Friday, 24 September 2021

Gotta love a petrol crisis

 Last year it was toilet rolls, the flour...

Now the old favourite a good old scare about petrol and, err, boom. There is no petrol. 

Can confirm out of my window a 1 mile queue to the only petrol station with any left around here currently with a very happy franchise owner no doubt. 

These crises are such a good example of the downside of the risk-cost management approach of just in time delivery. Who wants expensive stock when you can rely on 99% delivery of enough product. Only the 1% of the time is rather painful.

As to the Government, nothing can be done. If petrol stations all get emptied, then indeed there is a crisis. Saying there is no crisis just makes it worse as people second guess. The crisis subsides in a few days when the cars are full and the stations can gradually re-stock. 

Perhaps the only lesson for now is that with a shortage of HGV drivers, perhaps there does need to be a hierarchy of need to allocate our resources - food, power, petrol, public transport, ambulances - these could have some priority to available resources, but all too complicated to figure out and implement before the crisis is over. Endure it we will!

Wednesday, 22 September 2021

Energy Crisis Rumbles On

This could get interesting.  Thus far, nothing fundamental has happened that should cause deep alarm, and the (UK) government has actually responded quite intelligently.  But there's an obvious risk that nerves are lost and mad policies get enacted in a hurry, which later become hard to unravel (see several of Sunak's little wheezes over Covid).

First of all, what does anyone expect when the whole world (a) is trying to stop using coal (yes, even China and India, though not trying very hard); (b) has installed epic quantities of wind power; and (c) is recovering strongly from the pandemic, including running big schemes for massive infrastructure development?  Oh, and the world's biggest producer (little Volodya, this means you) is willfully holding back supplies for political reasons?  

Commodity price spikes, that's what.

Although every country will have its special circumstances, the basic phenomenon is hitting everyone.  So - the market (and it's only relatively recently that the gas market has become global, thanks to LNG and the gradual cessation of mad oil-linked pricing in the Far East) is functioning correctly!    

One of the first things that will happen is that US shale producers (those still standing, that is) will be dusting off their drilling plans, having experienced an awful 18 months of rock-bottom gas prices.  That'll help.  (Wonder whether Boris will take another look at fracking, too ... but not this side of COP26!)   And not just gas production: the economics of a whole range of energy-related items will change, too: grid-scale batteries - the major beneficiaries of electricity price volatility, which is what we're seeing - are making absolute fortunes right now.  Some will benefit hugely, some will not:  the list is endless.

But what might policy makers stumble into at a time like this?  Actually, Kwasi Kwarteng gave a very good defence of the free market when he spoke over the weekend (as did Boris in his incoherent bumbling fashion): hopefully this means they aren't inclined to intervene in stupid ways.  The principles they've given for NOT bailing out the tiny suppliers (who shouldn't even exist - a real indictment of Ofgem that they ever got supply licences: many of them are outright scammers), but ensuring the smooth functioning of the "supplier of last resort" mechanism, seem prudent enough.  But the need to intervene in the chemicals industry (which I think is fair, given we are in uncharted territory) might result in mission-creep on other fronts.  The special-pleaders are forming a long queue ...    

What else?

Russia:  the Euro-wallahs are pretty angry with Putin's naked ransom-holding over Nord Stream 2.  What will they do?  Germany has an election coming up ...

Europe:  expect plans to shut down coal & lignite plants to be thrown into reverse (but not this side of COP26 ..!)  Even the Graun has noticed that Europe is fundamentally hooked on natural gas, whatever the greens might like to wish for.

Nukes:  EDF will be salivating at the prospect of a large-scale failure of nerve by HMG on a new public finance mechanism for more new nukes.  Rolls Royce won't be far behind with their odd "mini-nukes" plans (they aren't so "mini" at all).

Lefty-greens:  these types never miss an opportunity to set up their demented wails ("if only we had gone over to 100% wind five years ago, none of this would have happened ... oh, wait a minute ...";  "this shows the need for 100% nationalisation and a New Green Deal which involves everything we've ever wished for including Trans Rights, all bundled up together in green string") etc etc.  I think we may safely ignore them, just as Kier Starmer wisely does.

COP26:  The entertaining prospect emerges that November's COP26 might take place against a background of power cuts, if not to the conference hall then to industry.  (Actually I think that's more likely in Feb-March, but we'll see).  In any event, the whole thing has become more problematic for Boris and his longed-for global "king of the world" PR triumph, because even though most countries will politely defer big "retrograde" measures until after November, few of them will nowadays have quite as much stomach for "wind power solves all problems", or "you rich nations can easily afford $100bn p.a. for us developing nations" - in private, anyway. 

There are loads of other potential ramifications but I'll stop there for now.

Will the lights go out?  Regular readers will know I endlessly back National Grid to prevent this.  But this year, the cost of doing so will be very high indeed.  And you know what?  If we get a serious cold spell, they might actually fail this time.


Friday, 17 September 2021

AUKUS - welcome news indeed

Back in June I wrote here [OK, Cold War It Is]:

Joe, you and your new posse gotta rescue already-suborned New Zealand, and make Australia feel a lot more comfortable with its situation.  Fast.  Otherwise it'll be clear that your reach is only to those lazy countries that are a comfortable distance away from the coming action in the Far East.   And even they will still be defending their precious Sino-exports and graduate-student fee income, hoping nobody will notice or mind too much.

He was listening!  And now we have AUKUS, replete with new nuclear subs for Oz.  (Gotta love the choice of name: not sure AUSUK would have worked at all ...  At least someone was giving half a thought to the matter.)

A bit of context.  What has recently become common parlance as "the Five-Eyes (intelligence) community" is officially AUSCANUKUS, with the 'Aus' being Australasia.  (You will sometimes find people, e.g. Wiki, inserting an 'NZ' but that's technically spurious.)  Sadly, NZ has been so thoroughly suborned by China, they've effectively self-selected themselves out of the inner circle; and we have to guess Canada had no particular reason to be in on this latest one.  Pity, but there it is.

Now to the reactions.  China very hostile, natch: say no more.  France, hahah!  Crocodile tears all around.  They were screwing up their own Oz-deal, and had it coming.  What are they going to say to us - if you don't back-track, we'll let all those refugees sail across the Channel?  (Oh, wait a minute ...)   In fact, what we'll be saying to them is: pipe down, Johnny Frog, or we'll leave those troops of yours in Central Africa with no helicopter support or aerial reconnaissance.

And everyone else on the world stage?  Well, by Heaven, after the Afghan debacle, something had to be done, or else the Taiwanese and many others besides would have been starting to make their accommodations.  Let's hope there are several other good ideas where this one came from rolling out over the weeks and months - most especially including something significant and soon for New Zealand, please.  As often noted here before: the lines of logistics in politics - particularly in foreign policy - can be very short.  Imagination is everything.

Which brings us to the Labour Party - which rushed to applaud the whole thing!  With a speed that must leave plenty of domestic lefties just reeling.  Even the Graun is more or less onside, even if leaving themselves a bit of equivocal wriggle-room.  (Gad, these people are so easily blindsided!)  We can expect some pushback to this amusingly tame position, I expect, in the run-up to Party Conference.  (Perhaps Starmer's Lotto crowd plans to make it yet another dividing line for advancing their really quite ruthless purge.)

Anyhow: credit where it's due - hats off to Biden this time.  

(I reserve the right to call him senile again if he drops the ball next time, though.)


Thursday, 16 September 2021

More power disaster

 UK power prices soar after key cable hit by blaze - BBC News

Oh dear, so the earlier in the week incredible rise to £345 per MwH has been easily surpassed now by another £100 per hour or so.

Oops, and this is long-term, half the interconnector gone until March. Talk about bad luck, CFO's at retail power companies are going to be having a lot of sleepless nights. 

Maybe we should have built that Iceland interconnector after all!


I see Utility Point and Peoples' Energy have both ceased trading today. So much for fixing your domestic pricing....will be last man standing shortly. Maybe Centrica's share price will have a counter-intuitive bounce!

Tuesday, 14 September 2021

Time to switch off

 I really mean it too..

Check this story out - a very well written piece in Bloomberg that actually factually summarises all the relevant key points at hand. 

Due to no wind, there is a 10% gap in energy production in the UK this week. France has many of its nukes off-line, so we rely on back up coal and gas. Right at the point where global supply chain issues mean that prices are soaring.

And I mean soaring, one contract on Monday went for £1760, as opposed to the usual £50 per KwH. The average a mere £345 - just a seven-fold price increase for the week. 

Of course, the wind will blow again, but there is no way this episode does not lead to markedly higher consumer prices over the winter. Cold spells in winter now are going to cost the wholesalers even higher prices than this as supplies of gas are so tight. 

As such, time to make sure you turn of unused plugs around the house and look to limit consumption where you can. My rough guess is electricity prices will double over the winter at a minimum from where they are now and stay that way for a while. Worst case will be 3x or 4x the price in January.

Hello, is that inflation I see coming down the road at speed?