Tuesday 30 June 2020

Lurid Energy Nightmares

The first version of this post appeared on our good friend Sackerson's excellent blog ...

An important line of thought in energy matters is how coal transformed the entire world by being a very dense (and fairly convenient) form of energy.  Oil is even better.  (Google ERoEI for quantified approaches to these thoughts.)  Cheap coal and oil were the basis of industrial civilisation, and cheap electricity the basis of the modern way of life.  Oooh-errr, missus: isn't "green energy" going to be of much poorer ERoEI, and much more expensive? ... and hence, the end of civilisation as we know it? 

When allied to the obvious observation that activist "greens" are generally ignorant to the point of causing despair; and those that aren't daft romantics are often outright malcontents (sometimes anarchists and sometimes malevolent & motivated anti-capitalists) - oh, and add China to the mix, because they ain't falling for this crap but we are! - there's scope for some fairly apocalytic visions.  Oooh-errr, missus ... 

For a well-written example of this thesis my attention was drawn by the good Sackers to a piece by one John Constable, a name that will be familiar to those who get their kicks from the often rather peculiar output of the Global Warming Policy Foundation. His article is here.  Now I understand this "intellectual" line of thinking, and it's always nice to have something theoretical to worry about: but he's been eating too much cheese and I'm deeply skeptical of his argument, on three immediate grounds:
  • ad hominem: Constable is a deep fellow but always leaves the indelible impression he's pursuing an unacknowledged agenda 
  • "Attempting to reverse this process by returning much or all of the energy system to low density flows means handing over to those who control the renewable energy sector the majority of the potential for change available to our society.  The political implications of this are terrifying, and not even public ownership of those resources could avoid the concentration of power and constriction of human freedom that would result." 
  • he's dramatically (and, given his considerable knowledge, wilfully) wrong when he talks about "low density flows" as if that's anything remotely new ** 
Well, it's true Rebecca Long-Bailey (when shadow energy minister before GE2019) planned to hand the whole thing over to local authorities (the irony! when you see what a cock-up they make of their energy endeavours), right down to the level of parish councils and even "local communities ... of around 200 homes"; and of course all workers in the sector to be unionised.  To which preposterous package I'd be very hostile indeed.  But that ain't going to happen - anywhere. 

So whom does Constable imagine has been controlling the energy system** up until now (in the open-market era, i.e. post 1990)?  The nearest UK candidates are, in broad coalition, (a) National Grid (b) Ofgem (c) HMG.  The CCC helps a bit and snipes a bit, from the sidelines: other related quangos are either more helpful (being more closely directed by government and industry) or more snipey (being "greener").  Similar in most countries.  With most aspects of detailed development / delivery / execution outsourced to private companies (and/or municipal utilities in some countries), small and large (EDF is an egregious counter-example, but doomed in its present form).   Any serious signs it's about to be handed over to Greta?  What does she know about constructing anything more weighty than a tweet? 

No: as I keep saying here: net zero carbon has gone completely mainstream now (since 2019, specifically, in my assessment).  So - it's in the hands of the engineering companies, the traditional energy companies (who ain't volunteering to go the way of the dinosaurs any time soon) as well as a rash of really creative newer engineering / technology companies, and the banks.++  Right now I'm working on a project for a gigantic "traditional polluter" whose products are vital for our way of life, whose efforts to go green up until last year were next to nil, and who now are throwing their best people into really bold schemes to go zero carbon!   And when you see real, competent people working these Big (very big) Problems, constructively and productively, it makes the idea of "handing things over to parish councils" look utterly, utterly absurd.  And despite RL-B's talk of the unions taking a controlling stake in all this, whose side do you think a practical GMB man is on?  (Or Kier Starmer?)   For reasons both of jobs, and keeping the lights on, nobody in the real world will do anything other than let the big corporates do what they're doing. 

Now: will our 2050 energy end up being more expensive?  Not sure: there are some very simplistic a priori arguments in the air on this one.  Yes, there are huge upfront capital costs - but right now, that's surely going to be spent on Something Big, on Keynsian grounds at least, so it might as well be building clean & useful stuff.  (Plus adaptation / mitigation, of course - a key part of the 2019 breakthrough-to-mainstream.)  And the beauty of wind and solar is that once the (substantial, but fast declining) capital expenditure has been taken care of, the operating costs are wholly unburdened by the fuel costs that dominate "conventional" energy.  (Don't fret about the details like grid balancing, over which Mr Constable frequently hyper-ventilates - and I used once to worry myself a few years ago.  It's just an engineering problem: the Grid is very good at it; lots of clever people are beavering away at it - and the costs of all that will fall, too.) 

But let's suppose, as seems possible, that Chinese coal+wind+solar beats western hydrogen+wind+solar+batteries on cost.   So what?  Globalism is over!  We ain't gonna be buying our stuff from them on the same scale anymore, anyway.   Are we ..? 

** the whole point about the gas industry is that methane is INCREDIBLY low in energy density, (even when you freeze it to put it in ships, it's still quite poor) - but an exceptionally useful form of energy.  And so, highly specialised infrastructures (physical, financial and commercial) have long since been established to cater for this.  In many respects (although the technical analogies aren't easily mapped for non-scientists), the electricity situation is even more extreme.   Neither of these massive industries are in the hands of the Green Blob.  Anywhere.  Whatever daftness sometimes surfaces in the legislation under which they conduct their resolutely practical business.

++ OK, yes, and a bunch of chancers, con artists and would-be 'war profiteers' at the margin

Monday 29 June 2020

Covid, review of the season to date

Another week of Covid-19 starts and frankly now we are on episode eighteen the real action is now starting to take place.

On the political front, the poorly scripted revolutionary rabble of BLM continue to make bizarre ground. With a huge following of what seem to be death-cultists, their franky bizarre demands are only now getting minimal attention. Such is the zeitgeist prevalent though, they are able to act with impuntiy against the weak police and inaction of the Government who are intent on letting the thing blow out.

The Government itself has largely been ignored by the writers since the "Prime Minister gets Covid" story of a couple of months ago. Not really capable of doing anything much about the virus, the Government characters come out to make little speeches about not mch, building towards what should be big economic announcement, but it is a toss up as to whether they give Rishi Sunak a big script or just ignore him. For the opposition, it is easy to give some time to the dashing and hand-wringing lawyer Sir Keir Starmer, without him having any actual impact on events.

The references to the global impact of the virus are the weakest bit of the writing and presentation. The US is portrayed as if some sort of dictatorial revultion is going on when in fact it is an election year. Lots of places around the world are mentioned as doing better or doing worse seemingly only on the basis of if they have a right of centre Government. It is a silly approach becuase the same statistics they have used show the virus being virulent basically everywhere there is high population density and has to spread into the population.

The effect on day to day lives is a better view, the little people they throw into the show every now and again add some good colour to what is a very complex story. No one really comes close to the Colonel Tom Moore character though.

Overall though the whole show feels like it is building to a point, but equally could just fizzle out into a not very compelling conclusion - the whole thing is a morass of intertwined stories and the effort to make it a morality tale ring very hollow.

How is everyone else enjoying it?

Saturday 27 June 2020

Weekend: Yoof on the Streets

An ongoing line of thought, over the months and years since the 2011 riots.  I won't bother, this time, to give references to earlier pieces.

A short while ago I mentioned in horror the chart showing how UK politics has become a generational divide above all else.  It's so stark, it's just dreadful.  The fact that right now the crossover point leaves a comfortable parliamentary majority for the oldies, doesn't really resolve things.  At all.

And where the 2019 XR spasm was deftly quashed by the 2019 universal (western) policy-shift to "zero net carbon 2050", a summer 2020 spasm arising from a mash-up of inchoate BLM discontent, pent-up rave-potential unable to get to Glastonbury, organised criminals itching to get back into post lock-down business etc etc etc ... well.  A summer of yoof with literally nothing else to do, flanked by general drunken yobbery, culminating in the Notting Hill Carnival ...  it can't be contained by the constabulary, that's for sure, nor the mostly-Labour city mayors, however respectable and well-intentioned they must be seen to be on such occasions.  And nobody wants to it run until some horrible "innocent deaths" occur, sending everyone home in sullen, shame-faced dismay (and nothing resolved) - even if that's the usual way of British peasants revolts and Pilgimages of Grace. 

There are those - like the doctrinaire-barmy, but fundamentally honest Aaron Bastani - who are quite optimistic this can work out (he expects a big political upheaval to accompany it).  But it's all a bit wishful, and certainly not a concrete programme for 2020.

As I've asked before: what is the specific XR-style trick that can be played this time around?  What are the demands?

There are several points of departure from this opening.
1. The radical left says:  easy!  It's the Green-New-Deal-incorporating-"A Just Transition" (plus-Extra-BAME-Jobs) - that parenthetical last, a recent simple add-on that only represents a couple more words in each clause of the legislation
2.  The business world says something broadly similar:  lots big government contracts for infrastructure stuff, please, with no planning restrictions if it's all the same to you (oh, and OK, as many sops to BLM as you feel you need)
3.  A series of Marcus Rashford moments, the significance of which I reckon is badly under-rated.  Think what happened there: in the midst of a complete political vacuum, a footballer suggested something sweeping and practicable that was agreed to within 48 hours!  AND - here's the important bit - it is (effectively) a means-tested benefit, and the word "BAME" appeared nowhere!  To the extent it calmed things down a bit in the week of white yoof running around tearing down statues like real anarchists, that's an astonishing achievement** - and more Rashford moments can easily be envisaged.
Or maybe it's just downhill all the way.  There are certainly voices for Hold Yer Nerve And Crack Some Skulls.  I repeat my prediction that the EU will make a spectacular *magnanimous offer* if everything's really going to ratshit here.

** In a couple of days Rashford achieved the following:
  • showed Boris up to be the inadequate dolt he is
  • left Starmer floundering (I was going to say tripped him up, but since Starmer conducts his business from the tenth row in the stands, that isn't really possible)
  • took the wind out of an awkward situation, (albeit perhaps only temporarily) - must have been annoying for the out-and-out BLM malcontents of all colours; and in so doing, gave a useful precedent / exemplar for future sop-giving
  • threw the doctrinaire Left into a deep quandry.  They too hate palliative sops.  They don't like freelance political initiatives from their side (like the Catholic Church really hated Joan of Arc).  They are very ambivalent over means-tested benefits.  BUT the really serious Marxists are keen to take race out of the equation and bring it all back to class - so free meals on demand for all hard-up families is right up their street

Thursday 25 June 2020

Junk Jenrick: He's a Horrible Foretaste of the Future

It may not be unprecedented but it's pretty sordid, and IMHO Jenrick should have been ditched in a heartbeat.  Unfortunately, we're going to see a ton more of this.

Why? - because of the feeding-frenzy that is the post-covid-brave-green-new-world plan to Save the Economy.  Due process is about to go straight out of the window, and the most outrageous windfalls are going to be harvested by the biggest liars and most brazen bribers and "lobbyists" - on a scale nobody will be able to keep up with.  There aren't the regulators in the land to even attempt it, still less the politicians with the balls to offer them any support if they were to - once in a while, in the most egregious (or randomly discovered) cases.

If it were me, before launching the forthcoming list of privileged "shovel-ready projects" about to be given, errrr, whatever they want, I'd pass a one-paragraph Profiteering Act, as follows:  
If any person breaches or faciltates the breach of any law or regulation, or makes or endorses any fraudulant statements or claims, in the process of developing or approving any project receiving government support under the [Saving the Economy Emergency Act 2020] they shall be guilty of a Crime punishable by an unlimited fine, forfeiture of state benefits, and 10 years in prison, in addition to other applicable penalties extant for the Crime, if any.  No Statute of Limitations shall apply to such Crimes.
Or something.  I'm no constitutional lawyer but you get the drift.  Fire a resounding warning-shot right at the start.  Make it really easy to make an example of somebody high profile, and then do it.  Make the would-be war profiteers and their little helpers think carefully before embarking on their self-serving adventures.

There'd be votes in it!  But, somehow, sadly, I don't think that's Boris' style.


Tuesday 23 June 2020

Sajid Javaid says not return to Austerity

Even when Capitalism and right-wing orthodoxy are shown to have worked, these days the impact in denied. It is a truism today that the culture war started in the US is over in the UK; the left have won. Defeated at the ballot box, they have returned in social media, education and on the streets to reclaim their power.

I don't say this lightly as it is a sad endictment of the right, so good at winning elections but so bad at spelling out policies and facing up to dishonesty with the truth.

The example today is a typical one. Not long ago, Sajid Javaid was Chancellor. Boris and others were always keen to distance themselves from George Osborne, who was personally never very popular in power or policy. But the austerity policies from 2010 to 2018 worked a treat. The UK faced a dire macro situatio in 2010 and the path to reducing the burgeoning public debt was to decrease structural spend whilst also increasing immiediate social security spending to prevent poverty and starvation.

Labour and the communists started a long-campaign which has proved fruitful to say this austerity killed 100,000 people. Total fake news based one left-wing report which extrapolated average deaths over too long a time period.

Nonetheless, at the ballot box this has failed but in the minds of many it has succeeded. Even Javid here is a victim of the mind meld. He is now saying no to more austerity and let's go with more Laour inspired-spending. The fight is over. We are seeing this in a range of areas such as the BLM protests etc too that the left wing viewpoint prevails.

Saturday 20 June 2020

Weekend: Those Fearless Labour GE Post Mortems...

Oh, they promised to be fearless, these inquest-holders, to accept no shibboleths or no-go areas or taboos; no stone to be left unturned.  Well, it transpires they were wrong about their mandates, to which we shall return at the end of this post.

There are two out this week.  The big one first:  Ed Miliband + Labour Together's 154 page epic.  The stuff on the Election itself isn't revelatory: their summary is as follows -
• Negative perceptions of our leader were a key reason why Labour lost so many votes in this election
• Labour’s position on Brexit alienated voters on both sides of the 2016 referendum divide 
• The popularity of our policies was undermined by a lack of confidence that we could deliver them 
• In Scotland these issues combined with and were reinforced by national debates and dynamics 
• These issues served as focal points for deeper divisions of values and outlook 
• Value-based analysis of Labour’s vote base reveals a coalition that is crumbling
Well what else could they say?  We all knew that: and the only issue is the ranking of the first two disasters the list.  In the party of Kier "peoples vote" Starmer, unsurprisingly they opt for Corbyn.  Only respectful references to the new Dear Leader here.

What's genuinely worth reading is the numerical stuff (Miliband is a wonk, after all): several commentators reckon to have found some gems there.  No space here to summarise it, but one chilling graph leaves a deep impression.  Forget north vs south / city vs towns / workers vs the bourgeoisie: figure 8 shows with blinding clarity how UK politics has, over the years, become polarised into essentially a generational divide.  Presumably this graphic is prominent on Cummings' wall, too, and explains his current culture-war tactics**.  Sobering stuff indeed.

The conclusions and recommendations are all pro forma, completely anodyne, and unlikely to stir Starmer in any way.  He already knows what he's about.

The second autopsy, published on the same day, is from "Labour for a European Future", which deploys a lot of Ashcroft data (inter alia).  No prizes for guessing their #1 conclusion is -
The election loss was not caused by the second referendum policy
Yeah, right.   That aside, it's altogther punchier and more opinionated than the bigger report, and has been hurriedly but intelligently brought bang up-to-date.  (No chance of nimbleness like that with Miliband's stolid crew, which had to answer to a board of 15 Commissioners, one of which is a collective(!))  One could imagine Starmer finding the shorter one more useful, and not just because of its congenial Euro-bias.

So where are the gaps?  Again, it's the Mili-version that betrays the weakness most glaringly.  As a BTL commenter put it in the Graun today: 
You can blame brexit, 'genius Tories', voters not liking corbyn, but there is another reason, which was only spoken about in hushed tones and behind closed doors that spooked millions of people in former Labour strongholds. It can't be addressed, it won't be addressed and Labour will continue lose those votes.
Now let's tread carefully ourselves here (OK?); and take just one of these *unaddressed* issues.  If (for example) Labour becomes clearly identified as the party of Trans Rights, they will silently haemorrhage votes, even as they refuse to contemplate the matter.  (The rather niche Labour Uncut blog is bravely willing to air the subject, even if nobody else is.)

And so it goes on.  Cummings must be spending this weekend laughing out loud.  Starmer has strategic problems extending far more widely than Scotland, and Wonk Miliband may not be much help to him.

** Or Munira Mirza's - whomever 

UPDATE: Rawnsley, Graun, today
The report concludes that Labour will only achieve power again by building “a winning coalition of voters that spans generations, geographies and outlooks”. This is so right that it is a truism ... In their vagueness about how this feat is to be achieved, the report’s authors are faithful reflections of the party’s leader. Mr Starmer has had almost nothing to say about policy since he became leader.

Friday 19 June 2020

600,000 unemployed in UK since Corona but QE re-starts

Interesting week of economic news in the UK to round-up:

- The ONS estimates around 600,000 people have lost their jobs in the last 3 months, but that this total will continue to increase sharply as the furlough scheme rolls off. Equally, job creation still remains quite high and also will continue as new companies appear to replace those impacted by Covid-19.

- The Bank of England thinks the economy shrinking 20% in Q3 is a good result as it had feared a 27% fall - however, it and the ONS estimates are very shaky for huge sectors of the economy like Travel and Leisure.

- The Bank of England also has put another £100 billion of quantitative easing into the economy. This will be huge boost to money supply which was lacking as demand fell away so much across the economy.

The big impact is that this money, together with the Federal Reserve, has succeeded where they failed in 2008. We had a 25% sell-off but the bounce back, supported by the Central Banks, has been impressive considering the circumstances. To me still it is only putting off the inevitable and cushioning the blow. However, that may in itself help to temper the worst of the recession. Funds and Asset Managers still have a 'risk-on' mindset.

I still think we are in for a choppy few months and an eventual nasty crash, but with the huge pump priming of the money markets, asset prices will hold up as those lucky recipients of free money it swap it for real assets.

Wednesday 17 June 2020

Wokeness transitioning to real world impacts is not a good thing.

The strange times we live in are very evident every day. Statues being attacked in the UK by a small minority of far-left nutjobs, Black Lives Matter protestors crying in the street over the number of black people being killed by police - not worrying to much that this is in another Country altogether. 

Politicians emoting along with them and no one attempting any rational debate because of fears of being accused of racism or nazism...maybe even both. Business culture in particular has adopted woke madness in the extreme, with gender neutral toilets in offices where there are no trans people and this past week huge long prose pieces by CEO's saying about how their company is so inclusive but others can do better. 

It made me recall a time in the past when this was just starting out. Michelle Obama, then First Lady of the USA, became concerned about an event in Africa. 
Members of a militant organisation, Boko Haram, had kidnapped 276 girls from a school in Chibok, Nigeria, on 14 April 2014.
Afterwards Michelle Obama posted an image of herself on social media, posing with a white sheet of paper that said: "#BringBackOurGirls". She received wild applause and attention from the whole media, celebrities and business leaders - remind you of anything?
This was part of a wide social media campaign, David Cameron and world leaders gave it their backing. Her husband, then President of the USA sent a literal handful of advisors to Nigeria to see what they could do. The answer was nothing - so much for the powerful USA President and his tough can-do wife.
Soon the hashtag dropped away and the girls were forgotten about until a few years later when the Nigerians bought some of them back off Boko Haram. Michelle Obama switched to raising some money for educating African children and stopped answering questions about the girls. 
The lesson is even the best wishes and most potent hashtags achieve so little. People feel better sharing and get angry and emotional- but it does not do anything. The realities were the US could not take on Boko Haram in Nigeria if the Nigerians did not want them too. 
Fast forward to today and we see how much further this emoting has taken the world and how different the reactions in the West. Now marching and demonstrating are common place and emoting is everything. No one thinks about what has gone before - lockdown too soon! Lockdown too late! only today's trendy view matters.
The interesting part to me is that Western politicians have started bending to knee to the mob - see Keir Starmer just this week for example. I see as I write this that a social media campaign by a footballer, Marcus Rashford, has changed Government policy in a few short hours. It makes Black Mirror look a bit tame by comparison. Russia and China seem less susceptible to this nonsense. Does this now mean Western Democracy is mob rule by proxy?  I can see some definite downsides to this revolution. 

Tuesday 16 June 2020

UK Unrest: Scores on the Doors

Last week we looked at runners & riders cynically looking to make capital from putative UK unrest this summer.  So far, no flames - for which, thank God.  Much, much too early to declare the arrival of autumnal cool, however.  So let's look at the current scoring for the players we identified.

The would-be hard-men

Pritti Patel     - she's had a crack at it; but not very convincing
Boris       - trying to box clever: widely assumed to be adopting a Cummings-strategy of invoking a Culture War that he can win.  Probably better at this than his utterly, culpably lame Covid performance (see also Starmer below)

The extra-parliamentaries

Stormzy   - yup, he's pitched in, but with cash rather than outright leadership
Owen Jones   -  feeble, predictable stuff; and he's quickly risen to the Boris Bait on trans rights
Gary Lineker   -  ditto feeble & predictable
Oxbridge Armchair revolutionaries    - still armchair-bound: well, Social Distancing, don't y'know (!)
A.N.Other   -  well Marcus Rashford has certainly trended strongly this week: & perfectly responsible, too, if we allow footballers to input politically (see also Demands below).  Any other nominees?

The parliamentary Left

Diane Abbbottt   - not really trying.  Along with the rest of Team Corbs, she's vacated the field (at least for now)
David Lammy   - started exactly as we said: voice of reason & nuance.  Has decided to go for it a bit more in the last couple of days - so, one to watch.  In the obvious absence of any clear leadership, he's keeping all his options open
Sadiq Khan   - as confidently predicted, he's been ducking & diving all over the shop.  And will continue to do so, triangulating and calibrating every inch of the way, every hour of the day.  Is anyone impressed by this?  I've never met anyone on the left who considers him anything other than a (successful &) unscrupulous careerist.  Then again, ditto Boris ... so everyone has that wary degree of respec'
Kier Starmer   - aloof, as we knew he would be: but the whole Starmer picture needs to be covered in more than just a one-liner: some preliminary observations below

The missing Demands

Infinite kudos to Rashford - he's come up with something concrete and deliverable! For the rest, they're floundering.  I have seen the word "reparations" crop up a couple of times (and not just BTL on this blog).  Anyone else spotted something in the "feasible / deliverable" category? - besides the laughable "bi-partisan statue protection" policy ...

No sign of the XR-style strategy being readied by Government: but I'm sure it's on the shelf - they have laudably tended to act by bold strokes that take people by surprise.  Nobody's really formulated it as a demand yet, although there are loads of vague desiderata in the air.  We must believe it's being ruminated upon in the camp of ...

Kier Starmer

This man's willingness to piss off the Left knows few limits.  As I've suggested here before, he's presumably decided an out-and-out showdown is inevitable, so let's get it on, and out of the way.  But his reactive and non-combative output is driving the left beserk.  Classic example: his own condemnation of the weekend confrontations didn't attack "racism" in those terms - but Boris' did!  

Strategically he must be right to be precipitating off the Left per se.  But there is a danger for him in this:  it  seems that BAME members are quitting Labour at a disproportionate rate, to cries of "the BAME vote is being taken for granted".  The optics are obviously awful.

As we said before: he needs to watch his back, even if he thinks Labour has nowhere else to go for leadership.  (Incidentally, he does benefit from a posse of heavyweight Blairites watching his back for him.) 
_   _   _   _   _

The "Labour Together" election report will be published soon; and we must suppose the EHRC will come off the pot eventually.  They'll be important events in the grid. 


Sunday 14 June 2020

Energy in the Future

Regular readers will know I identify 2019 as the year everything changed.  Up until then (in my estimation), most people's attitude to climate change was, yeah, s'pose, maybe; so what?  During 2019 most people switched to yeah, of course - flooding, forest fires:  presumably someone will be doing something about it.   And indeed Theresa May (Theresa May!) did.   On the XR-Greta bounce, she passed the Net Zero 2050 legislation, hastily followed by, errr, pretty much every other western government you can name.

What this jolly damascene narrative misses is two gigantic Real World developments offstage.  The first, and biggest, is that all of a sudden, spending on Adaptation & Mitigation - getting ahead of those floods and fires! - was admitted to the ranks of what counts as Green.  This means that every clunking old heavy-industry company feels it stands a chance of joining in the upcoming feeding frenzy (steel-and-concrete, yay! - not just those poncey, ex-hippy solar farm wallahs); and of course every bank.  That's huge.

The second is that Big Private Energy (if not the NOCs and their like) decided in 2019 that they'd better join the party, too - properly, not just a nibble around the edges of the lettuce-leaf for greewashing purposes as theretofore.  Shell is only the latest.  And why not?  It all plays to their strengths, innit?  -  R&D; Big Engineering; massive capex; expert project management; dealing with governments etc etc etc.  (They are wrong about their strengths in some detailed regards, but let that pass - they'll find out in due course.  And the better ones will quickly learn.)
_   _   _   _   _   _

Let's give one really big, and really important example: the natural gas industry.  It's Big.  And the capital it has sunk (your pension fund has sunk) in steel-&-concrete, & real-estate, & highly-trained people etc etc) is very, very large.  Much of it is rather static, too: gas production facilities, mammoth intercontinental pipelines, processing facilities, liquefaction plant, LNG fleets, re-gas facilities, myriad small distribution pipelines ...  and nobody fancies writing that lot off.
Up until 2019, they kinda felt they didn't need to contemplate this awful prospect because they felt they'd been given a multi-decade pass.  Hey - the greatest reductions ever made in CO2 emissions come when gas replaces coal!  We're the good guys!  Watch us repeat the UK trick and the USA trick in, errr, China and India ...

Then they notice that in the west, coal has already given up the ghost (except in Germany) and all eyes are on them as the next big fossil fuel villains:  AND not just the know-nothing swampy-greens, but the steely-eyed, utterly ruthless ex-hippies taking all the government money for wind and solar, who've got the gas sector lined up to be supplanted by ELECTRIFICATION.  And all that gas capital tied up in steel-&-concrete!

Suddenly (and truly, it was abrupt) the entire industry has lighted upon conversion from natgas to hydrogen.  Why?  Because -

(a)  actually the threat of wholesale electrification isn't imminent: in most countries you just can't switch that amout of space heating from gas to electricity without colossal expenditure (like, in the UK for example, trebling the capacity of the Grid  - which is what you'd need) - so, they get a breather if not a free pass, provided they are seen to be With the Program, and knuckling down (which they are):
(b) they get to utilise a lot of those existing assets that represent so much of their balance sheets (phew!):
(c) it's squarely in their sweet spot:  fairly conventional and established technology, pretty basic chemical- and civil-engineering, lots of scope for improvements and efficiencies on existing processes - the kinds of things they can easily find / redeploy staffing and raise money for:
(d) it solves a massive problem for governments (relying on electrification of space heating, trucking and large-scale gas-burning industry wasn't going to get them far towards Net Zero, as they know):
(e) it potentially also solves a problem for the green electricity wallahs, too.  Solar and wind (and in fact nuclear, too) generates when electricity isn't wanted, which is easily managed when they only represent a small amount of the total, but is getting to be a serious issue.  They can see themselves turning their excess production into hydrogen, via electrolysis:
(f) even the Russians might be able to play: they can turn their methane into hydrogen (via steam reforming) and sell that to us instead of natgas (even if they need to, errr, think about all the left-over CO2 ...)
(g)  SUNK COSTS(!) - as we keep saying on C@W.
Here's not the place to sketch out the many significant practical (and political) issues a hydrogen-based energy system will face along the way.  All I'd say is:  there's a combination here of massive incentive and feasible technology.  In my experience, that's a recipe for things getting done.  Many's the time I've seen first hand, just how far people will go to avoid writing an asset off completely.

And I'd contrast hydrogen strongly with two other supposed "energy-technologies of the future":  (i) small nukes of various types; and  (ii) carbon capture & storage (CCS, or these days CCUS), both of which have been identified as 100% necessary for decarbonisation, and only just-around-the-corner as regards technology and commercial feasibility**.  As they have been for, errr, decades ...  in which case, W(here)TF are they?   Nope, small nukes and CCS don't pass my personal reality-check;  writing not as an engineer but as a commercial type and longtime observer of what's actually happening, and what's BS.

Whereas hydrogen looks the part, in every dimension so far as I can see.  Anone who's skeptical about any of this just needs to check out what's going on.  In the Real World.  Real companies, spending real cash (money of their own, at the moment) and real effort.  Solving real problems along the way.  Don't bet against it.


**Addendum:  not to say there aren't stirrings in both these camps.  And in principle, Big Oil & Gas ought to love the idea of CCS, on some of the same a priori grounds that make hydrogen attractive for them.  But, among several other contrary indicators, Germany shows no interest whatever in CCS, an significant disadvantage when compared with their enthusiasm for H. 

Friday 12 June 2020

UK GDP 20.45% down in April - FTSE up 1%

The headline is a great example of cognitive dissonance.

Market commentators will say the drop is already priced in. Yet the market is down just shy of 20%  from its peak of 7674 on 7th Jan 2020.

How can we have removed 20% of the economy and the market still be happy - it is not priced in at all.

The next argument the commentators will use is that this is not only priced in, but the markets are already looking to the future bounce back. I say this is very unlikey to be fast bounceback. In the medium term I am sure there will be new restaurants and coffee shops, in the short term a huge amount are dead and only exist now because of the wasted furlough support (wasted as in it is being used to support companies that can't make it, not as in I want people jobless and poor!).

IAG and EZY - two major listed airlines are indeed down 50% and of course the market is also made up of companies doing well in the pandemic. But 50% down for airlines is optimistic, I am very bearish on their prognosis - flying will be very limited for a long while to come and appetitite for it will take years to come back. Indeed, if capacity is not used in the next quarter they will be a fraction of the size they were pre-crisis.

We have the Government spending money, the Bank of England pouring liquidity in the background (which finds its way to assets, like shares), a closed economy and not quite sorted pandemic.

It will be very rocky, but I stick by what I have been saying for a couple of weeks, the end of this month is key. Quarterly rents, these GDP numbers and their quarterly companions and the move to economic re-opening as much as it will be possible for a few months will all be in place. At that point we could easily see the big market correction - or, as ever, market irrationality and acceleration. My hunch is the former.

Thursday 11 June 2020

Shell Going Green: a very big straw in the wind

"Anglo-Dutch supermajor Shell is hatching plans for a massive company-wide restructuring in response to the Covid-19 pandemic and to position the 113-year-old oil and gas company for the shift to lower-carbon energy. A special internal project team began work behind closed doors earlier this month and is set to present its findings in the third quarter or early fourth quarter, according to Shell sources"  (Recharge News)
Well, they are all at it these days and I intend to post at greater length shortly.  Incidentally, and in case anyone was wondering, I'd say this is Big, and Real.

On a lighter note, I wonder what codename they've given this effort.  Back in the mists of time when another big downturn in oil price was underway, Shell initiated aother such restructuring programme - rather less radical, of course, but far-reaching nonetheless - and they coined it "SEARCH".  The "S" stood for Shell, of course.

Nobody will ever recall what the rest stood for, because the programme caused such mayhem it soon became known as Stop Everything And (w)Reak Complete Havoc ...


Wednesday 10 June 2020

Statuesque insanity

Apart from being very tempted to crowd fund for a statue to Farage holding hands with Genghis Khan, the whole charade being played out in the UK is very dispiriting.

We have enough to deal with in terms of a pandemic, with the need for race riots and civil disorder too.

No doubt many feel strongly but the Government has to get more of a grip - solutions to that are less clear though. A bit of leadership on some uncontroversial aspects - coming out strongly against defacing war memorials etc would go some way to starting the process.

Of course the constant defeat of the left at the ballot box both in the UK and US has bequeathed us a motivated group of whingy lefties with no prospect of power. Let us not forget, power moderates as the realities of the situation sink in. Lack of political power drives people to political extremes, eventually even terrorism as we know all too well in these isles.

So now, we are facing extremists on lots of fronts, climate change, racial tensions, unions, pandemic response Whilst there is an overlap of sorts, these are one issue brigades that have become a whack-a-mole for the Government to address. Each has a list of undeliverable nonsense to try and ignore.

Meanwhile, not enough vim is being shown to counter these protests and agitators. They have the bit between their teeth, a few arrests and court appearances would temper the tantrums. More worrying yesterday was even the Met Police union critcised Cressida Dick for acting to weakly in the face of the protestors.

And of all times, now is easy, there is a pandemic with social distancing, the Government can actually take the moral high ground for once. I have not understood why they are not taking this open goals to stuff the crazies

Saturday 6 June 2020

Weekend: Capitalising on BLM Catastrophe

The BLM situation, clearly febrile, is ripe for 'entrepreneurship':  watch out for -
  •  a leadership vacuum if riots ensue
  •  the 'XR solution' from Starmer - OR Boris 
  •  frustration for Khan
  •  the EU's Big Play ...

For every Zuckerberg and Gates and their homegrown empires, there's a Green, an Ecclestone and a Deripaska.  They spotted the distressed or undervalued asset, they capitalised on it, invested it, looted it.

The world of power-politics is full of entrepreneurs on the lookout, too.  And we've all been mulling over a distress scenario - BLM copycat riots, for want of a better term - which might be coming to the boil right now, and which must look like the plummest of plum opportunities for several people, particularly on the Left, if they can stop it degenerating into another 2011.  If they can get ahead of it at all, that is ...  

Now let's immediately acknowledge that sometimes these violent prospects evaporate.  A good example is Grenfell.  That seemed pretty febrile at the time: but to my surprise, it settled fairly quickly into a deep and luxuriant patch of traditional English long grass, its insurgency potential slipping away.   Nor did Les Gilets Jaunes ever really gained hardcore Political traction (we'll come to XR later, because it's important).  Yes, Britain's armchair revolutionaries - white, Oxbridge, dilettante - are indeed wedded to their equally luxuriant armchairs.  They still hanker after being the officer-class, though, directing the street-masses via social media from their châteaux HQs.  And there's no obvious sign of organic leadership within the demonstrators just yet. 
The anti-racism demonstrators, overwhelmingly aged under 30, have largely been part of a movement using the LDNBLM hashtag that has no identifiable leaders and whose events are publicised via word of mouth and social media
We'll start with the more lurid possibilities.  Let's consider at least the possibility that UK summer riots, if they occur, might allow for political initiative; and that several ambitious fellows have spotted a leadership vacancy.  If things develop into no more than 2011-style looting & arson, well, not many established politicians want their names to be blackened by association with inchoate anarchy.   But the Left is keenly looking for opportunities to Politicise (as Kev commented BTL here, "it's the Left's way of gaining back what they couldn't get through the ballot box"), eagerly abetted by the Beeb, as many have noted. 

The question, then, is: IF rioting starts here ... who's likely to attempt what?

The Players

In many such circumstances someone on the government side might try to make a name for themselves as the hard man.  It could be argued Cameron had a crack at this back in 2011, along with his DPP, one Kier Starmer ...  But - Priti Patel?  Doesn't look terribly plausible.  Boris?  Errr, no.

No, we're looking for Grabber to emerge from the other side.  If Corbyn's regime was still in place, I'd have expected it to be McDonnell, a genuine revolutionary on paper: but again, none of them really ran with Grenfell. 

Is there anyone who can front for the putative rioters, in the sense of declaring themselves to be the leader, particularly for "negotiating" purposes?  This would be quite difficult for any established politician when (innocent) people, including coppers and fire-fighters, start getting hurt.  It's possible one of the new intake of firebrand Labour MPs might give it a crack, (nothing to lose, see what happens).  Clearly enough there are some unpleasant people in those ranks, but personally I don't know enough about them to nominate any.  Of the established urban MPs: David 'Broadwater' Lammy?  No revolutionary, he: rather, in recent times a man of measured statements and nuanced views.  Diane Abbbottt?  Hmm.

I think we may also rule out Starmer.  For several reasons he doesn't look like fronting up for violence: it's categorically not in his makeup (respectable lawyer, not revolutionary; and a prosecutor to boot).  He'll want to capitalise alright - by staying exactly where he is, risking nothing, in order to have the plum fall in his lap all the more certainly in 2025.  He might be wrong about that, of course, but it'll be his strategy - statesmanlike mediator; distant and lofty proscriber of vague & worthy medicaments.  He just needs to watch his back for the serious impatience within the People's Party that has already been angrily directed his way on several occasions already. 

Outside Parliament (which is of course where the really fidgety Momentum types feel the action should be) ...  StormzyOwen Jones?  Someone from rather more, errr, mainstream pop-culture - Gary Lineker?  Who can tell; the hour doth sometimes bringeth forward the man: but can anyone seriously spot a Martin Luther King or a Nelson Mandela out there in Park Lane?

Someone who can be absolutely guaranteed to be seen prominently flitting about with both the hare and the hounds is of course Sadiq Khan.  His ambition to be seen to be in command of the "BAME vote" is never far below the surface; but his desire for world-stage metro respectability is pretty enormous, too - him with his world-class police force and armoured Range Rover.  Plus, of course, he's ultra-transactional (and very pragmatic, as every mayor ends up being): everything's up for negotiation - and he's busting to get back at HMG for the recent TfL settlement he was forced to swallow.  Like Starmer though, what he really wants is a Good-War rep for future purposes, not a high-risk position in the streets.  (And if there's half a chance of a "responsible", Parliamentary outcome - see XR below - Khan, as so often, will be deeply frustrated at his own current lack of a Parliamentary platform, and will try hard to inveigle himself onto the platform.)

All in all, for want of obvious outright, authoritative leadership willing to get down and dirty, Gerry Adams style, the Left may encounter some challenges in re-purposing riots into something more tangibly Political.  It's tantalising for them, because (a) they don't get many opportunities and are currently smarting from GE2019; (b) in strictly Marxist terms a section of the urban BAME community might actually be in a technically revolutionary frame of mind:  nothing to lose, any change whatsoever must be beneficial to them.  But the same theory would also suggest that an ethnic minority doth not a revolution make - nor indeed anything short of the entire Working Class. 
What will be the demands?

All this is by way of ruminating on an age-old issue: in large-scale conflict, it suits both sides to know who speaks for - and can deliver - the other side.  Even calling for unconditional capitulation generally pre-supposes some effective leadership on the losing side that can present themselves for signing the instrument of surrender, and reliably thereafter give the dismal command to stand down.  If it's more balanced, then actual negotiations need to be conducted, for which an authoritative counterparty is required (e.g. Good Friday Agreement).

There's something else that in due course needs to be tied down.  What, concretely, will the Left be demanding?  If they don't know, it all descends into mere anarchy and they lose their moment.

Sometimes there is tactical merit in making ridiculous ("impossibilist") demands to ensure failure and dissatisfaction, a strategem often associated with Trotsky.  But in June 2020, as we've said, there is likely to be a strong desire on the Left to leverage the rare moment to obtain something immediately tangible on the political front (as well as, errr, electrical goods and fashionable clothing).   "A better deal for BAME people" or similar doesn't really advance their cause in quite the immediate ways they'd like.  Black History Month to be extended to a full year?  Compulsory diversity training for the entire population?  A special BAME minimum wage?  Immediate rehousing for everyone living in a tower block?

The problem is clear.  For a political demand to be successful, the gain it seeks must be tangibly, irreversably deliverable.  This is a real challenge for sudden uprisings, when the said gain must be promptly deliverable, too - before the rain starts and everyone packs up and goes home.  As British history amply illustrates, it ain't as easy it it might seem (Chartists, Pilgrimage of Grace, Peasants' Revolt etc etc).

This puts us in the realm of what I call politics with short lines of logistics.  Stuff that can effectively be done with the stroke of a pen.  (That's why "release of prisoners" or "returning troops to barracks" feature so often, for example.)  Foreign policy can more often be in this category - treaties, troop movements and the like.   But big domestic items - "general improvement in welfare" or "Green New Deal" can't be delivered on the spot.  Even legislation can't be promised in a useful timeframe for a riot situation

The XR Precedent

XR is interesting - and not, in truth, really a riot.  In many respects it's surprising XR was so easily fobbed off with can-kicking legislation, albeit notionally epic in scale.  If things get really bad, Boris will keenly wish to repeat this trick.  And I could well imagine some on the Left reckoning the XR type of outcome - virtue-signalling legislation for long term change, mutatis mutandis - is actually quite a good one, if less immediately dramatic than a coup.  If Starmer is as smart as some reckon, that's what he'll angle for:  it's Parliamentary (which he'll happily front for any day of the week); it can be packaged to look highly responsible; he can even attempt to get (some) all-party support - very PM-like.  In fact, if Cummings is really on the ball, he'll be planning how to get ahead of this one right now, as May more-or-less did last year. The upcoming "Great Recovery Bill" is the obvious vehicle; and if Boris doesn't propose the relevant clauses himself we may be sure Starmer will be quick with his own amendments.

But back to demands emerging from the more lurid extra-Parliamentary riot-scenario: what's it to be?  I mentioned release of prisoners with a purpose, because amnesty for looters might very well be on the list by the time we're finished.  Beyond that, I'm not keen to give anyone ideas.  Except ...

The EU Angle

As has been widely surmised, part of this imminent potential crisis is surely tied in with the looming deadline for Barnier to come off the pot.  A classic stroke-of-the-pen job would be to demand, say, that Frost be sent to grovel for an extension of the transition period.  Let's see how this is first floated in public - a C@W Extension Bingo prize for the first authentic sighting of this in the specific context of the putative riots.  (Note, however: a lot of the activist Left is for Lexit.)  With the Beeb's active connivance, ways can be found to insinuate this, then try to sell it as part of a package to appease the looters.  Far-fetched?  That's before you factor in the deviousness of a Mandelson or the brazen determination of a Gina Miller. 

Here's a prediction.  If the putative arson etc is on a scale that's material for the economy, the EU will swing in with an offer, along the lines of:  UK to get a pro rata share of an EU post-Covid economic stimulus package, plus immediate solidarity & cohesion fund payments targeted at inner city areas (to be distributed by city mayors) - in return for a 2-year transition-period extension, plus x, y and z ... 

Even Starmer might find it hard not to front for that.


Friday 5 June 2020

C@W channels Ambrose-Evans Pritchard

When I was younger I use to always read AEP, I felt he was the most serious economic journalist in the UK, taking a global view of macro economic events, speaking to key participants and reporting in a complex but persuasive way. As the years go by, his track record though builds up, he always thought the next recession was round the corner and with it would be the end of the world as we know it. In effect, he really is a marxist analyst, much as he would reject that label, his work speaks for itself, somehow capitalism will always fail (well, everything will, he is bearish on China too for balance).

However, at the moment I feel very AEP myself. The markets are nice and frothy, with the FTSE barely 15% down from its pre-Virus year high. The US market is UP this week, after the largest civil unrest in a generation and one hundred thousand visu deaths - obviously.

There are though some key markers coming up, the June quarter rent day in the UK will be important. At last quarter end most rent got paid, but lockdown had only been in place for just over a week. This time it is 3 full months. Landlords have made preparations for this event but it could get ugly. If not enough rent is paid, borrowing covenants will be breached and banks will start to call in their loans. This may set of a chain reaction and credit crunch - not on the scale of 2008, but very bad nonetheless.

Also at the end of June the Q2 GDP figures will come out across the West. These will be bad, with 15-30% falls - for just one quarter. This is far worse than anything in living memory. Maybe if the viurs recedes markets will live with this and look to a better future.

But to my mind, even if we get a quick bounce back, markets can't stay at a mere 12% off pre-crisis levels when the economy as a whole is smaller than this and only is at that level because of hundreds of billions of Government spending and debt creation all over the world.

To me the only question is how big the dip will be in the summer.

Wednesday 3 June 2020

A Strong Sense of Déjà Vu

Now where have we encountered this before.  As recently as, oh, 2020.

In a foreign country, a ba-ad situation is developing.  There's no reason to believe we in the UK are immune from it.  Many of the same factors prevail here, too.  It's on our screens, every day and every night.  Hmm, we think, perhaps it won't spread to here - not to the good old United Kingdom ...

Boris doesn't seem to think so either (to the extent he ever engages his brain).  At least, not so you'd notice. 

Are any preparations being laid on just in case it does, though?



Monday 1 June 2020

Corbyn's legacy - endless protesting

One of the downsides of the many happy upsides to Jeremy Corbyn being Labour leader last year, has been his legacy of continual protest. Corbyn was keen to get on board with the lies spewed by the unltra-left (such as Austerity has killed 120,000 people, Boris the Butcher and other pathetic memes) and to encourage 'resistance' against the Tories. Indeed, this was deemed more important than winning elections (see, there were upsides...).

Now we have the awful murder in America of yet another black guy by over zealous police. Having lived in the the US myself, the police can be very dangerous to get involved with. They get shot at very often so tend to take no chances. However, this was a horrible case of murder. As such the police have been fired and put on muder charges. In the US, radical Antifa types have used this as a proxy for a bit of rioting as have the various criminals who have had their 'livings' curtailed by lockdown.

Why though a huge protest in London? Justice in the US is being done, there is no similar case in the UK. The huge protest in London was a chance to have a little protest and possibly again for some criminals to get out and about and back to a bit of nicking.

This is Corbyn's legacy, any issue anywhere needs a huge protest and somehow it is the Tories fault - ecology, fascism, communism, police brutality- whatever cause takes their fancy (except grooming gangs for some reason). Even when the issue is a domestic one in the US.

In lighter times I wuold be relaxed, this is a good way for the left to expend their energy without achievingng any of their nutty aim. But with us literally just having a bit of control over the Coronavirues it was a very porr thing to do to have a mass protest in Central London yesterday. Sadly it shows what a bunch of hippocrits lefties are, baying for Cummings' blood a few days agho but happy to go on a dangerous march which could easily become a super-spreading virus event.