As oil prices hit yet another record of over $146 per barrel the good folks at The Oil Drum blog have published a timely update of the Wikipedia Oil Project Database.  It makes frightening reading. 

What they do is compile stats on all the oil megaprojects in the pipeline to estimate when and how much additional oil will come to market. 

 The big dark blue area is production already established before the project started.  The coloured stripes represent the contribution from fields brought into production since then, organized by year of first oil while the small red diamonds represent actual production as estimated by the EIA (Energy Information Administration).

It is clear we have a problem, a monster problem; the scenario illustrated in the graph shows some increase up to 2010 then a precipate decline.  And remember, this includes all projects in the pipeline.  Any new discoveries (and there are precious few of those thesedays) will come onstream too late to change this picture even if there are no political, technical, climatic or other delays (which there will be almost by definition since any significant new discoveries will be in frontier areas like the high Arctic or ultra-deep water).  In fact, even the identified oil projects have already shown an alarming tendency to accumulate delays.

The ‘bottom up’ approach adopted by the project team can be difficult and sometimes controversial.  The oil industry is plagued by dreadful statistics and the rate of decline of existing fields (the big dark blue area of the graph) is very uncertain.  This scenario graphed above assumes a decline of -4.5% pa.  However, there are reasons to suspect that it could soon become a much steeper decline.  (Just to take one example: there are persistent rumours that Saudi Arabia’s monster Ghawar oil field - easily the World’s largest and single-handedly responsible for over half of Saudi production) is beginning to suck dry although this is denied by the Saudis).  If this is the case then this graph represents a very optimistic scenario indeed.

Actually, it doesn’t matter how bad the statistics are, or how much oil is or isn’t left in the Ghawar field.  These uncertaities only shift the timescale and then only slightly and most of the uncertainties are downside.   This is the inevitable result of geometric demand growth coming up against the constraint of a finite resource.

This is by far the greatest crisis we have faced since World War 2 and there is precious little time to devise and implement a transition to a post-oil economy.  Where is Churchill?

I’ve just heard Shadow Chancellor, George Osbourne, claiming on Radio 4’s The World at One” that Britain now has the longest tax code in the developed world - a claim that I’ve no reason to doubt.

In a sense this merely serves to confirm what we already knew - that Brown is a ‘fiddler’ whose vision (although this is hardly the right word) is to sneak in a little stealth tax here or tweak some tax incentive there, all as part of his plan to work towards his socialist nirvana where everything is ‘controlled’ and everything is ‘fair’.

There’s just one small problem.  It isn’t working because it’s not capable of working.

For one thing it’s not fair: a vastly complicated tax code makes that quite impossible.  The only people who benefit are the super-rich who can afford high-powered tax advice and the tax experts who provide it.  Ordinary mortals are left out in the cold unable to utilize the loopholes that the rich can. 

For another thing it’s expensive:  it is equivalent to out-of-control overheads in the context of a commercial company.  And what’s the first thing a company in trouble has to do?  Cut overheads of course.

And finally it generates the illusion of economic progress and a growing GDP as all those expensive tax advisors work away but it doesn’t actually generate wealth.  Quite the opposite in fact as resources - both human and financial - are diverted from productive uses into an arms race with HMRC. 

Bring on flat tax (or at least a reasonable approximation to it).  It is fairer, costs less, and doesn’t divert resources from proper uses.

For some time now there has been a rising tide of ‘chatter’ from segments of the US media that Bush and Cheney are planning another war.  Incredibly, it seems that they are even funding Al Qaeda –linked groups to achieve this as Pulitzer prize-winning journalist Seymour Hersh outlines in the New Yorker magazine. (Hat Tip: Jon Taplin)

“Late last year, Congress agreed to a request from President Bush to fund a major escalation of covert operations against Iran, according to current and former military, intelligence, and congressional sources. These operations, for which the President sought up to four hundred million dollars, were described in a Presidential Finding signed by Bush, and are designed to destabilize the country’s religious leadership. The covert activities involve support of the minority Ahwazi Arab and Baluchi groups and other dissident organizations. They also include gathering intelligence about Iran’s suspected nuclear-weapons program.”

The funding was eventually approved, although some legislators were troubled by aspects of the Presidential Finding, and “there was a significant amount of high-level discussion” according to Hersh’s source.

In recent years the Bush Administration has:

“… conflated what is an intelligence operation and what is a military one in order to avoid fully informing Congress about what it is doing.”  David Obey, a senior Democrat, is quoted as saying, “I suspect there’s something going on, but I don’t know what to believe. Cheney has always wanted to go after Iran, and if he had more time he’d find a way to do it.”

Another source familiar with the contents of the Presidential Finding said:

“The oversight process has not kept pace—it’s been co-opted” [by the Administration].  The process is broken, and this is dangerous stuff we’re authorizing.”

Sadly, the Democrats in the House of Representatives and Senate don’t seem to be awake to what’s going on.

On the ground covert operations are being run by Joint Special Operations Command (JSOC) at the behest of civilians without telling the uniformed military what is going on making it impossible for them to run a coherent strategy – a factor that played a big role in the early retirement of the highly regarded Admiral William Fallon earlier this year and the ongoing chaos in Iraq.  Apparently,

 “When Fallon tried to make sense of all the overt and covert activity conducted by the military in his area of responsibility, a small group in the White House leadership shut him out.” 

The dissident groups Cheney is supporting are by any standards the very last people the US should be funding and arming.  According to Robert Baer, a former C.I.A. clandestine officer who worked for nearly two decades in South Asia and the Middle East,

“The Baluchis are Sunni fundamentalists who hate the regime in Tehran, but you can also describe them as Al Qaeda.  These are guys who cut off the heads of nonbelievers—in this case, it’s Shiite Iranians.” 

(Khalid Sheikh Mohammed, who is considered one of the leading planners of the September 11th attacks, is a Baluchi Sunni).

Another group, the M.E.K., has been on the State Department’s terrorist list for more than a decade, yet in recent years the group has received arms and intelligence, directly or indirectly, from the United States as have the Jundallah, (also known as the Iranian People’s Resistance Movement) one of the most active and violent anti-regime groups which describes itself as a resistance force fighting for the rights of Sunnis in Iran.  According to one of Hersh’s sources,

“This is a vicious Salafi organization whose followers attended the same madrassas as the Taliban and Pakistani extremists. They are suspected of having links to Al Qaeda and they are also thought to be tied to the drug culture.”

Iran is certainly experiencing an upsurge in violence which is being reported in the Iranian media with increasingly frequent clashes and a growing casualty list.  Of course, US involvement cannot be proved but the Iranians have started blaming the US.

Needless so say, Cheney’s deranged warmongering will only rally support for the Tehran regime and if he is allowed to get away with it the only possible outcome is disaster on an unimaginable scale – not just for Iran and the US but for the whole world.

Just to take one example; Iran could, if it so wished (and as it has threatened to do if attacked) cut the Straights of Hormuz which are just 21 miles wide at one point and thereby cut oil exports from the Persian Gulf.  Even now, with just the looming threat of trouble, oil analysts say the oil price contains a substantial risk premium for this possibility.  In other words, Bush and Cheney’s warmongering is already hurting people around the World.

The UK government should make it very plain to Bush that this is unacceptable behaviour and bring our troops home now.

See also John Perry on this.

As an ardent supporter of the ideal of the EU, I am delighted that the Irish have trashed the Lisbon Constitution (aka Treaty). In doing so, they have spoken for the many, including us Brits, who have not been allowed a vote.

For around 20 years I have been arguing that while I support the ideal of the EU, I could not in conscience, support this particular direction of constitutional evolution because it is, quite simply, fundamentally illiberal and undemocratic, centralizing and elitist.

Emerging reaction to the Irish vote only serves to underline this. As the BBC’s Mark Mardell notes in his blog:

But what will happen next? People are starting to back one of three options:

Ireland votes again;
Abandon Lisbon;
Move ahead without Ireland.

Luxembourg’s foreign minister has suggested that Ireland could be given assurances about defence and abortion: a clear prelude to a second vote.

The new Italian foreign minister, former commissioner Franco Frattini, said as he went in that the referendum was “a cold shower, but Europe does not stop for this”. Perhaps that is close to the third position.

Sadly, this is just as one has come to expect and continues a thoroughly ignoble tradition of carrying on regardless of public opinion, the rights of smaller countries and even the law.

The difficulty is that the EU has just grown like topsy from its beginnings as a very limited arrangement between just 6 countries in the 1950s. But the arrangements that its founders put in place back then are simply not scalable to a Europe of vastly greater ambitions and 27 members operating in the very different World of the 21st Century.

The EU establishment has simply not understood this ‘lack-of-scalability’ adequately, nor has it been able to suggest any alternative constitution to address it. (Arguably, the vested interests are such that they have little interest in alternatives which would inevitably upset their gravy-filled trough).

That is why they are so desperately trying to get the Lisbon Treaty adopted by fair means or foul – now mainly foul. But increasingly, I think the public does understand, albeit often in a confused way, that the EU is not working as it should, that it is too centralized, undemocratic and opaque. In short, it needs a restart with a radically different constitutional approach – one that is decentralized, democratic and transparent and which democrats of all stripes would be happy to support.

Those who cannot imagine any other plan, or indeed even that there COULD BE another plan, are in a terrible bind – soldier on in defiance of public opinion, law and common sense or give up on the whole European Project.

However, I sense that at long last there is a mood to think new and radical thoughts about Europe’s future. Am I right?

We all know that British supermarkets are highly competitive and give outstanding value for money.  And how do we know?  We know because they told us so.

If you smell a rat you are right.

What we actually have are 4 near-identikit firms who maintain an illusion of competition but actually have no real interest in duffing each other up and every interest in maintaining a system that suits them just fine.  What they actually do is to use their size and power to roll over and squelch any upstart competition that emerges so ensuring that real competition is minimised and that they are left with free reign to beat up their suppliers and achieve ever greater margins.

As Cheshire dairy farmer Ray Brown told the BBC:

“If you [the farmer] are lucky you get 26-27 pence per litre, it’s the same price as we were getting 11 years ago.

 

“Supermarkets have a big score to settle there. The consumer then was paying 40 pence per litre, currently they are paying 57-58 pence.”

 

He’s absolutely right.  This means that consumers are being overcharged by a minimum 45% by the supposedly ‘competitive’ supermarkets (and that’s only using the reference point of 11 years ago).  Could there be any clearer evidence of market failure?  Could there be any clearer justification for a strong anti-monopoly response from Govt?

I think hard-pressed families (and farmers!) deserve some answers and some action.

In this context the publication yesterday of the latest investigation by the Competition Commission is yet another depressing example of the utter uselessness of the established system of regulation (see also Northern Rock etc).   Predictably, and in line with established form, the results will not worry the supermarkets.  Not that they actually wrote it as such but they do seem (as David Boyle suggested recently in this excellent piece on monopoly) to have successfully framed the issues in ways that play right into their hands.  It’s appears that in the rose-tinted World of the Competition Commission the supermarkets are basically virtuous and hence deserving of all possible support—which they are naturally pleased to give with just the lightest possible rap on the knuckles.

For instance a principle plank of the CC’s proposals is that planning applications for new stores or store extensions should be made subject to a ‘competition test’.  At first this seems reasonable until you stop to think that using Planning to address a Competition issue is basically barmy.  Moreover, it does nothing to address established local abuses—for instance Tescopoly reports that Tesco is the dominant retailer in 67% of postcode areas and has a greater than 50% market share in 5 areas.  (In contrast note that the CC had earlier concluded that over market shares of over 8% lead to abuse).

Another main plank of the CC’s proposals is that a supermarket ombudsman be appointed to oversee and where necessary enforce a stronger code of practice for dealing with suppliers.  Predictably the supermarkets are engaging in heavy breathing and talking ominously of costs of “hundreds of millions … which could be passed on to the consumer”.  To say this is a bit rich in view of their soaring margins on for instance milk is an understatement.

Actually, I too am opposed to the idea of a revised code of practice but for a very different reason.  It’s an administrative solution for a problem that requires a market solution and as such it simply won’t work for its intended purpose—although it might well provide lots of new civil service jobs!

David Boyle is absolutely right—Lib Dems should make this issue their own.

The mainstream media have been remarkably slow in understanding just how serious the Grangemouth strike could become and until today it has been treating the story simply as one of queues at filling stations.  It’s not.  The Oil Drum Blog has been reporting for several days that closing the refinery could close the Forties pipeline and this is now being confirmed by the BBC.

This will cost the UK around 700,000 bpd lost oil production and 70 million cubic meters per day of gas which is about 25% of our consumption.  Further, because the network of pipelines and refineries is all so interconnected it is even possible that in time other gas supplies could be affected.  Not surprisingly, gas prices have risen sharply (around +10% yesterday) and with gas accounting for around 40% of electricity consumers can expect further increases in both gas and electricity prices before long.

Successive Governments have bunked off ensuring that the UK has adequate gas storage capacity preferring instead to pretend that gas in situ under the sea counted—a strategy that is looking pretty foolish right now.  Moreover at this time of year stocks are seasonally run down.  There may be as little as 6 days reserves in the system before interruptible industrial users and eventually power stations have to start closing.  

When will this useless Government get round to developing a coherent energy strategy?

Normally driving through England in the spring is a delight with trees and hedgerows bursting into the delicate greens of new growth soon to be followed by the blossom of the early-flowering species.  But this year has been different—or at least I noticed it as different.

Plastic has taken over.  Even in deeply rural North Yorkshire the trees and hedges are festooned with the wretched stuff and the verges are a sea of abandoned crisp packets, cans and bottles.  More populous areas are even worse.  I stopped at one lay-by on the A1 in the East Midlands which can only be described as disgusting.  There was a small litter bin but it had clearly been full a long time and there was more rubbish round it than in it.

Presumably litter works like graffiti; ignore it and it becomes the norm dragging the whole area down into a slum.  Is that really what we want for England’s formerly green and pleasant land?  Will the tourist industry soon have to advertise “Visit our slummy Country”?

Coincidentally (or perhaps not) CPRE has just started a ‘Stop the Drop’ campaign.  Apparently the amount of litter has increased by 500% since the sixties and is 70% food-related; the general level has dropped from ‘satisfactory’ to ‘unsatisfactory’ over the last 12 months by the Government’s own measure and litter now costs over £500 million pa to clean up (not including public parks).  It is one of the public’s top concerns as evidenced by opinion polls and letters to councillors and MPs.

Picking the stuff up after the event is sadly necessary, but hardly sufficient.  Is it time to legislate for a (say) 10p deposit on convenience and take-away food and drink packaging (yes, including crisp packets) unless it is rapidly biodegradable?  And of course bring in that plastic bag tax the Government can’t quite seem to get round to.

One of the curious features of the sub-prime crisis is why no-one in authority seems to have spotted what was going on and stopped it before it got out of hand.   After all, it doesn’t take a financial genius to realize that something is wrong when loans are made with complete disregard for ability to pay - hence the description of some borrowers as “NINJAs” (No Income, No Job, No Assets) - coupled with widespread evidence of predatory lending practices ranging from gross misrepresentation to illegal kickbacks.

Whether the primary motivation is consumer protection or regulating the financial system the answer has to be the same: this is dangerous, possibly even criminal.

Now it turns out in an article written by Eliot Spitzer shortly before the events that cost him his job as Governor of New York State that the growing sub-prime scandal was spotted in good time.  In fact the authorities in all 50 states took action to curb predatory lending ranging from litigation to legislation but unbelievably were prevented from doing anything by the Bush Administration.

Indeed the Bush Administration went so far as to promulgate new rules based on old legislation enacted for an entirely different purpose to prevent states enforcing their own existing consumer protection against national banks despite determined opposition from state authorities.

In the final analysis government must be a deeply moral activity; amongst other things, it must protect the weak and not allow itself to become a tool of the rich and powerful.  Without a moral compass it will loose whatever mandate it might have started with AND will also screw things up for everyone - including the rich and powerful.

If you’re apartment-hunting in Paris “contre services” is what you hope not to see in an advert - especially if you’re an attractive female student.  It can be perfectly innocent, but all too often it’s a not-so-subtle code meaning that the rent will include sexual favours.

This is the iniquitous result of a housing crisis that the French Government admits is the worst since WW2 with money rents (never mind the ‘extras’) rising far beyond the reach of most ordinary people.  The BBC has more here.

No doubt many lessons can and should be drawn from this but what strikes me is what it tells us about markets.  All too often we forget that the undoubted beneficial power of markets is subject to some rather restrictive but crucial conditions like, for example, that there are ‘many willing buyers and sellers’.  When this is not so, when the one of the parties is not so much willing as desperate, then the balance of power becomes too unequal and the market becomes dangerously perverse.

In other words, a market can malfunction just as dangerously as the brakes on your car if they are not properly maintained.  Such maintenance is a core responsibility of government in a complex modern economy and it neglects it at the extreme peril of the more vulnerable members of society - the old, the young, the poor, the sick.  Labour is, of course, neglecting it which is why they are finding inequality, child poverty etc. so intractable.

Reform of political funding is very much on the agenda with the main parties deadlocked on positions that just happen to suit their traditional funding base – unions for Labour; big hitters for the Tories.  Here at last is a new idea (well, new to me at least) from the good old US of A.

It’s known as ‘Voter-Owned Elections’ or ‘Clean Elections’ and here’s how it works.  All supporters contribute an equal $5 – and only $5 – to their favoured candidate over an interval governed by the electoral timetable and up to the ceiling set for that election.

Result: no covert obligations to be paid back in government contracts or ‘difficult’ planning permissions awarded and, according to this account greater public engagement in the system.

Does anyone know more about it?