News That's Fit To Punt - 13/Mar/2017

Mining Bust Out West

Jeez, that election in Western Australia looked like a real rout. It's funny how the state votes in the conservatives during the years of the boom and somehow trusts them to do the right thing with it, and then when the boom turns into a bust they discover the conservatives have squandered it. It seems to be like a collective insanity that takes hold of the state. During the mining boom years, the rest of Australia had to listen to utter idiocy coming out of the WA Government thanks to the fact the recent mining boom turned  WA into a net contributor to the GST regime rather than a net recipient. Then they cried poor about it , and got very little sympathy - as they should - and now that the state finances are in ruin, the people finally vote in the ALP. When you consider that at one point the WA LNP were mouthing off about seceding from the rest of Australia, it's certainly laughable that they will be a net recipient to the GST regime once more.

I guess one shouldn't laugh at the misfortune of others, but this one was pretty predictable.

Mining booms often turn to busts. Most Australians know this, except it seems, the outgoing administration of the nation's resource-rich west. 

Western Australia's now former premier Colin Barnett bungled the bonanza, splurging windfall cash during the good times only to find the cupboard bare in the bad ones. The upshot is the state's budget deficit and debt have spiralled, the AAA rating is gone and people are fleeing, the latter at least has the advantage of containing an unemployment rate that's already the nation's highest. 

"There's an element of Dutch disease there, and the government certainly mismanaged the boom, but it also reflects the sheer size of the mining sector in WA so when it collapses it drags everything down," said Shane Oliver, head of investment strategy at AMP Capital Investors in Sydney. 

"WA didn't seem to learn any of the lessons from Australia's past mistakes during commodity cycles and now the state is effectively in recession." 

(edit)
Western Australia's Treasury was projecting the revenue windfall from mining would still be continuing in 2018-19, despite commodity prices peaking in the third quarter of 2011 and mining investment not too long after. 

As a result, the government has been trying to cut outlays in a weakening economy and there's even been talk of tax increases as gross debt is on course to surpass 20 per cent of gross state product in coming years.

It's pretty laughable when you have a long memory. So much for the notion that WA somehow had organised things differently to all the other mining boom and bust cycles in the past. Tire's a lesson in there for the fossil fuels industries too.
There's a lot more to be said bout all this, so I'll come back to this below.

100 Days Of Tesla

We live in times such that a tech billionaire tweets something and it turns into a head-to-head discussion with the Premier of SA and PM of Australia. It's weird but all of a sudden people want this project to happen - which would be nice of South Australia but also, - which would be the proper part of the renewables tech business getting a crack at the Australian electrical grid.

Tesla's Elon Musk may have put large scale battery storage on the national agenda with his offer last week to solve South Australia's power crisis for free if he did not deliver a large system with 100 days of signing a contract, but both the Prime Minister and South Australia's Premier are looking for more detail before taking him up on the offer. 

Mr Turnbull and Mr Musk spoke for an hour early Sunday afternoon, with the Prime Minister yet to form a view on the merits of power storage systems in solving South Australia's power supply woes. 

"They had an in-depth discussion on the value of storage and the future of the electricity system," a spokesman for the Prime Minister's Office said. 

Their discussion was not political in tone, but rather a discussion between two people "picking each other's brains" over the options for energy storage in Australia, one source familiar with the discussion said.

Elon Musk for his part has resumed campaigning for a shot on Twitter. You'd look an idiot if you turned him down now, wouldn't you? Of course these are people in government in Australia are people who don't mind looking like an idiot, so you have to subtract your optimism. Or is that curb your enthusiasm. In any case, the offer is there. Now begins the process of looking the gift horse in the mouth.

Time To Start Collecting Canned Food?

This link is from Pleiades.

While economists love trade, it has extremely political ramifications. And it is politics that in Every’s view is driving the world back to a 19th century style trade world. A world where after a period of free trade, high tariffs were set up and where trade became a conflict involving domination of one country over another.

And the problem is that economic conflict can quickly become real conflict.

It was a scary prospect – not only would raising trade barriers reduce our standard of living – but if the path of the next 10 years follows the path of the late 1800s and early 1900s then the world gets very dangerous very quickly.

The biggest difficulty for those selling the idea of free trade is that a soon as you start talking about things such as “comparative advantage” people quickly switch off. It’s much easier to understand trade in what is known as a mercantilist sense – the “domination” point of view, where the aim is to export more than you import.

That is certainly the view of Donald Trump and his trade advisor, Peter Navarro, who has recently argued that because GDP is made up of consumption, government spending, investment and net exports (exports minus imports) reducing the US trade deficit is a good way to grow the US economy.

The problem with that view is that in the US – as in Australia – the size of net exports pales in comparison to consumption, investment and government spending.

Clearly, if the benefits of trade are not doled out to the public but instead, accrues to a small percentage, as has happened in the last 30years, the public becomes less enamoured of free trade; and so we must wonder if we've hit that point where the public has decided it won't back free trade any more. It would explain the shift toward  parochial kind of anti-tradepolitics as seen in the Brexit debate/debacle as well as the rise of Trump-ism (devoid of any coherent ideological framework, it does seem to to be a cry against free trade).

A Scary Passage From Crikey

Also from Pleiades was Crikey's entry about the WA election, which I think deserves a long quote.

They have to do something. They should have done something before. When the red dust settles and the tallying’s done, the verdict on the mining boom in WA will be a harsh one. No Norwegian-style social fund was established — Norway now has a trillion dollars under management from North Sea oil and gas, and the whole country could retire — and much of the money that did come in served principally to inflate prices to, well, Norwegian levels. FIFO was imposed on people who wanted settled jobs, and no government stepped in to oblige the companies to give their workers more options. Men and women of modest skills and earning capacities were suddenly pulling in huge wages, with little advice as to how to invest it. Many bought houses in regional FIFO towns at prices approaching capital city levels — and then saw them halve in value as the boom died away. Meanwhile, the towns that became FIFO bases — from Singleton in NSW’s Hunter Valley to Kalgoorlie to Bunbury — were drained of the communal stability that makes life possible. “How can you organise a footy team? How can you even get a picnic going,” a woman had said to me in Singleton, two years ago, “when you never know who’s going to be here? The shops are empty, the town’s bled dry.” Two days ago, someone said the same thing, near word for word, in Kalgoorlie. In both towns, and many others, the miner’s mansions have “for sale” signs in front of them, directed at a market that isn’t there. 

Some didn’t even make it to the bad-investment stage. A lot of people were drawn to FIFO by the idea that it would allow them to make big bank, on the simple principle that once you’re in camp, there’s nothing to spend your money on. But that scheme misses the effect of 14-day, 21-day, 28-day stints of 12-hour shifts on the human psyche. Beyond a certain point of such punishing, inhuman labour, it is all but impossible for most people not to blow their money in the first days off, especially if they’re young. Everyone who’s done night shifts, continuous shifts, back-to-backs knows this. The money spends itself, burns its way out of your pocket. Potlatch, the old tribal custom of wanton destruction, takes over. You stride into a bar and fuck it, you’re not going to drink beer, or Red Label, you’re going to drink Chivas! A double! Chivas for everyone! For some people who just came to do a couple of years in the mines and party up, that’s probably no great tragedy. Others have worked years at grinding, dirty, dangerous work and have nothing to show, a fact that must be part-cause of the suicides, depression, domestic violence and addiction that has broken through FIFO communities like a long wave. 

Given a free kick by 4 billion years of geology, and a chance to reinvest, Western Australia appears to have created a situation in which Wake in Fright and The Unknown Industrial Prisoner serve not as dystopian warnings, but as HR manuals. Now a state that has spent a decade chipping bits of itself off and floating it northward for silly-money prices cannot pay for its most basic services, pay down its debt, and is proposing taxes that should have been being levied since the 1990s and scrambling to fill the gap with infrastructure projects it can’t afford to start. Services cut include those to Aboriginal people, which in turn has produced unwilling population movements, pressure on centralised and reduced services, and a resultant and distinct fraying of white-black community relations in a range of towns, a fall away from such detente and mutual understanding as has been achieved in recent years. What looks like a racial political issue, is, in reality, a product of the state’s fiscal crisis, and its panicked efforts to plug the gap.

That's pretty bleak reading. It turned out they needed a mining tax but realised it after they campaigned hard to get rid of it. Oops. What do you do with this kind of collective hubris and stupidity? It doesn't end well:

The gap has been plugged, instead, with meth, a drug that has boomed out of control in WA, simply because it has become so cheap, easily made from base chemicals, in suburban labs springing up in every city and town. Those looking to explain its reach in WA by its occult power to turn people into speedfreak zombies are ironbarking up the wrong tree — meth hit the big time when it became cheaper than dope. Its popularity is a product not of addled obliviousness, but of the judicious application of rational choice theory by substance abusers, looking to maximise their investment. It’d make the Institute of Public Affairs proud.

All that, in overlapping bits and pieces is the conversations you get into across the state — with everyone. Miners, ex-miners, civic boosters, NGO officers, emergency services, journos, snappers. In WA, everyone’s become an amateur political sociologist, hot on the trail of where it all went wrong, and what the solution might be.
Whatever happens on Saturday, the state’s dilemma concentrates the mind wonderfully. Kalgoorlie stands as a metonym for Western Australia; Western Australia for Australia itself. We are all aware that we have not stored away for the lean years, and the fat years come to an end. The prospect, delicious for pundits, less for the public, is that either major party will fall short of a majority, and have to cobble together government in both houses of Parliament. Looked at clear-eyed, this often delivers good government, but the public rarely thinks so, and the golden west exemplifies the decay of political legitimacy and effectiveness in Australia, and if that occurs here, it may not be too long before the state is back at the polls once more. 

What WA needs is the Unflux, the many nations in one — a party with a realistic and integrated program to deal with the reality of resources-led states, not the fantasies they offer. As goes the state, so goes the nation.

Everybody's got 20-20 hindsight it appears. Right now, it's hard not to think of all those mortgages underwater in Western Australia and what that's doing to the banks' bottom line.  It all went crazy out there with the low interest rates and the seemingly low inflation as 'measured'y the RBA. If the reality was in fact significant inflation, then clearly Western Australia was not served well at all by the RBA's policies in the last decade. You can start to see the whole thing start to unravel. You have to wonder just how long will it be before it hits the East Coast?

Junichiro Koizumi Goes For Zero Nuclear

The Interview Is Out On Bungei Shunjuu

The most riveting read for me in the last 24hours was the interview with former Prime Minister Junichiro Koizumi and his current anti-nuclear power station stance. I was vaguely aware that he had started talking aloud against nuclear power after his time in political office. The most significant Japanese Prime Minister this century was in office for five and a half years and did nothing about nuclear power. All of a sudden he's become a vocal critic of the entire nuclear industry in Japan, so much so it has become his single issue.

Amazingly, he is retracting everything he ever said in favour of the nuclear industry in plain language. He says all the claims made by the nuclear industry in favour of nuclear power are lies. It is not cheap, it is not safe, and it is not sustainable. He goes through it in great detail as to why all those claims are lies, and forcefully makes the point that the electrical companies, the nuclear industry and the unions for the electrical companies, and therefore the politicians who receive political donations are too close to see it.

Mr. Koizumi says it is possible for Japan to completely abandon nuclear power. It can be done, it should be done, and all it would take would be for a Prime Minister to decide it is his cause. After Fukushima, Japan in fact did it without any nuclear power for four and a half years before they started up one of the plants. Germany by contrast has declared it is down to zero, but is still using eight nuclear plants as they wind them down.

When asked about his historic involvement with nuclear power back to the 1970s, he says he deeply regrets believing what the industry representatives presented to government. He was given genuine assurances from all the presenters dating back to the 1970s that it would be "cheap, safe and clean" - a claim he says is so deceitfully wrong, he simply has to speak up now. It's frustrating to read that because I remember those discussions in the 1970s when I was still a kid, and thinking how in the name of all that is good can these politicians believe nuclear power is safe after Three Mile Island?  Reading the change in position by Mr. Koizumi today is devastating because it was known back in the late 1970s that nuclear power was not cheap, safe or clean. Really, I was a kid and I knew it.

I guess it's a case of better late than never. It's truly frustrating.
There is a generation of people in Japan that became apolitical and stayed apolitical in the late 70s through to the moment of Fukushima. As if a great political and scientific amnesia covered Japan, and they simply forgot the risks until it all went pear-shaped. The stupid thing is that had they thought about it before, they would have known the risks that emerge out of catastrophic failure are catastrophe itself. Even Mr. Koizumi and his LDP cohorts must have known on some level back in the 1970s.

In his rationalisation, Mr. Koizumi offers the context of the oil shock of the 1970s as giving great impetus to move nuclear energy as quickly as possible. While it is true that nuclear power freed Japan from dependence on oil, it put it right on course for Fukushima. Even so, you sort of wonder why these heads could not balance up the risks against those benefits. It's humiliating to read Mr. Koizumi wants 100% renewables in Japan, and that he is arguing his case to the LDP hard. In many ways, it's too fucking late. I appreciate he saw the light, but he could have done it as Prime Minister, had he known back then; and he could have known back then. It's not like the information to do with the risks were hidden out of sight.

It's an amazing interview. I believe he's seen the light. It's still much too late.

Still Living In The Shadow Of Kakuei Tanaka's World

The LDP rule in Japan between 1955 and 1993 had many strange effects. One of them was how government bureaucrats stopped distinguishing between government business and LDP party politics. This was because they were in power so long, and so dominantly that there simply was no point in talking to the opposition parties. This has led to some strange outcomes in Japanese politics, namely, when the opposition has managed to claw its way into power, the bureaucrats have been hostile to the Socialists or the Democrats that formed government from the merger of opposition parties. This has meant factional politics of the LDP were much more important than the actual business of the Japanese Diet.

The leading kingpin of the kind of factional politics led by graft and bribery was Kakuei Tanaka, who essentially railroaded the nuclear industry into Japan. He did so because the nuclear industry has ancillary costs, all of which could be diverted to constituents. By building expensive nuclear power plants, and paying off the local residents to host these plants in their neighbourhoods, the LDP were able to retain the rural votes. If you add in all the favours and tenders that involved bribes, too many people benefited to question the risks.

The other problem of factional politics is that the people in safe seats wielded far more power than politicians in marginal seats. Kakuei Tanaka made sure he bribed the politicians in marginal seats regardless of party affiliation, so that he could wield extra-party influence. When you combine all this together, you have a structure where the politicians in marginal seats and the bureaucrats of particular ministries with rural offices become intimately entwined in an exchange of favours and bribes.

If we are to be fair to Junichiro Koizumi's time as Prime Minister, he used up all his capital in dismantling this structure by privatising out the postal services of Japan. Asking him to dismantle nuclear power plants would have been next to impossible given the priority of privatising the postal services. In the interview, Junichiro Koizumi describes the privatisation as dismantling Kakuei's legacy. It sounds easy, but there were a lot of vested interests that got sent packing. The interesting thing is that it never got explained to the public that was what was happening. It's only after the fact that we can now understand the full meaning of that privatisation.

View From The Couch - 27/Sep/2015

Does Privatisation Actually Work For The Citizen At All?

Sometimes I think privatisation of government monopolies gets discussed in a vacuum, free of context so all anybody has to do is fling figures around the abstract and settle on a deal in the abstract, thus letting the chips where they may fall in reality, far from the negotiating room. So far, since the late 1990s when NSW embarked on allowing competition in the marketplace for electricity billings, it has contributed to condition whereby we seem to be getting charged more, thanks to the gold plating going on with the electric companies. this has led to the Australian Competition Tribunal to step in and overturning a decision by the electricity price regulator that would have allowed the electricity price to group even more. Now, that intervention is being contested with a phalanx lawyers, trying to get back to charging whatever the hell they like.

A phalanx of about 40 lawyers representing electricity networks across Australia are attempting to convince three men – the members of the Australian Competition Tribunal – to overturn a decision by the electricity price regulator which would have rewarded NSW households with a $100 to $300 a year saving on their power bills. 

And get this: because the electricity networks in some states are publicly owned, it is taxpayers who will pick up the tab for this legal free-for-all – rumoured to be as high as $90 million – which is also aimed at getting them to pay higher bills. Other states, where the networks are privately owned will also see the effects over time. 

Also present in the room are two barristers for the Public Interest Advocacy Centre which with a modest annual budget of $3 million, is mounting the case consumers should pay even less than the regulator's edict. 

The case has emerged as a fascinating window into just how far our economy strays from the free market ideal. 

Electricity networks are, of course, natural monopolies.
In a competitive market, firms are forced to operate efficiently, and at lowest cost, lest their customers flee to their competitors. 

Without this disciplinary force of a free market, electricity networks require a regulator to hold them to account, impose efficient pricing and keep prices as low as possible for consumers. 

Every four years, the Australian Energy Regulator determines how much electricity networks can charge customers, based on what an "efficient and prudent" business would need to charge in order to cover its costs and make a profit.
Networks costs make up about half your household bill.

And there you have it - the very picture of how the electricity industry is one big rent-seeking enterprise, trying to set prices not by any relationship to the market but by how much it can gouge. It kind of puts to rest any notion that there is any kind competition going on; instead is abundantly clear that it is yet another oligopoly that has the power to set prices any which way it likes. Worse still, the current Coalition Government has created conditions whereby there is minimal investment in renewable energy, so things quickly reduce to minimal choices for the consumer, and every opportunity to collude and set any price they like, for the electric companies.

Compounding the problem further still is the desire by the NSW Government to lease out the poles and wires so they can "build more infrastructure" with the proceeds. So it goes without saying that the NSW Government wants to be able to gouge lots of money so that it looks good on the bottom line for investors to pay up for the poles and wires. Once it goes private, the private ownership will do everything in its power to push up prices to what the market will bear. Again, it is not clear how privatisation actually helps the public. 

It is understandable that as a government monopoly, it is ripe for a sell-off and that the proceeds from the sale are desirable. It just doesn't seem to fulfil the bit where the government is supposed to serve all of its people, and not just the wealthy private interests. 

What Infrastructure? WasteCONnex!?

There's a certain element of predictability about what the state government of NSW does when it comes to infrastructure - it basically builds big budget toll roads first and foremost, and not much of anything else. They do this because General Construction forms a vast rent-seeking lobby whereby they can promise jobs as well as the seeming appearance of progress, by building vast concrete structures. What's truly amazing about the WestConnex project underway is that it is being built without a business case for which to answer. In other words, the government is promising to spend oodles of money on project without really knowing if it is going to be productive or useful, but it's insisting on doing so because the people who stand to make lots of money at the public's expense are their friends. The Government is minimally interested in the collateral damage it is likely to cause, and all of it is centred around the notion that toll roads are good things. 

I won't go into my usual complaint that the nepotism and crony-capitalism is a terrible thing (it is); I won't go into my rant about how medieval and anti-progressive toll roads are in concept (they are); or how self-serving the arguments are in favour of these things (God bless Adam Smith and self-interest); but I do want to point at the urban sprawl these developments are encouraging.

The NSW Government is saying, with its semaphore of policies, "go live out in the boonies 50km away from you jobs. We'll put in toll roads so you can pay $100 a week to go to and home from your jobs. But you get a backyard in a cookie-cutter suburb designed by the lowest IQ architects and town planners we could find." And they're not in the least bit ashamed that this is happening because hey, the electorate is so stupid they think they really want this too. And maybe it does - which goes to show we really get the leadership we deserve.

I've said this before but if you apply the simple cui bono test, you come up with the same old crony-capitalist rent-seeking lobby groups. If somebody goes with a proposal for rail - whether it be a high speed rail system or a metro network - the government offices immediately think they're some train-spotting rail enthusiast nut with little understanding of state finances. It really is quite barbaric. In the mean time it commits us to more cars, and rampant emissions and urban sprawl. If this really is our way of life, we need to change our way of life.

Cars Cars Cars

Speaking of motor transport, the Volkswagen scandal this week has been quite informative. The notion that there can be clean diesel combustion has taken a major hit as Volkswagen admitted to screwing with the emissions test with a bit of software.

I grabbed that screenshot from the WSJ to show just how much VW vehicles are over the various limits.  We don't know if this kind of cheating is widespread, or whether it is just VW/Porsche/Audi indulging in this kind of chicanery. Anybody manufacturing a diesel model is now under a cloud. Sometime ago I read a report that Mazda had built diesel versions of their vehicles and while they could get fuel efficiencies up, it was harder for them to meet emissions targets, which feeds into the notion that maybe there's a lot of motivation to cover up emissions from diesel vehicles. Japanese manufacturers have been much slower in coming up with diesel as a cleaner option - they've tended to explore things like Hybrids, electrics and hydrogen fuelled cars; which tells you something about how hard it is to get emissions down on diesel.

Thus when you look at the overall picture, it is looking less likely that diesel cars are anywhere near as 'clean' as claimed. As a personal side, none of this surprises me. Next to big black German 4WDs, the biggest dickheads on the road seem to be guys driving VWs. You can easily tar the lot of them with the same brush and file them under dickhead consumers, dickhead corporation. 

But hey, we want to build our future cities around dirty big toll roads going out 50km to outer-ring suburbs where people can drive to commute every day. What could possibly go wrong?

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.