, the data shows 100 year waves of instability, and superimposed on each wave — which Turchin calls the “Secular Cycle” — there’s typically an additional 50-year cycle of widespread political violence. The 50-year cycles aren’t universal — they don’t appear in China, for instance. But they do appear in the United States. 

The 100-year Secular Cycles, Turchin believes, are caused by longer-term demographic trends. They occur when a population grows beyond its capacity to be productive, resulting in falling wages, a disproportionately large number of young people in the population, and increased state spending deficits. But there’s a more important factor, one that better predicts instability than population growth. Turchin calls it “elite overproduction.” This refers to a growing class of elites who are competing for a limited number of elite positions, such as political appointments. These conflicts, Turchin says, can destabilize the state. 

Many of these issues persist in industrial societies. Although population growth is no longer likely to result in mass starvation, it can push the supply of labor beyond demand, leading to increased unemployment.

And there you have it - the kind of conclusion Harry S. Dent Jr. came up with, which leaves you going, "yeah sure mate". I'm not sure how predictive these kinds of heuristics can be, given the kinds of parameters being lined up. Also, it does seem to have a deterministic underpinning that utterly fails to explain why the 1970 peak was so low, for instance. And while terrorism is indeed way up, lynchings are way down, so you wonder if lynchings is even a relevant term to be including in such an analysis.

One of the best ideas to come out of quantitative analysis of baseball was the notion of "replacement level". That is to say, if you state that something is good, or bad the natural question is "compared to what?" And that leads to the notion of an arbitrary mathematical straw man we can call the replacement level player. In a sense if we're going to put up stats and give them qualitative assertions, we need to at least have a framework of comparison - are 100 murders/riots/terror acts a year good or bad? Compared to what? It's this kind of benchmarking that is completely lacking in these numbers.

Still, I thought some people might be interested in this stuff.

Quick Shots - 04/Jan/2016

Belatedly, Happy New Year To You All!

Here's to the new year, may it be better than the last one.
I'm doing okay, I hope you are all okay or much better than okay. :)

Iran, Saudi Arabia, OPEC, Oil

This business of Saudi Arabia beheading people is the quiet problem nobody's willing to talk about. Thinking back to Gulf War I, the western media has always played reports on Saudi Arabia with a favourable view, by and large because they were most supportive of Bush Snr.'s Gulf War. They cemented that media handle by being all-in behind GWB's Iraq War, and beating up on Saddam. With Saddam gone, and the West largely withdrawing from the colonial project, Saudi Arabia is now at loggerheads with Iran because, well, religion and race are different.

And so it's now a Sunni versus Shi'ite spat with Saudi Arabia executing a Shi'ite cleric and of course Iran being the land of religious fundamentalist rule, they're not taking this lightly. Brent crude has gone up 6.5%.

CMC Markets chief market analyst Ric Spooner said the price rise was directly linked to the political unrest.

"News that Saudi Arabia has cut diplomatic relations with Iran has led to short covering in early trading on the oil market as traders build risk premium into prices," said Mr Spooner. 

"While there is no immediate threat to production implied by this situation, political unrest that directly impacts major OPEC producers is unsettling.
"Oil markets will be concerned that this could be an incremental step in a deteriorating political situation that might ultimately threaten world oil supply."

I guess it's a case of it-never-rains-it-pours. OPEC is as good as dead if nobody is sticking to the cartel's own supply plans. Saudi Arabia is trying to max out on market share through over-production which is surprising because if the peak oil advocates are to be believed, they're bringing about their own doom much sooner. One would think temperance would dictate they cut supplies to maintain prices.

Of course, Saudi Arabia being the strange place that it is, it is also fighting a waring Yemen and lots of the ruling elite are tacitly handing out money to ISIL (who are ostensibly Sunni crazies) ; ISIL is flooding the market with their cheap oil which they pump through Turkey, and Russia's trying to earn as much foreign currency as well as it struggles under sanctions so they're not exactly going to cut their oil production either. If peak oil is even remotely a true-ish concept, the rate at which we're pumping out crude oil beggars belief.

Turnbull's Frontbencher Woes

It's amazing how fragile the balance of agreements that places MPs as ministers on the frontbench. It might not even be their own good talent or character at all - it might just be that they're the right factional member with the right amount of seniority. It's hard to imagine why Mal Brough had to be brought back to Parliament after 2007's election wiped him out. The cloak and dagger conniptions involving Peter Slipper and his underling revel him to be a man of not-so-great character, but of course with the Abbott-Disposal and the rise of Malcolm Turnbull, he had to be a frontbencher.

Jamie Briggs is weirder. I've never even heard of this 37 year old idiot until he misbehaved and got himself into a world trouble. For the life of me I can't figure what exactly this man has done to be so deserving to be a frontbencher, but there he was until he fucked up.

Today, the news is turning into a discussion about Peter Dutton and his abusive text sent to a journalist. These people are proving to be far less professional than the local community theatre group.

I don't exactly have a lot of faith in the current crop of ALP frontbenchers after watching that Sarah Ferguson doco that dissected them, but this business shows just how lacking the Liberal Party is when it comes to proper, professional talent. Career politicians are going to ruin this country.

If It's So Good, Why's Everybody So Keen To Leave?

it's a genuine question. The Middle Flower Kingdom likes to beat its chest about all kinds things but somehow everybody seems to want to leave. They want to send their money overseas and get out. So despite being the world's second largest economy, they have to exert capital controls like Malaysia in the 1990s during the Asian Financial Crisis.

The latest move comes just three months after the People's Bank of China (PBOC) ordered banks to scrutinise clients' foreign exchange transactions to prevent illicit cross-border currency arbitrage between the offshore and onshore yuan. 

On Wednesday, the country's foreign exchange regulator also said it would improve its reserve position and contingency plans to curb risks from abnormal cross-border capital flows. 

"The main purpose is to crack down on excessive currency speculation and arbitrage, which may hurt the economy," said a senior economist at a think-tank linked to China's Cabinet. 

"They are worried about falling FX reserves. The yuan faces obvious depreciation pressure as the Fed (U.S. Federal Reserve) may continue to raise interest rates, so policymakers are concerned and intend to take effective measures to respond."
A source at one of the affected banks said China's central bank asked them to disclose the names of their foreign exchange clients buying spot and instructed any state-owned enterprises among them to stop trading. 

"The PBOC is robbing us. They're not being reasonable; even if we comply with everything, we provide all the documents, our spot volume is too large," the person said.

That's a great way to start the year. China's deep in the process of dealing with the end of its own financial bubble. It's not going to pull off any kind of soft landing. 

View From The Couch - 24/Dec/2015

Kim Jong-Un And His Hydrogen Bomb

As these things go, maybe it's not as hysterical as it sounds, but Kim Jong-Un recently said North Korea has a hydrogen bomb, and is able to stick it on the tip of a Rodong rocket and fire it into Washington DC. Amazingly, this didn't make the news in Australia because it's the kind of thing I tend to notice in the headlines.  It might have been missed because Reuters' headline was already tinged with scepticism. Experts think it is unlikely:

In Washington, the White House said it was doubtful that North Korea had developed a hydrogen bomb, but said Pyongyang remained a threat. 

"At this point, the information that we have access to calls into serious question those claims, but we take very seriously the risk and the threat that is posed by the North Korean regime in their ambitions to develop a nuclear weapon," White House spokesman Josh Earnest told a regular briefing.

The U.S. State Department repeated a call on North Korea to comply with its international obligations and abandon all nuclear weapons.

One sort of wonders what the dictator is up to, but it's all kind of kooky how he wants to get the wrong kind of attention at this juncture. In response to this claim, Xi Jinping shut off oil supplies to North Korea, which is unheard of when you think about what it might mean. It tacitly indicates China is ready to disown its old communist bulwark ally; or it may mean nothing especially because oil has collapsed down to US$35 a barrel, and seems to be the ubiquitous commodity - North Korea can buy it cheaply elsewhere. It's really hard to figure out how much this would even corner North Korea. When all the European banks closed off business with North Korea because of sanctions, they simply moved on to using African banks for international settlements. Much like ISIL, it is proving hard to completely shut off the supply of cash to the rogue state. Too many entities seem to be able to profit from dealing with the North Koreans.

Anyway, it's a nice thought on Christmas Eve that Kim Jong-Un has his nation working busily with a plan to blow up the world. He really is like some Bond villain.

Turkey, Russia, Oil

The business of that downed Russian jet by the Turks is turning into a drama of sorts. It goes back to the ISIL thing where the Islamist insurgents are selling oil on the black market. Buying this oil at next-to-nix is none other than Turkey, which then on-sells it for a tidy profit, even with prices crashing to US$35/barrel. As it turns out, the man running this operation out of Turkey is none other than President Recep Erdogan's son.

Sometime back at the the G-20, Putin pressed Erdogan about this issue. Erdogan denied all of it. Apparently Vladimir Putin pressed pretty hard, asking to make sure Recep Erdogan's family weren't in on the ISIL oil deal, and Erdogan still denied it.  So Putin ordered his airmen to go bomb all the lorries carrying oil out of ISIL held territory which resulted in hundreds of these oil trucks getting blown up in Syria. As it turns out, these trucks were mostly Turkish trucks. So Erdogan got upset and green-lit that attack on the Sukhoi. Basically, there was no invasion of Turkish airspace.

Since then Russia has closed off all trade with Turkey, which basically amounts to about half of Turkey's exports.Turkey for it's part is staggering towards more armed conflict with Russia, which is kind of insane because Turkey's nuclear deterrent is NATO. What's worrying about this is that the relationship between the two nations is pretty much naked power politics in the style of the 15th century, just with modern equipment. All this leads me to think that west will likely rue the day they let Turkey into NATO. A war could start on the eastern end of Turkey, and NATO might be drawn into this stupidity by dint of the alliance.

It would be especially galling if it happened as Turkey kept dealing and cash-funding ISIL.

On The Low Low Oil Prices

Jeez, the ACCC must be pretty dumb. If you ever needed evidence that petrol prices at the pump are fixed through collusion, you only have to look at the prices at the bowser and the oil prices by the barrel. Crude oil prices have gone from US$120/barrel down to US$35/barrel. That's roughly a third to a quarter. If the petrol stations and suppliers were genuinely competing, the prices at the bowser should proportionately go down to about 40-50cents per litre. The fact that it hasn't tells you all you need to know. It doesn't go down because they're not really competing, and if they're not competing, the only answer is that they're colluding. In short, these companies are pocketing the difference and not passing it on to the consumer. What a joke.

Anyway.
I saw this interesting account of fossil fuels and their future today.

Why and how coal (and oil) is and will be produced at a loss has been neatly explained by the Australia Institute's Richard Denniss: 

"Imagine you owned an ice cream van parked by the beach and your refrigerator broke. No matter what you paid for the ice cream, you should sell it for anything you can before it melts. Some money is better than no money. 

"Now imagine that you owned billions of tonnes of coal and you thought that in 20 years time new technology or new global restrictions meant you might not be able to sell it. We have heard for decades how Australia had 'hundreds of years' worth of coal, but now we are trying to sell it in a few decades. The green paradox says that talk of future emission reductions can cause an increase in current coal production. Indeed, global coal production has risen 50 percent since the world first agreed to reduce emissions in 1992." 

Dumping coal (and oil) on the market keeps renewables expensive, but it also provides the incentive to make renewables cheaper. There are very good arguments for governments to invest more in renewables research than just subsidising the existing quality of solar and wind projects.

And that explains why the Coalition Government is going to make sure the Adani mine goes ahead in Queensland. It's anti-democratic and breaks a whole bunch of environmental protections, but the promise of 10,000 jobs in North Queensland has essentially convinced this government that this is somehow going to be okay.

Yet if you look at it from the ice-cream truck simile, you can see why there's such a rush. If Australia doesn't sell off as much of its fossil fuels before it becomes totally unviable, we would be leaving too much money on the table. Greg Hunt isn't really a Minister for the Environment - he's kind of a spokesperson for the Government that addresses the environment as an issue, but doesn't do anything that might remotely be perceived to be standing in the way of corporate profits. He's somebody who is not terribly serious about his job or its title or what it means. He's a careerist pulling down a ministerial pay-packet, pretending to be doing something. He's about as effective as Tony Abbott was as the Minster for Women, and more's the pity. 

This reminds me... Way back a long time ago, I was a young person working at the parcel pickup service of Grace Brothers. The groceries would come up in numbered tubs and we'd hand them out to the customers with the tickets. On certain times of the week, like Thursday night and Saturday morning, they would come in droves, and leave their car engines idling in the driveway. The fumes would be terrible. Just terrible. At this time of the year, the car queues would be 20 cars deep all idling away, and the air was unbreathable. I would dry retch all night long after working some of those shifts. 

Eventually we complained to management asking them to install a powered vent or fan. They demurred. So we called the union, who then organised somebody from the EPA to take measurements. The EPA dude turned up on a Monday morning when there was hardly a vehicle in the whole shopping complex car park - and declared the air was safe. We told him he was there at the wrong time, and that he should come back to when it was peak fumes. He said no, because that would be a biased reading. We were ropable, apoplectic with rage. What was the point of the exercise? He shrugged and said they were the rules, and went back and reported everything was fine. So, management weren't protecting us; the union wasn't really protecting us; and the government wan't protecting us. It was pretty sobering. If you ever wonder why I have occasional bouts of political anarchism, it's from experiences like these. 

I relate this, just to share with you the sense of hopelessness in expecting the government to do the right thing when everybody working for the government, whether elected offical or employed, is against doing any such thing. Folks, they really don't give a shit. Oh, and there's no question that  the ACCC are idiots. 

Oil Stories

Which Peak Are We Climbing?

Around 2008, the big story was peak oil. The production of crude was going to peak, and that spelt a contracted future for energy for our civilization. since then, the world has gotten on to this business of fracking and as ugly as it may seem, it has changed the equation of our future consumption of oil as energy.

Heck, I admit: I was one of the people taken in by the Peak Oil argument - but only because the person who first introduced me to the notion had very good facts and figures. Of course, if you take a static snapshot of where we are and extrapolate, you ca imagine all kinds of scenarios. Neither he nor I imagined that fracking would come along, back in 2005-2006.

In that light I want to draw attention to a couple of articles worth getting your head around. The first is this one which discusses oil and gas in the context of a 'commodities supercycle'.

After eight years, the Oil Drum is closing down, giving up the long struggle to alert us all to ‘‘peak oil’’ and the dangers of an energy crunch. The theme has gone out of fashion, eclipsed by shale and US fracking.

The demise of Britain’s leading website for oil dissidents has been seized on by critics as an admission that peak oil is a Malthusian myth. It comes amid a spate of reports from global banks announcing the death of the commodity supercycle, slain by creative technology.

Yet if you stand back, it is hardly evident that the world is again enjoying an abundant supply of cheap energy, metals, or food. Commodity prices have held up remarkably well, given that we are in a global trade depression of sorts.

The eurozone is in the longest unbroken recession since the 1930s, with industrial production 13 per cent below the pre-Lehman peak. Growth in the US has averaged 1.1 per cent over the last three quarters as it grapples with the most drastic fiscal tightening since the Korean War.

Russia and Brazil have ground to a near halt. China’s growth is near zero on a GDP deflator basis. Oil imports were down 1.4 per cent in June from a year earlier. Imports of iron ore were down 9.1 per cent.

It all adds up to a prostrate global economy, yet Brent crude oil is still trading at $US106. There is no comparison with the collapse to $US11 in 1998. The CRB commodities index remains three times higher than a decade ago.

You might conclude that the supercycle is in rude good health given what has been thrown at it. A new Eos report by the American Geophysical Union, Peak Oil and Energy Independence: Myth and Reality, argues that global crude output has been stuck on a plateau near 75 million barrels per day (bpd) since 2005 despite enticing returns.

The way the article couches it, it seems the immediacy of peak oil is temporarily delayed, thanks to the development of fracking, which will stave off peak production of fossil fuels in general for a generation. It's pretty begrudging about the technological development aspect of what has led to the fracking business. The fact is, that a technological breakthrough came along and solved the problem of peak oil by changing the mode of our harvesting of fuel and energy. This is very much in line with Schumpeter's observations about a creative destruction of value, as well as why to date, the Malthusian crunch has not come about.

The other article is this one in the Economist which covers the possibility that our demand for oil may be peaking, so future demand for crude oil may be nothing like the extrapolation of the Malthusian alarmists.

The other great change is in automotive technology. Rapid advances in engine and vehicle design also threaten oil’s dominance. Foremost is the efficiency of the internal-combustion engine itself. Petrol and diesel engines are becoming ever more frugal. The materials used to make cars are getting lighter and stronger. The growing popularity of electric and hybrid cars, as well as vehicles powered by natural gas or hydrogen fuel cells, will also have an effect on demand for oil. Analysts at Citi, a bank, calculate that if the fuel-efficiency of cars and trucks improves by an average of 2.5% a year it will be enough to constrain oil demand; they predict that a peak of less than 92m b/d will come in the next few years. Ricardo, a big automotive engineer, has come to a similar conclusion.

Not surprisingly, the oil “supermajors” and the IEA disagree. They point out that most of the emerging world has a long way to go before it owns as many cars, or drives as many miles per head, as America.

But it would be foolish to extrapolate from the rich world’s past to booming Asia’s future. The sort of environmental policies that are reducing the thirst for fuel in Europe and America by imposing ever-tougher fuel-efficiency standards on vehicles are also being adopted in the emerging economies. China recently introduced its own set of fuel-economy measures. If, as a result of its determination to reduce its dependence on imported oil, the regime imposes policies designed to “leapfrog” the country’s transport system to hybrids, oil demand will come under even more pressure.

Basically, our policies and technological advances are working to constrain our demand for oil. It seems there will be enough of these to match the decline in production of oil with a decline in demand. I imagine this sits really badly with my friends in the environmental movement who have been praying and hoping for peak oil to crash our technological civilisation once and for all. I chalk all this up to Schumpeter and his creative destruction of values as well as the Kurzweil vision of a Technological Singularity. Collectively, we seem to be accelerating to a point of development, not slowing down. Calling this cargo-ism seems to be just as ideologically motivated as the sort of people who wanted peak oil to cripple our civilisation.

Certainly, this is an interesting vision of the near future:

The biggest impact of declining demand could be geopolitical. Oil underpins Vladimir Putin’s kleptocracy. The Kremlin will find it more difficult to impose its will on the country if its main source of patronage is diminished. The Saudi princes have relied on a high oil price to balance their budgets while paying for lavish social programmes to placate the restless young generation that has taken to the streets elsewhere. Their huge financial reserves can plug the gap for a while; but if the oil flows into the kingdom’s coffers less readily, buying off the opposition will be harder and the chances of upheaval greater. And if America is heading towards shale-powered energy self-sufficiency, it is unlikely to be as indulgent in future towards the Arab allies it propped up in the past. In its rise, oil has fuelled many conflicts. It may continue to do so as it falls. For all that, most people will welcome the change.

If this indeed comes to pass, the world is going to be a very different place to the 'Peak Oil' scenario.

Whither Oil Prices?

Not Feeling The Pinch In Australia

I just had a thought today that we haven't really felt the ups and down of crude oil prices in Australia as much as parts of last decade. I remember 2005-2008 being particularly painful for petroleum price rises, and oddly enough calls by the public to look at public transport a lot harder. Since then a few things have happened, namely, the Australian Dollar has appreciated to almost twice what it was, and the price of crude has come off the peaks. As of this writing it's siting at about US$115 /barrel, which is about 20% off the peak of US$ 145/barrel reached in 2008.

Of course during the GFC it fell down to $35/barrel, and yet the US$115 it is sitting at is above the price point that people in Australia started feeling the pinch. In short, we're being protected from this high price of oil by the high Australian Dollar. Judging from all the people driving their gas-guzzling 4WDs in Sydney, it's fair to say they're not feeling the price point of US$115 as they did in say, 2007. Also as of this writing, they're reporting record prices for gasoline in the USA.

This leaves me to ponder a) how soon will parity break for the Australian Dollar, b) how much it will go down, and then c) how soon we'll start hearing about oil prices and gasoline prices then.

At the moment, Nick Greiner and his cronies are pushing for WestConnex, a crazy tollway-driven project as part of their so-called Infrastructure NSW plan, which is mostly devoid of public transportation plans and seems to assume a great many things including the relative stability of oil prices, continuing for a long time in the future. A quick look at the crude oil prices and exchange rate tells you that this assumption is way off base, and that Nick Greiner and his vested interest cronies are asking the people of NSW to foot a massive bill to build roads that will maybe be too expensive to drive upon, and will in no way solve problems of congestion, for a future where car use may decline as a result of skyrocketing gasoline prices.

It is entirely possible that they build this crazy tollway and there won't be enough users to drive over it. It's possible this thing is going to be worse than a white elephant project.

Anyway, just some random thoughts watching the price of Brent Crude.

Peak Oil Is Knocking

Today's Peak Oil Article

Here it is.

Peak oil is forcing its way to the top of the agenda with stark warnings from the International Energy Agency and others repeated on ABC radio and television this week, after an investigation by the Catalyst program.
Following up a similar program she made in 2005, journalist Jonica Newby gained a rare interview with the IEA chief economist, Fatih Birol, who said crude oil production peaked in 2006 and, in veiled terms, added governments should have started working seriously on the problem a decade ago and warned of the threat of more oil wars.

Whereas five years ago the agency expected total production - including oil from deep-sea drilling and unconventional sources such as tar sands - could rise to 120 million barrels a day by 2030, the agency now expects production will reach only 96 million barrels. And Birol reckons there are no guarantees it can be brought out of the ground in a timely fashion.

''Existing fields are declining so sharply that in order to stay where we are in terms of production levels, in the next 25 years we have to find and develop four new Saudi Arabias. That is a huge challenge.''

If you're unsure of the general outline of the argument for Peak Oil, here's the helpful Wikipedia entry with the usual caveats about Wikipedia. Even the mighty Russian fields peaked in 2007 according to Wikipedia. If you want to read in more depth, here's a cool link.

Anyway, back to the article:

Desperately needed, of course, is a policy to tackle both peak oil and climate change at the same time.
Last year the think tank Beyond Zero Emissions, with Melbourne University's Energy Research Institute, published its Zero Carbon Australia Stationary Energy Plan, which shook things up by calling for investment of $37 billion a year to switch the whole country over to 100 per cent renewable energy within a decade. The plan included enough installed energy capacity to power all our transport needs.

Beyond Zero has assembled a team of scientists, engineers and planners working pro bono on a fully costed, national transport plan that will take in three streams: city passenger and public transport, freight, and intercity transport and high-speed rail.

Workshops are under way, drafts are circulating and the report is due out by the end of the year.
The executive director, Matthew Wright, says the opportunity for Australia is there to invest in new, climate-friendly transport infrastructure and avoid spending on high-priced oil imports, which Beyond Zero estimates could exceed $50 billion a year by 2015. ''That's what I call a great big tax,'' says Wright.

That should be the take home message for now. our politicians are barely on the edge of the crux of the problem, and they're whipping up the wrong frenzy. Somewhere in the midterm, our dependence on oil could cripple our economy when it becomes impossible to move things around this country without oil. It's on the cards, it's part of the complex problem that gives rise to the need to prepare infrastructure for alternative energy sources. If one thing could contribute to the popping of the Australian Property Bubble, it would be the rising cost of oil.If people value the investment value of their houses, they might consider moving to alternative energies faster, not slower; and in turn stop whinging about the Carbon pricing because that is the mechanism by which the technology will be funded.

Libya In The Targetsight

Peace Through War

In one of those weird turns of history, NATO are at war with colonel Gadhafi's Libya. It came together around much French diplomacy as well as Kevin Rudd flying around telling people the rebels of Libya needed a no-fly zone to at least have an even chance to oust Colonel Gadhafi.

On a political level, Mr Sarkozy badly wanted to restore the credibility of French diplomacy after failing to read the Arab uprisings in Tunisia and then Egypt. Last month, he had to get rid of his foreign minister, Michèle Alliot-Marie, after she not only offered French security “savoir faire” to the Tunisian regime just days before it fell, but then failed to explain her links to a businessman close to the deposed rulers. French diplomats have been mortified by the damage this did to the country’s standing. Moreover, Mr Sarkozy had personal reasons to want to turn the screws on Colonel Muammar Qaddafi, who last week called him a “clown”, and whose son, Saif al-Islam,  alleged without evidence that Libya had helped to finance his 2007 presidential-election campaign (a claim denied by the Elysée).

Another factor has been the arrival of Alain Juppé to replace Ms Alliot-Marie. A former prime minister, and one-time foreign minister, he has brought heavyweight experience to the job. Initially hesitant about intervening militarily, he laid down various conditions for backing the establishment of a no-fly zone over Libyan airspace: it would need the international legitimacy of a clear United Nations Security Council resolution; it should not be a NATO operation because of the Alliance’s image in the Arab world as an American tool; it would need at least symbolic Arab military participation; and it would require an explicit call from the Arab world.

Last week, Mr Juppé cancelled a trip to Berlin at the last moment to fly to New York to plead France’s case in person at the UN Security Council on March 17th. (The speech carried distinct echoes of that by Dominique de Villepin, a former foreign minister, who argued just as passionately against military intervention in Iraq in 2003.) By the time resolution 1973 was passed, and with the nod of the Arab League, all of Mr Juppé’s conditions had been, broadly, met. The Paris summit tied up the loose ends, and supplied non-Western legitimacy, however symbolic. On French television a few hours after French fighter jets had begun to strike Libyan tanks, Mr Juppé spoke persuasively and calmly of “calculated risks”, and the restoration of French honour in defending its values.

If you add in that wars can help politicians in the polls, maybe it's not surprising. Wars are an interesting adjunct to the post GFC landscape as the West now has ample motivation to go and fight a gratuitous war to increase military spending and by extension help the GDP. America is less motivated to join this war because it's already got Afghanistan, and barely got out of Iraq having gone there exactly to shore up markets after 9/11. Of course thre's the dirty big debt that got racked up to think about, but nobody is capable of dealing with that.

The other thing to watch of course is oil price. Libyan crude is actually the best crude in the world and goes into airplanes. So not only will the oil price rise, it will likely rise in a way so as to hurt airline margins. It's not something that will show up immediately but you can bet your bottom dollar this is going to hurt industries around the world. The longer the action continues in Libya, the more we're going to line ourselves up for GFC part 2. The ideal scenario is a quick finish, but it's actually hard to see an endgame in the Libyan contest. Do these rebels really have what it takes to oust Gadhafi from his lair/bunker/stronghold in Tripoli? It's a good question sure to worry at least more than Nikolas Sarkozy or Mr Juppé.

You wonder why so much of the world continues to be happy relying on oil for fuel when it is so vulnerable to events in the middle east. One would have thought that other industries might have put on more pressure for energy companies and the like to look for better alternatives that don't put us all at the whims of dictators and Arab militants and other assorted complications that are opaque, irrational, and willfully hostile and difficult. I mean, do people like say, Steve Jobs or George Soros or Steve Ballmer or the guy running General Motors these days really enjoy this affecting their share prices?

Opaque Forecasts For Oil

Whither Peak Oil

I don't get it, I guess. There's the school of thought that the production of oil is either about to peak, or has peaked, or is at its peak as we speak. That's the theory known as 'Peak Oil'.

In Time Magazine, there's an article about how some of the diplomatic cables leaked reveal that Saudi Arabia is overstating its oil reserves by 40%.

A cable from December 2007 tells the story. U.S. diplomats in the Saudi capital of Riyadh met with al-Husseini. The American representatives had been told earlier by current Aramco executives that the company had 716 billion barrels of total oil reserves, of which just over half were considered recoverable. ("Recoverable" oil means that petroleum that is economically worth the cost of getting it out of the ground.) Current Aramco executives believed that in 20 years the company would have over 900 billion barrels in reserves, and that advances in technology would mean that 70% of it would be recoverable—good news for those who want to keep oil prices from rising in the future.

But al-Husseini, the former Aramco exec, told the U.S. diplomats that his successors were far too optimistic. He said that Aramco was overstating its reserves by as much as 300 billion barrels. He believes that Saudi Arabia has approximately 360 billion barrels of proven reserves—meaning oil that has already been produced or which can be exploited with current technology. Al-Husseni said that once 50% of those reserves had been produced, the country would reach an inflection point, resulting in a slow and steady decline in output. He also believes that inflection point would be reached in 14 years at current rates of production (12 million barrels a day), and that it would be followed by a plateau in output and then a decline. Al-Husseini also told American diplomats that Saudi Arabia lacked the engineers and other resources to push production to the max.

That all fits the theory of Peak Oil that's been bandied about since the late 1990s.

Yet at the same time, I read this article on the very same day.

A new drilling technique is opening up vast fields of previously out-of-reach oil in the western United States, helping reverse a two-decade decline in domestic production of crude.

Companies are investing billions of dollars to get at oil deposits scattered across North Dakota, Colorado, Texas and California. By 2015, oil executives and analysts say, the new fields could yield as much as 2 million barrels of oil a day — more than the entire Gulf of Mexico produces now.

This new drilling is expected to raise U.S. production by at least 20 percent over the next five years. And within 10 years, it could help reduce oil imports by more than half, advancing a goal that has long eluded policymakers.

"That's a significant contribution to energy security," says Ed Morse, head of commodities research at Credit Suisse.

Oil engineers are applying what critics say is an environmentally questionable method developed in recent years to tap natural gas trapped in underground shale. They drill down and horizontally into the rock, then pump water, sand and chemicals into the hole to crack the shale and allow gas to flow up.

Because oil molecules are sticky and larger than gas molecules, engineers thought the process wouldn't work to squeeze oil out fast enough to make it economical. But drillers learned how to increase the number of cracks in the rock and use different chemicals to free up oil at low cost.

"We've completely transformed the natural gas industry, and I wouldn't be surprised if we transform the oil business in the next few years too," says Aubrey McClendon, chief executive of Chesapeake Energy, which is using the technique.

So it seems there's more oil to be squeezed out of the earth, depending on the technique. The previous theory was that it was hard to access but this is being turned on its head. Presumably if these can help America find more oil, then surely the same techniques can be used to extract more oil in the Middle East. This would then account for this article.

The reality is that we are in uncharted waters. The world has never, ever seen anything like the rise of major developing countries like China and India—over a billion people growing into the middle class, demanding meat, cars, planes, electricity. Just because we proved smart enough to innovate our way out of periods of past growth doesn't mean we'll be able to handle a world with 9 billion plus people by 2050, most of them richer than now. We may already see that impact on the U.S., which will likely have to dig its way out of recession with the added burden of high energy prices thanks to healthy demand from the developing world.

It's actually hard to see if 'Peak Oil' will play out the way the theory predicts. If they keep finding oil, and in the case of Russians - they're finding them in odd places but they do find them - it seems we'll have more than plenty. The question is how are we going to control all that carbon getting emitted. I guess that's another problem altogether.

For those who like reading way-out-there things on the internet, I'll share this link with you. This one in particular is way way way out there.

Things To Depress You

Hey, I Don't Invent This Stuff



It was one thing for a wayward tanker to crash right into the Great Barrier Reef this month, there's also been this disaster in the Gulf of Mexico where an oil rig blew up and now oil is spewing everywhere.

NEW ORLEANS, Louisiana (AFP) – Oil is leaking from the ruptured well of a large rig that exploded, burnt and sank in the Gulf of Mexico earlier this week, the US Coast Guard said Saturday.

The Coast Guard estimated that up to 1,000 of barrels of oil, or 42,000 gallons (158,987 liters) were spewing each day from a riser and a drill pipe, prompting further concerns of damage to Louisiana's fragile ecosystem, already stressed by hurricanes and coastal erosion.
Officials confirmed the discovery a day after the Coast Guard said that no oil appeared to be leaking from the well head.

Coast Guard Eighth District commander Rear Admiral Mary Landry told reporters the leak likely began on Thursday, when the rig sank two days after an initial explosion tore through the Deepwater Horizon semi-submersible oil drilling platform.

The best case scenario is sealing off the pipe ruptures in a few days; the worst case scenario is a matter of months. The Coast Guard said it would take several days before they determine how to stop the pipe leaks 5,000 feet (1,525 meters) down in the Gulf waters.

Petty Officer Connie Terrell told AFP the oil sheen was now 20 miles (32 kilometers) in diameter about 40 miles (64 km) off the Louisiana coast. Over 33,700 gallons (127,570 liters) of oily water mix have been recovered in the cleanup effort so far, she said.

Now that's got to be an ecological disaster the size of which has not been seen since the Exxon Valdez. I know our civilisation runs on oil, but surely these kinds of disasters have to force us to think of alternatives means of running out civilisation. It's depressing to think that 21 years on from the Exxon Valdez outrage we're still just as hooked on oil and vulnerable to massive ecological disasters.

The Big ETS Delay

Meanwhile back in Australia, the Labor Government is now making noises that it will delay the introduction of the ETS.

A spokesman for Mr Rudd said the government would legislate an emissions trading scheme by 2013 if there had been ''sufficient international action''. The strategy has been the subject of fierce debate within the government. The move will save $2.5 billion over the next four years.

A special prime ministerial task group will report in June on options including an energy efficiency trading scheme and new industrial and building efficiency measures.

Together with new fuel efficiency regulations and existing funding for solar and clean coal projects, the measures will become pre-election announcements to justify the claim the government is still committed to tackling climate change and able to meet the reduction targets it has pledged internationally.

But environment groups said the deferral - aimed at defusing the opposition leader Tony Abbott's scare campaign about ''a great big new tax on everything'' - would drastically increase the cost of meeting Australia's targets, no matter what other policies the government adopts. They said it would also send a disastrous signal to the flailing international climate negotiations.

In other words, you delay it and pay more, but you're not crossing the road alone, first. Was tat really what we voted for back in 2007?

Here is another piece on it, with more of an explanation why they will delay the introduction of the ETS.

The Climate Change Minister, Penny Wong, told the Herald the government would not try to legislate the ETS even by its new delayed start year of 2013 unless there is ''credible action'' by the end of 2012 from countries such as China, India and the US. It would also require a resolution of the Copenhagen deadlock over how national efforts are checked.

''We will only [legislate] if there is sufficient international action,'' Senator Wong said, declining to explain exactly what that meant. She admitted the delay would ''make meeting our [emission reduction] targets more expensive'' and that without a carbon price Australia would not meet the targets at all.

''You can't get to your targets without a cost on carbon … we have been very clear that we have to put a price on carbon,'' she said.

Which all goes to show they understand what they're trying to do, they understand how urgent it is to do it, but they're letting the rest of world's intractability get in the way of doing the right thing. Consider that Kevin Rudd's government got elected on this promise back in late 2007.  2013 would be 6 years lapsed from that election. The wait is intolerable, and this is absolutely the kind of failure of leadership for which Kevin Rudd was lambasting the Coalition.

The commentary on this very moral cowardice is here.

Tony ''the settled science of climate change is absolute crap'' Abbott and Kevin ''the greatest moral challenge of our age'' Rudd know they have to have a carbon price to make a significant difference to Australian greenhouse emissions. But both now say they want to wait and see what the rest of the world does.

To understand just how far this debate has shifted, think back to poor old Brendan Nelson, who lost the Liberal leadership in 2008 for suggesting the wait-and-see approach that now seems to have bipartisan approval.

Kevin Rudd suggested yesterday he was just shifting the timing of the ''implementation'' of his carbon pollution reduction scheme - like it was a minor administrative matter.

But then he also said he would be assessing at the end of 2012 what the rest of the world had done, and the political realities in the Senate. What if the rest of the world hasn't done much? Seems he could drop an emissions trading scheme altogether.

The Coalition's decision to abandon bipartisan support for an emissions trading scheme last year obviously changed the politics of the issue. Labor could have put the issue to a double dissolution election, or said it would try again after a normal half Senate poll. Instead it has distanced itself as far from the scheme as it can without dropping it altogether.

And therein lies the heart of the shit-fight that is the ETS scheme. For a start, the best thing about the ETS is that it puts a price on carbon. When you look at it closer, it's a crappy price they put on it, because they don't want to hurt the current emitting industry too much, but it also stalls the growth of carbon capture/management businesses that are waiting for a price. Then of course the ETS arrangement isn't even perfect. It gives away too many freebies to polluters, which is why the Greens won't even countenance negotiating with the ALP.

So really, the Rudd Government is basically strapped to both extremes of the argument having to put something in the space dead-bang in between, while the extremes move further out in their cloud-cuckoo directions... rather than just doing what's right. It should be willing to go the double-dissolution on this alone, but hasn't. There's something that reminds us of the politics around the introduction of the GST back in the day. There was no way known a Labor government could/would introduce it, so it fell to the Coalition. The electorate bitched and whined and moaned all the way but hasn't really found the GST regime to be so crippling to the economy or daily life. It seems there's no way that a Coalition government an ever put in an ETS given its 'Global Warming Sceptic' constituency, so it's inevitably going to fall to Labor to pass it. And the electorate will bitch and whine and moan, but chances are that in years to come it will be accepted for what it is.

The thing is, if it's so necessary - and sane people all agree it is - then why don't they just do it properly? That's all I'm asking for.

From The Mailbox

From Russia With Political Intent

This came in from Pleiades who is always on the look out for shifts in the global geopolitical game.

Prime Minister Vladimir Putin launched Russia's long-awaited Siberian oil export route Monday, giving energy-hungry Asia a new supply source from the world's largest crude exporter seeking to diversify its client base away from Europe.

Putin, clad in a heavy winter parka, pushed a button that initiated the first filling of an oil tanker bound for Hong Kong at a new oil terminal near the Russian Pacific port of Nakhodka, the projected terminus of the new Siberian oil pipeline.

"For Russia this is truly a serious event," Putin said during the terminal inauguration ceremony at the port of Kozmino near Nakhodka, in comments broadcast on state television.

"This is a strategic project because it allows us to enter completely new, growing, promising markets of the Asian Pacific region," Putin said.

"This is the completion of one of the largest projects in modern Russia. And not only modern Russia. It would be a grandiose project for the former Soviet Union too."

Earlier this year, Russian oil pipeline monopoly Transneft completed the construction of the first 2,694-kilometre (1,600-mile) section of the oil pipeline known by the acronym ESPO (Estern Siberian Pacific Ocean) linking Taishet in eastern Siberia with Skovorodino in the Amur region.

This portion of the project also included the construction of the Kozmino oil port inaugurated by Putin.

The second portion, a 2,100-kilometre (1,300-mile) stretch of pipeline, will run from Skovorodino to the Kozmino port.

For now, oil is being delivered by rail from Skovorodino to the Kozmino port where it is then to be pumped into tankers for shipment to markets in Asia.

Putin said the state-of-the-art terminal, which he praised as "eye candy," had cost 60 billion rubles (two billion US dollars) to build.

One would think such a pipeline cements the close ties between Russia and China as well as increase the pressure on the Arab Oil exporters to sell more oil, faster and cheaper. Not good for the global warming thing, but doubly, given the likelihood of peak oil scenarios, this is going to be very interesting how the diminishing oil resources are going to be accessed.

One ramification for America is that it is conceivable that the USA, Europe and Japan reach the bottom of the Saudi and Iraqi supply way before the Russians and Chinese exhaust their supply.

Medieval Records Show...


Here's another interesting article from Pleiades about Global Warming.

The study found evidence for periods of significant warmth (890 - 1170) in the Northern Hemisphere during medieval times and for clearly colder periods (1580 - 1850) during the so-called "Little Ice Age".

Their key conclusion was that the 20th century stands out as having unusually widespread warmth, compared to all of the natural warming and cooling episodes during the past 1,200 years.

The research team gathered climate change data from a number of regions in the Northern Hemisphere especially:

Long life evergreen trees growing in Scandinavia, Siberia and the Rockies, which had been cored to reveal the patterns of wide and narrow tree rings over time -- wider rings relating to warmer temperatures.

Ice from cores drilled in the Greenland ice sheets revealed which years were warmer than others by the chemical composition of the ice.

They also used a record developed from diaries of people living in the Netherlands and Belgium over the past 750 years that revealed for example the years when the canals froze.

I particularly liked the bit where they took records of when the canals froze as a reference. The Global Warming deniers are ever louder in their denials about what the scientists are saying. Here's a sample of Lord Monckton:

Well, after a decade and a half with no statistically significant "global warming", and after three decades in which the mean warming rate has been well below the ever-falling predictions of the UN's climate panel, that notion has not been disproved in reality.

However, the question I address is whether the cost of taking action is many times greater than the cost of not acting? The answer is yes.

Millions are already dying of starvation in the world's poorest nations because world food prices have doubled in two years. That was caused by a sharp drop in world food production, caused by suddenly taking millions of acres of land out of growing food for people who need it, to grow biofuels for clunkers that don't. The policies that you advocate are killing people by the million. At a time when so many of the world's people are already short of food, the UN's right-to-food rapporteur, Herr Ziegler, has rightly condemned the biofuel scam as "a crime against humanity".

Yet this slaughter is founded upon a lie: the claim by the IPCC that it is 90 per cent certain that most of the "global warming" since 1950 is man-made. This claim - based not on science but on a show of hands among political representatives, with China wanting a lower figure and other nations wanting a higher figure - is demonstrably false. Peer-reviewed analyses of changes in cloud cover over recent decades - changes almost entirely unconnected with changes in CO2 concentration - show that it was this largely natural reduction in cloud cover from 1983-2001 and a consequent increase in the amount of short-wave and UV solar radiation reaching the Earth that accounted for five times as much warming as CO2 could have caused.

Nor is the IPCC's great lie the only lie in the official documents of the IPCC and in the speeches of its current chairman, who has made himself a multi-millionaire as a "global warming" profiteer.

It is also a fact that, while those of the UN's computer models that can be forced with an increase in sea-surface temperatures all predict a consequent fall in the flux of outgoing radiation at top of atmosphere, in observed reality there is an increase.

In short, the radiation that is supposed to be trapped here in the troposphere to cause "global warming" is measured as escaping to space much as usual, so that it cannot be causing more than about one-fifth of the warming the IPCC predicts.

He doesn't seem to be aware of global dimming that is masking the global warming effect and that the likely outgoing radiation is a result of the pollution particles in the air. In fact, the more you read Monckton's article you get the feeling of a man trying to construct a straw man out of global warming and taking immense satisfaction in beating the straw man.

It's classic private school debating bullshit, where if you spin bullshit hard enough, you might persuade the world to your ways. Well, physical reality says otherwise.But Tony Abbott indulges in this crap too, an he's now the Leader of Opposition. You sort of wonder where it's all going to go. I guess that as long as they deny it, their coal mining friends an coal-fire power generator owning friends don't have to fork out the money to pay for the carbon they're throwing in the atmosphere.

Talk about having their heads in the sand.

The Oil Economy

Just How Does Crude Oil relate To All This GFC Stuff?

Here's a cool article courtesy of Pleiades. This bit halfway in got my attention:

During boom times, as we saw in the years leading up to 1973 and again after 2002, the rise in oil demand strengthens oil producers, which reap massive profits by intentionally underinvesting in oil-production capacity. Oil prices continue to rise, filling their treasuries with a sudden influx of capital that cannot be absorbed at home. Petrodollars flow out, seeking returns in already inflating financial markets and pushing bubbles to dangerous levels.

As the business cycle turns, the euphoria begins to wane. Investors assess financial risks more accurately. Interest rates rise, further feeding the downswing. The irrational exuberance that amplified the boom quickly reverses course, accelerating the bust. Demand for oil collapses, causing oil prices to crash. Petrodollar flows dry up, hitting financial markets and real-sector growth still harder. Then, reduced liquidity and credit prevent oil exporters from investing sufficiently in productive capacity during the recession, and our story eventually repeats, each time more dramatically than before.

The geopolitical component of this megacycle is equally insidious. As oil-producing countries amass substantial financial reserves, they tend to allocate investment and expenditure disproportionately less to oil-production capacity and more toward areas that benefit the ruling elites. In the Middle East, significant portions of oil receipts have been spent on arms purchases, which protect the ruling class from both external threats and internal challenges -- indirectly, by appeasing military leaders who might pose a threat, and directly, by stifling opposition through robust internal security spending. (Military personnel as a percentage of the labor force is a very high 3 percent in the Middle East and North Africa, and military expenditures as a percentage of GDP are also consistently high, for example 9 percent in Saudi Arabia.)

Oil-importing advanced economies such as France and the United States, which eagerly sell weapons as a means of recycling petrodollars, cannot escape their own complicity in this game. Middle Eastern arms races boost not only the arsenals of national militaries, but also of subnational militias and even terrorist organizations. Iran's long-standing support of Hezbollah, for example, is well documented. The flow of weapons increases geopolitical risks, once again increasing oil prices as fears grow that military conflict or terrorist threats will disrupt supplies. Put bluntly, a little bit of terrorism is good for oil exporters.

And the links between oil and terrorism don't stop there. As oil exporters mimic the consumption behavior of advanced economies during booms, young populations develop highly unrealistic expectations, premised on a sense of entitlement to oil wealth. It's these frustrated expectations that drive youth toward radical and militant ideologies, not poverty per se. In Saudi Arabia, for example, real per capita income in the early 1980s was higher than that of the United States. Saudi nationals were accustomed to free housing, guaranteed incomes, and subsidized electricity and gasoline until low oil prices caused budget cutbacks in the mid-1990s. The Sept. 11, 2001, hijackers, after all, were mainly educated middle-class men. They were undoubtedly influenced by the arguments of Osama bin Laden, who in the 1990s was raging against "the greatest theft in history," arguing that the real price of oil in late 1979 should have persisted for the next two decades.

Does anybody feel that gasoline/petroleum is actually under-priced give its value to our society? A bottle of water can cost more than the equivalent volume of oil. That's really weird - or it tells you that the next 'commodity' for us to run short of will be drinking water, and not oil. I'm not sure.

The last bit in the excerpt got me thinking about the nature of the hyper-angry Islamist Terrorist types who recruit from poor workers working in the oil fields, as depicted (in Hollywood style, that is) in 'Syrianna'.

News That's Fit To Punt

Bail Out Happens

In the end the House voted on the bailout.

The bipartisan legislation reversed the House rejection earlier this week that sent global stock markets plunging. The measure authorizes the government to buy troubled assets from financial institutions reeling from record home foreclosures. The bill contains $US149 billion in tax breaks and affirms regulators' power to suspend asset-valuing rules that companies blame for fueling the crisis.

``These steps represent decisive action to ease the credit crunch that is now threatening our economy,'' Bush said at the White House.

The House approved the measure 263-171, four days after rejecting an earlier version. The bill's defeat on Sept. 29 caused a 778-point drop in the Dow Jones Industrial Average, prompting dozens of lawmakers to switch their vote on the legislation, the government's largest intervention in the markets since Franklin Roosevelt's New Deal.

``The issue is stopping the panic,'' said Adam Posen, deputy director of the Peterson Institute for International Economics in Washington. ``The plan's not perfect, but it's certainly better than doing nothing. Now Treasury has to be very aggressive about purchasing a wide range of assets very quickly.''

There are many discussions as to whether it is a bail out or a rescue package or good money after bad, but the bottom line is that without shoring up the US banks, the global role of the US economy is going to be greatly hampered.

Perhaps The American Century Is Coming To An End
Here's a great article in the SMH. I'm surprised there are still great reads in the Herald some times.

In Washington, George Bush and his top economic officer had spent hours in the White House persuading and cajoling the congressional leaders of both American political parties to endorse his rescue plan. With the burning smell of some of the biggest financial institutions in the world still fresh in their nostrils as their ruins smouldered in New York, Bush grew increasingly frustrated.

"If money isn't loosened up, this sucker could go down," he said of the US economy, marshalling the inimitable eloquence of the President who has given rise to a minor industry of books and wall calendars featuring the manglings known as Bushisms. All efforts failed.

"In the Roosevelt Room after the session, the Treasury Secretary, Henry M. Paulson Jr, literally bent down on one knee as he pleaded with Nancy Pelosi, the House Speaker, not to blow it up by withdrawing her party's support for the package," The New York Times reported.

Pelosi leads the Democrats in the House of Representatives. Bush and Paulson are Republicans. Pelosi jibed: "I didn't know you were Catholic." And then, on the business at hand: "It's not me blowing this up; it's the Republicans." It was Bush's own party blocking the plan. Paulson reportedly sighed, "I know, I know."

It was on the same day, September 25, that China launched the Shenzhou 7 space mission, sending aloft three astronauts or, as the Chinese call them, taikonauts. Two days later, Colonel Zhai floated out of his module and "walked" in space for 20 minutes.

Zhai radioed back to his President and the chairman of the Chinese Communist Party, Hu Jintao: "The space-walk mission has been accomplished smoothly. Please set your mind at ease, Chairman Hu and the people of China. In the vastness of space, I felt proud of our motherland."

Hours after the Chinese module returned to Earth safely, the US House of Representatives rejected the Bush Administration's rescue plan to allow the Treasury to buy distressed debt so that US credit markets could start to function again. US stocks fell by 7 per cent and more than $US1 trillion in value was destroyed as investors despaired. It was one of the biggest one-day falls on Wall Street.

There's more in this thought provoking article.
The 'Coelacanth 2' album's working theme has been about The American Century, so I take great interest in discussions on this point.I have hard predictions of an end to the US hegemony and the end of the American Empire, but I am always wary of such claims. Unless the barbarians at the gate end up parading down Pennsylvania Ave with a noose around the captured POTUS's head, I don't think it's a likely 'scenario'. This is just a temporary dip in its power, mostly thanks to the ineptness of its current leadership.

That's not to say these damages by the current incumbent idiots cannot be undone.

A Note About Oil

Because the Financial Review does not have a free-to-public online edition available, I cannot reproduce the text here. Clever people, those Fin Review folks. Anyway, in it was an article last week about the crude oil market which drew my attention. OPEC has been tightening quotas in order to drive up oil prices because naturally, per unit sales helps their economies more and they know the world is hooked on to it. Iran in particularly loves it when the oil price goes up and the price rise puts a hurt on the US consumer.

What is not widely reported is that Saudi Arabia often over-produces its quota and then sells off the excess production to oil companies in order to lower the crude price.
The reason given for this was that if the world consumer moves away from their SUV to a hybrid car, them they are not coming back to the SUV market - in other words, Saudi Arabia does not want you to be weaned off its chief export. It made me laugh.
After my accident, I think I want to wean myself off cars entirely.

Damien Hirst's Big Haul

He's like some chubby rock star, really. Yet his works are worth millions.

What could be dumber than Hirst's dot paintings, painted by assistants with stencils? Or ashtrays of all sizes filled with used butts? Such pieces were sold for hundreds of thousands of pounds in last week's auction. The piece-de-resistance was his Golden Calf - a dead bull with gilded hooves and horns in a gold-rimmed tank of formaldehyde. Nothing could serve as a more pointed "up yours" to wealthy, eager buyers. It was a descendent of the effigy erected by the Israelites while Moses was conversing with his Maker on top of the mountain.

Hirst may be saying that money, or perhaps the stockmarket, is the false god of our times. Just as easily, he might be talking about himself. "Here I am," he says. "Come and worship!"

This sort of grandiose cynicism is greeted with admiration in art circles - "Ho, ho, Damien is really giving it to those rich capitalist bastards." In this scenario, Hirst becomes ever more subversive as his personal wealth increases. By this standard he must be the most subversive artist that has lived, since he is now said to be worth more than $US1 billion and employs almost 200 people in a chain of specialised art-making workshops.

Money exerts a narcotic influence on seemingly rational minds and Hirst has made the accumulation of capital his central artistic concern. In this, he has perfectly captured the temper of our times, in which cultural achievement is measured by the mass media in dollar terms. So it is hardly surprising to read in a wire service article reprinted in many papers around the world (including this one) that last year "Hirst sold a platinum skull encrusted with 8601 diamonds for £50 million, which is thought to be the world's most expensive piece of contemporary art".

In fact, as reported in The Art Newspaper and other sources, the skull was actually "sold" to a group that included Hirst, his dealer and his business manager. His record-breaking achievement must be tempered by the knowledge that Hirst was both creator and purchaser.

The auction represents an even greater triumph of publicity over probity, because we have no way of knowing who was buying all those works via the telephone. Even if the artist was not personally involved, there were enough dealers and high-end collectors who simply could not afford to see the auction fail and the value of their own investments plummet. The idea that this event represented a "gamble" on Hirst's part was sheer spin. This was one auction that never stood a chance of failure.

It's a bit mind-boggling where Contemporary Art has got to right now. The diamond encrusted skull is a little bit too 'Elton John' in its aesthetic, but what the heck. It's still a Diamond encrusted skull! Literally, it is what it is in a way that defies critical dissection.
This following bit caught my attention:

One gets the measure of Greer's shallow nihilism when she writes: "What is touching about Hughes's despair is that he thinks that artists still make things." Call me naive and sentimental but I believe that's almost the definition of an artist: someone who makes things. Those who employ hundreds of people to make saleable commodities are perhaps better known as "manufacturers".

Few people embrace poverty but for most artists the pleasure of making things exceeds the pleasure of making money. If it were the other way around, everyone would tailor his or her work to the most obvious commercial imperatives. Yet some artists, driven by their own wilfulness or creative compulsions, will persist with works nobody wants to buy for most of their careers

I think the art work is actually an artefact of the artistic moment. The legacy of the inspiration. The physical evidence of the Edisonian notion - the artwork itself represents the 99% of perspiration part, but signifies the 1% of genuine inspiration. This has been my personal theory for about 10 years but every time I bring it up with artists they treat me like I've gone insane or have no insight whatsoever into why they do what they do. Don't listen to me guys, but I am somebody who has translated 2 books on Contemporary Art, so I do think I have a clue.

Nonetheless, when you think about it, when you buy the finished album by say, your favorite band, you're really buying something that represents the culmination of the labor which points to the inspiration - what's this song about? - and not the artistic moment itself. It's certainly true of my songs, good and bad, that the final recorded version is merely the reflection of the moment I went "ah ha! There's a cool idea!"

All the pricing issue is a matter of how much people value the labor or materials. Sometimes a work of art is worth less than its materials - much like the copper statue that was stolen and smelted for export to China. Damien Hirst is doing alright.