From The Business Pages, Part I: A Herd of Yaks
Irwin Stelzer, Rupert Murdoch's Emissary To Earth, throws his oar into the ring on the subject of resource prices in his American account coulmn, this week entitled, 'Skill shortages hit quest for extra energy supplies'.
"The new consensus that crude oil prices will stay at or above $50 a barrel has had several consequences. Like its oil-industry competitors, Shell has raised its spending on exploration and development, in its case by 27% to $19 billion (£10.7 billion). Kuwait has decided to draw on western expertise to help it develop its untapped reserves, which look a lot more attractive at $50 than they did at $10. Other oil companies are scrambling for drilling rigs, labour and supplies"
Yep, that's Allah for you! Gives you slavery, dhimmitude and suicide bombing, but if you want a decent drill-bit - you have to go to the kufir! Bummer!
"Demand is also pressing on the supply of natural gas in many countries. In America, cold weather is driving demand and prices to levels unimagined when natural gas became the fuel of choice for power generators, many of whom are ruing that decision. In Britain, rising demand and monopoly constraints on supplies from the Continent are having the same effect on prices. And western Europe will face a difficult winter if a dispute between Russia and Ukraine, through which Russian natural gas passes en route to Germany and elsewhere, is not resolved"
So, like, if the Continent were like us, the price would be lower? Hold on - their prices are lower than ours, but we are the ones with the free market. Does that mean I have to pay the market rate when the market rate is so high I can't afford to heat my home?
Why must it be assumed that the current gas suppliers have to stay in business if they're either unwilling or unable to supply gas at prices people are willing to pay? These people do not understand that it is in their interest for the price to be low - if everyone is piping the stuff through the same pieces of copper, and everyone is subject to the same pressures of supply, then that is how you, duh, attract customers in a, duh, free market.
I've just had a brilliant idea to cure the crises in gas supply. Maybe I'll start Gnome-o-Gas plc tomorrow, then I'll bugger off to Nepal, buy a herd of farting yaks and bingo, I'm in business! Somebody get me the CEO of Shell's business card!
And the revelation that it gets cold in some parts of America during the winter does not necessarily spell the economic Gotterdammerung that Stelzer seems to think it might be. Economists will drivel about the resilience of markets all day, quite forgetting the resilience of markets depends on the resilience of people. People always get by. They might be poorer or weaker than they were before, but they recover.
He takes a wee greenie turn:
"Electricity shortages also threaten, or at least are seen by policymakers and large users as likely to occur before the decade is out. So nuclear power is once again being considered as a solution to the problem of keeping the factories running without increasing carbon emissions. And much of the political opposition to wind farms from all except the hardcore Nimby crowd seems to be dissipating, clearing the way for increased production of electricity from wind"
So, Irwin, are you saying that, like, I'm going to have to teach my yaks to multi-task? He continues,
"But the willingness of investors to come up with the money needed to augment energy supplies cannot alone solve the supply problem, at least not soon. It seems that there is a shortage of many of the resources needed to find and to construct new sources of energy.
Drilling rigs are in short supply, as are trained oilfield workers. This is why fully one-quarter of the $4 billion increase in Shell’s outlays will go to cover the higher prices of the labour and supplies it needs to punch holes in the deserts and ocean beds that contain the new reserves it so badly needs. That’s just what the Federal Reserve has in mind when it worries that resource constraints might result in an inflation-inducing bidding war for supplies and labour"
Sorry, but the yaks can't help you there, boss - lack of opposable thumbs and all that sort of stuff. Ah, I see what you're getting at! Clearly the lack of such skills within the indigenous market means that the skilled oildfield workers will have to be taken from wherever they can be found - most likely, not the USA.
And so the skilled oilfield workers will all just have to be allowed to settle in the USA then, won't they? He continues,
"The situation in the wind business is no different. Promoters and operators of wind farms are finding that they simply cannot get the machines (windmills, to us lay folk) they need. In some instances, manufacturers are diverting supplies to the United States to take advantage of a new and attractive tax regime. In all instances, prices are rising and waiting times for delivery are lengthening"
Gnome-o-Gas plc, at your service - well, at least it's a market-based solution!
"Nuclear advocates, too, have to confront a shortage of resources, most notably the skilled technicians needed to build and operate these facilities. With no new nuclear plants built in the United States for decades, the engineers and other highly trained staff that build these have drifted into other jobs. It will be no easy thing to reconstruct a workforce capable of building safe plants, once plans to start construction get the multiple planning and safety approvals they need — if they ever do. "
Yep, illegals handling nuclear fuel rods. Don't you just love the market in action!
"The inability to expand energy supplies creates a political problem. The political and economic cycles are out of joint. Higher prices for energy will, eventually, call forth additional supplies and curtail consumption. But “eventually” is not good enough for politicians, who must do, or at least be seen to do, something right away.
So we get counterproductive moves such as chancellor Gordon Brown’s retroactive windfall- profits tax on oil companies, and a similar move by America’s Congress to appropriate “excess profits” while lavishing subsidies on uneconomic sources of energy. Everywhere, politicians express a new interest in nuclear power, but no interest in learning about its cost.
Meanwhile, the American economy seems to survive the waste created by politicians’ renewed interest in energy, and their unwillingness to give markets the time needed to sort things out. Growth continues at an annual rate of something like 4%. The drop in petrol prices to about $2 a gallon, from a high of $3, has increased both consumer confidence and the level of cheer in America’s boardrooms."
Growth, preferably achieved by screwing workers into the ground, is always a signal for boardroom cheer. Stelzer's not done though -
"A survey by TEC International, the “world’s largest organisation of CEOs” of small and mid-sized companies, shows that “on average, a majority of CEOs expects to see increased sales revenues, profits, investments, and employee numbers” in the next 12 months"
And hopefully American citizens will see the Fed's consequent corporation tax windfalls translated into lots of new Border Patrol Agents to outprocess the new 'employee numbers'.
And they could all be mounted on yaks. This idea is beginning to sound like a business plan.
"More significant from the point of vies of the Federal Reserve is the fact that more than half of the chief executives plan to raise prices next year. Those pundits who are expecting the current cycle of rate increases to end when Alan Greenspan leaves the stage in January, might want to think again. It is true that short-term rates are now 3.25% above their low in 2004, and that the housing market is showing signs of cooling. But in real, inflation-adjusted terms, interest rates are still only a bit above 2%, which is below the long-term average, and not deemed likely to stifle growth.
As the Federal Reserve watches Shell being forced to pay more for labour and supplies, and hears that chief executives are thinking about raising product prices, it is not likely to abandon the Greenspan upward ratchet merely because it has a new chairman."
Because that's maybe, like, the right policy...
As time passes, I am coming more and more to the conclusion that free-market economists are actually an alien race not dissimilar to The Borg, if only because it seems that their passion for the creation of a global trading market is equalled only by the bloodlessness of their dispassion towards the fate of the world's inhabitants; a herd, just like a herd of yaks.