Friday, 19 December 2014

Is the North Sea really a dead duck?

The papers are full of bandwagoning about the death of the North Sea. Do we think this is true though or just useful copy as the fall in oil price plays out.

Here are some thoughts on it:

1 - The oil price will bounce back, but in reality the days of $200 oil are a chimera. There is lots of shale oil, LNG is replacing oil demand rapidly across the world (rapid in terms of over this decade). Many countries full of oil have restricted access to market - Libya, Iran and Syria for example.

2 - So where will it hit, well the ceiling may well be governed by the Shale Oil sit around $69 in the US currently, maybe a tad more. So long-term this may well be the placeholder for oil to float around - touching a hundred in times of stress maybe, but no further. Certainly going lower at points such as we are now.

3 - Oil demand is rising more slowly than in the past as the world grows more slowly and Renewables and LNG take the strain- another long-term constraint is in play.

So, overall this is very bad news for the North Sea, where extraction costs are $60-70 per barrel - the same as Shale oil. So it won't die but it becomes a very marginal business with small fields at the end of their lives. Plus the increasing regulation around decommissioning is another negative factor.

I can't see a new North Sea rush without huge tax breaks (umm, by which I mean reduction of the huge taxes on production and distribution, not actual subsidies) which maybe what is needed. The greenies in the political parties may well put a stop to this.

Such a shame for the humour of the world that the Scots did not go independent though and then have to face this reality!

Wednesday, 17 December 2014

How wrong can you be?

I seem to have lost my touch. 
Anytime there was a story in the media, that I formed an opinion on, I have been wrong.

I expected that a baker who didn't want to bake a cake for a client, for whatever reason, wouldn't have to. I was wrong. 
I thought that Douglas Carswell's principled re-election stance would prevent any followers. Wrong again. 

I supposed that a bisexual husband who handed a brown bag to a taxi driver, who then killed that man's wife, would at least have to face trial to explain why he went on online dating sites the night after her death. Wrong again.

I guessed that a man who fired fatal shots through the en-suite bathroom door would be guilty of manslaughter at the very least. Nah...

I thought that the last thing the government would do to revive the economy would be to give the housing bubble another pump. Another miscalculation.

Ii thought missing flight MH370 would turn up somewhere. It hasn't.

I guessed that the Scottish Referendum result would draw a line under independence for 20 years or so. It didn't.

I thought England's super dismal performance in Brazil would necessitate the usual change of manager. Oddly,  that never happened. And I thought Louis Van Gaal would have made a blistering start at Manchester United. Instead of the mud like slog they have been making of their season.

I assumed that government would not ban smoking in cars with children on the grounds its largely unenforceable. They jumped at the chance to introduce a pointless law.

I thought Putin just wouldn't push it too far and try and annex the Ukraine. He tried.

All in all .. I have been off on almost any decision I have thought about.

A pretty sorry state of affairs.

The only silver lining is I also thought that by now Miliband would be 7% ahead in the polls and looking at a 50 seat majority.

Beware the wounded Bear?

I have little time for the likes of Russia Today that seek to perpetually push a meme about how the West abandoned Russia in the 1990's and then sought in more recent years to re-ignite the Cold War. It is full of bathos about the role of Russia in the world and its assumed status as a global superpower.

in 2014, we can now see the true strength of Russia, high military spending and a resource based economy that was a major player in the world. Rather like Brazil then, with a bit more money spent on the military. However, with the collapse in the oil price driven by the global slowdown and rise of Shale Oil in the US, it is amazing to see that Russia's economy has unravelled as fast as that of known basket cases like Iran and Venezuela.

After all, Russia is full of very clever, bright and tough people - it should be in a better place than it is. Clearly the war in Ukraine has drained resources and the denial of access to Western Banking (so ironic that the bane of the anti-capitalist Left wing in Europe and America now proves to be our most effective means of extended diplomacy) has left Russia very exposed.

Raising interest rates by 7% in a day is not ever going to prove an effective strategy, plus a currency fall of 50% is going to push inflation up hugely on all imported goods, in Russia, this amounts to most products given the dearth of non-oil and non-defence industries.

Putin himself is so entrenched politically that he is unlikely to suffer an adverse consequences such as a coup. Everyone is on board with his project or has already been eliminated. The opposition is very weak and the people, sadly, brainwashed by extreme nationalism and partial media coverage by the likes of Russia Today equivalents.

The thing is, the West maybe feeling clever that it has brought about this denouement (really, its Saudi Arabia to a large extent, they offered a deal to Putin which he turned down). But Russia is not Iran or even Venezuela. The Ukraine apart Russia is not a sponsor of state terror or mass murder. Russia is as concerned about Islamic Extremism as the West is. Russia is at its heart a European country.

Whilst its lack of democracy and history of democracy makes it unlike a Western European state, Russia has no long term interest in facing away from the West. Today, it is likely to re-assess its chances of making its way in the world with the support of perfidious China.

The Politicians in the West would do well to try to accommodate some Russian demands to allow a climb down in the Ukraine and a normalising of relations. A bankrupt Russia, nuclear armed and run by paranoid Oligarchs is not the best outcome for the situation from here.

Tuesday, 16 December 2014

Miliband and Immigration

Mili's spin on the immigration debate is instructive: the 'root cause' of unhappiness is that immigrants are being paid so little - nay, being exploited !  The solution, as always, is to invent a new criminal offence: 
“This new criminal offence will provide protection to everyone. It will help ensure that when immigrants work here they do not face exploitation themselves and rogue employers are stopped from undercutting the terms and conditions of everyone else.”
Somhow I doubt this analysis and cure will defuse the 'not very well-drafted immigration / UKIP strategy document' row.  But when the dust is cleared, let me offer some observations on Ed's plan.  As regular readers will know I have good ongoing links into the civic affairs of the borough where once I was a councillor for many years, with plenty of accurate data from the front line.   Said borough is ultra-diverse with no one ethnic group really predominating, but there is one particular area (containing - no coincidence - the block that was razed to the ground during the riots in '11) that is solidly Tamil: quite well-organised and very hard-working.

And Mili will wish to be apprised that the going rate for jobs there is £2.00 per hour: everybody knows the score.   A tad lower than the Minimum Wage, I believe, but there we are.  Muster your raiding party, Ed, and lock 'em all up.

No?  Thought not.