category: Opinion



4
days ago

Low oil prices – a threat to the dollar

I’m on an email discussion list that includes a bunch of people in the oil industry. On an average day the ratio of shop-talk to global conspiracy stuff is 10:1… and really, there’s only so many times you can read the same impassioned arguments about the merits of different fluid injection methodologies. But every now and then a discussion about a wider political issue gains traction. By and large these are sober, conservative (small ‘c’) engineers not taken to flights of fancy. So when they start saying things like “there’s only a 60% chance the US dollar will still be a viable currency in 18 months”, it piques my interest.

For the past couple of months there has been an almost complete consensus among these people that the Gulf States are driving down the price of oil in order to destabilise Iran. There’s even a guy who – having spent some time chatting with a staffer in the UAE oil ministry – claims that Saudi Arabia, Kuwait and the UAE are targeting $40 per barrel by the middle of 2015 and they intend to keep it there for a year.

As an aside, I read a message from a guy who said he expects 5 year oil futures to drop below $85 any day now. That there… that’s as close to a sure thing investment as the modern financial industry is capable of. What’s more, given the short-sightedness of the financial industry, I wouldn’t be surprised if you could buy November 2020 oil futures for less than $70 by this time next year. Pretty crazy.

Anyway, there’s no doubt that Iran’s economy is utterly buggered if this continues for much longer. Even if the $40 for a year thing is exaggeration, this is presenting Tehran with very serious problems.

Thing is, Iran isn’t the only place this is hitting hard. The Gulf States can weather this storm, but almost no other major oil exporter can. And while oil importers are quite enjoying this period of temporary price-fixing, places like Venezuela and Nigeria are suffering. The fracking industry in the United States is also in trouble (though this price drop is only one of the reasons for that) but America isn’t too worried about that because they like seeing the squeeze put on Iran, while the damage being done to the Russian economy is being seen – curiously enough – through the lens of Ukraine, the Malaysia Airliner disaster and what’s being viewed as Putin’s increasingly aggressive stance towards the west. So the Americans are offering their explicit support to the Gulf States in order to put Russia under pressure.

Now, let’s be under no illusions here… Putin is a dangerous man. I’ve noticed more and more western liberals buying into the Russia Today narrative and viewing Putin with a kind of grudging, “enemy of my enemy” respect. Which is madness, because this guy should be viewed as at least as big an enemy as western capitalist imperialism. Anyway, it’s simply inconceivable that Russia won’t respond dramatically to this very real threat to their national economy. And what response will that be?

Well, according to the mailing list people, Putin is getting ready to announce a major shift in policy. Early next year he will be switching all of Russia’s petroleum trading to roubles. That’s what they’re saying on the grapevine anyway.

A lot of people – even economically literate ones – don’t fully understand the important link between the US dollar and the global oil trade. The pricing of oil in dollars isn’t just a matter of convenience. All trade in oil actually takes place in dollars. Dollars get exchanged for oil. Not euro, or roubles or yen. This ensures a constant demand for dollars as anyone who wants oil… i.e. everyone… needs to buy dollars before they can buy that oil.

Not sure if you’ve noticed the huge collapse in the value of the rouble in the past week? And the huge Russian interest rate hike? Well, according to some people Russia has deliberately torpedoed their currency in order to buy back roubles, from anyone who has them, at a bargain price. Because if Putin goes through with this and demands roubles in exchange for oil and gas? He will instantly make the rouble into a European reserve currency. Demand will rocket and the dollar flight will begin.

Unlike other countries, the US will not be able to intimidate Russia into backing down on this. Especially given the huge hardship being caused to Russia by this US-supported Gulf strategy. And if it turns out to be a success for Putin (which I think it will do) then there’s really nothing to prevent other countries doing the same.

The Saudis, with the support of the US, are playing a very risky game right now. And one that could result in the end of the dollar as global reserve currency. Sleep tight.

Leave a comment  |  Posted in: Opinion


14
Nov 2014

Oil at 80 dollars

Those who keep an eye on such things will know that something very strange has been happening with the oil price over the past few months. Saudi Arabia, Kuwait, Qatar and the Emirates have been aggressively driving down the price of oil (and have just signalled their intent to continue doing so). This fall has not coincided with an equally precipitous drop in demand, and it is not – except tangentially, in a manner I’ll discuss in the fifth paragraph – related to the “unconventional oil” coming out of America thanks to the fracking boom. That whole fracking thing is smoke and mirrors of the first order by the way.

No, what’s happening with the oil price right now is geopolitical. What’s more, it heralds an era of increased geopolitical tension.. something that’s only starting to filter through into the mainstream. There’s a big wake-up call coming folks.

What do I mean when I say the price drop is geopolitical? Well, it’s important to understand that when it comes to oil, the Saudis (and the other Gulf Kingdoms) are very astute. Right now they possess a large enough share of the oil export market to effectively drag the global price any direction they choose. And this has a massive effect on the global economy. However, it is extremely unlikely they will still possess this influence in 20 years (even 10 years from now there’s no guarantee). Based on depletion profiles that they take very seriously (even if the western media does not), they will never possess as great a global influence as they do today.

Saudi Arabia is taking the lead on this, and is being backed by Kuwait and Qatar (with the United Arab Emirates a more reluctant fellow-traveller… this hurts their economy more than it hurts the others for a bunch of reasons). It’s important to realise that it is not an OPEC thing. In fact… OPEC is bloody furious. And with good reason; a number of OPEC nations are going to end up as collateral damage in all this (Venezuela and Nigeria are both being crucified).

Russia is also feeling the pinch. And the fracking boom in America is being hit very hard. That entire industry is a pipe-dream. It can only exist thanks to massive government subsidy in tandem with a very high oil price. Both of which can be arranged, it’s true, but more importantly… there just isn’t as much of it as has been suggested. Nowhere near as much. And ramping up production to cover the drop in conventional crude production simply isn’t going to happen.

Now, it’s unlikely the Saudis are willing to take such a large economic hit themselves simply to undermine the US fracking industry. That Financial Times article suggests that the low price could put a strain on US / Saudi relations, but as an overall economy the United States benefits from a low oil price. So I don’t see that being the case. Besides which, the US and Saudi Arabia are firm allies and they share a common enemy… Iran.

The real reason the global oil price is low* right now is because Saudi Arabia is waging economic warfare on Iran.

When a country gains a large proportion of its income from oil exports, it is possible to calculate a “breakeven oil price” for that country. That is, the price at which they must sell oil to cover government spending. Different economists tend to come up with different numbers (no surprise there) but if you see them as a guideline rather than an absolute value then they can be illuminating. CitiGroup say Saudi Arabia’s breakeven number is $89. The IMF says it’s $80. Deutsche Bank say $78. So you can see that having oil down below $80 per barrel is going to hurt the Saudis, but it’s something they can live with – this is not a nation that finds credit hard to come by. Qatar’s down in the mid-70s. While Kuwait’s breakeven is between $54 and $75 depending on who you listen to.

Not so Iran. According to CitiGroup they have a breakeven price of $130. The IMF suggests it could be as high as $140. And if you hear an analyst on the news try to explain the current fall in oil prices in terms other than an outright economic assault by Saudi Arabia against Iran, they simply do not know what they’re talking about. Because this is shattering the Iranian economy. It’s also giving a proper kicking to a bunch of other oil exporters. Nigeria and Russia both have notional breakevens above $110 and Venezuela is right up there with Iran when it comes to exposure to low oil prices. As for Iraq… if the country is to have any chance of surviving as a united entity it needs a reliable income stream, and with a breakeven price around the $100 mark, it doesn’t have that right now.

The effect on Russia is particularly concerning, especially if you’re a European like me who has just witnessed Putin sign a contract to sell a whole bunch of gas to the Chinese and can see the spectre of European gas shortages should this looming Cold War escalate (when the normally taciturn Finns start complaining about something, it’s a good idea to listen). The notion that “they need our money as much as we need their gas” has simply never been true (the Russian capacity for belt-tightening far surpasses the capacity of European governments to survive power-cuts and cold winters… so European governments will always cave first). And it’s especially not true now when the Asian economies can provide an alternate source of income. Falling oil prices puts additional pressure on Russia and is likely to drive Putin towards a more aggressive foreign policy (in my view).

But Iran is the target, and while nobody outside Gulf aristocracy knows how long they plan to keep up this assault, it is likely to only be the first in a series of oil price manipulations over the next few years. And as a result, we’re likely to see the kind of geopolitical brinkmanship that has the potential to end very very badly indeed.

* Incidentally, describing $80 as a “low” price for oil would have been dystopian madness just a decade ago.

1 comment  |  Posted in: Opinion


4
May 2014

Today I Thunk: Political Promises

“Today I Thunk”… kind of like “Thought For Today” but with less gravitas.

Political PromisesSo as campaigning continues in the local and European elections, I am struck by just how hollow the claims of the candidates sound. We have reached a point where I basically assume a politician is lying whenever their lips are moving. Or at best, they are too damn stupid to understand just how stupid they sound. Either they are schemers with a hidden agenda, or they are careerists without the intelligence to hide their agenda of pure self-interest. And the problem, of course, is that politics has become a job without any consequences for failure*.

Which is kind of crazy given that it’s actually a pretty important job. Indeed, with the exception of Hollywood film producer and premiership referee, there is surely no other job where you can so consistently demonstrate incompetence and yet face no negative consequences aside from transient public criticism.

So here’s an idea… when politicians are campaigning for our vote, they should be obliged to sign a contract with the electorate. This contract would outline the exact terms by which their party would measure success if elected.

So, for example, they might state that unemployment would be below a certain percentage after their first term in power. Or that the number of people classified as being in poverty would be below a certain number. There are all manner of metrics that can (and should) be developed to quantify the success (or failure) of a government.

Then, at the end of the term in office, if they have not succeeded in keeping a significant proportion – say 75%? – of their promises, those individuals are legally prevented from (a) standing in the next election, and (b) drawing any pension from that term of office.

If nothing else, this will result in political parties being forced to openly admit they’re unwilling to make ambitious promises. It will demonstrate the paucity of their belief in their own intentions. It will bring some much needed “consequence” to their almost inevitable failure. And – over time – it may even result in a better class of politicians – people willing to make ambitious promises that they actually intend to keep.

* Voltaire wrote that “the ideal form of government is democracy tempered with assassination” and – as awful as this may sound – I think there may be something very wise in his satirical comment. We desperately need some form of negative consequence for political failure (and no, getting voted out of office with a hefty pension and a future full of non-executive directorships hardly qualifies).

2 comments  |  Posted in: Opinion


9
Apr 2014

U2 and It’s a Wonderful Life

Browsing twitter, I noticed Chris Brooke posted a link to an interview with a Tory MP in which he reveals that U2 is his favourite band.

Achtung BabyNow I happen to really like U2. It’s difficult perhaps to separate them from their stratospheric success (and Bono’s messianic shenanigans) and appreciate them musically. But just because Achtung Baby and Zooropa sold a kajillion copies doesn’t stop them being two of the most sonically interesting records of the 90s. As with The White Album… sometimes the stars align and what is popular achieves harmony with what is Truly Great. The albums just before and just after Achtung Baby and Zooropa had wonderful moments, but (and this not a popular opinion among my more musically discerning friends) those two were perfect slices of musical Greatness.

Crucially though, what they are not is political. There’s veiled social commentary here and there, but it’s mostly love songs, songs of regret, songs of personal loss and a whole bunch of Irish Catholicism. All played out across an Eno-produced soundscape of rock, electronica and complex polyrhythms. It’s what Can would have sounded like if they’d formed in 1989 and had an ego-maniacal philanthropist from Dublin as a lead singer.

As I say though, it’s not political music and they are not – in general – a political band. Sure, no band goes 30 years without doing some political stuff, but overall that’s not what they’re about, and an appreciation for U2’s music is no indication of political leanings (unlike say, Billy Bragg… if you say you’re a big Billy Bragg fan there’s a better than evens chance you’re left wing). Meanwhile, I doubt there’s a great many left wing Ted Nugent fans.

So it does not surprise me that a Tory MP would be a U2 fan. No more than it would surprise me that a Tory MP might be a big fan of Miles Davis.

Mr PotterWhat I did find surprising about Sajid Javid MP’s interview, however, was his claim that his favourite film is It’s A Wonderful Life. Because that film is overtly political. It’s a film that is vitriolic about the effects of capitalism on community life. Sure, sure, some see it as an ode to a simpler, kinder capitalism (a golden age that never existed) but that’s hogwash – Master’s degree in Critical Theory and Film Studies be damned! – it’s as close to a socialist manifesto as mainstream American cinema is ever likely to achieve.

And if that last scene where the whole town gathers together and pools their money to help out a down-on-his-luck neighbour is too subtle a metaphor for the average Tory MP; the film even has a character who clearly and unequivocally represents the capitalist establishment… represents Toryism. So how difficult must it be to list It’s A Wonderful Life as your favourite film when it chooses to depict you as Henry Potter?

Leave a comment  |  Posted in: Opinion


25
Mar 2014

There’s still money in mediocre coffee

For almost three years the façade stood bare. An empty shell of a building where once beat – symbolically at least – the dark heart of the Celtic Tiger. But the ephemeral nature of consumer capitalism means even the mausoleums are fleeting. A pause for reflection. But not too long, there’s still money to be made and we wouldn’t want to dwell, would we? We’ll always have the photo-montage I suppose… a reminder of how banal it all ended.

And so it was that the building that once housed Anglo Irish Bank lay empty for three years. Lurked more than lay. An unhappy reminder every time you were on Stephen’s Green of what happens when you gather all the greed and all the stupidity into one building and bizarrely hand them the reins of power.

But three years is a long time for Stephen’s Green real estate to lie fallow. I mean, decorum is one thing but wantonly throwing money away? Tch tch tch.

And so it was that earlier today someone captured a photo of the new tenants having their façade installed. Someone should tell Zizek, he’ll love this…

1 comment  |  Posted in: Opinion


10
Feb 2014

Bank of Ireland redefine time

Most of us, when we hear the phrase “that will take 24 hours” assume that means one day. The thing “that will take 24 hours” will be done the following day.

Not so the Bank of Ireland. For them, 24 hours seems to equate to “some unspecified time over the next week”. And this isn’t just a case of them being late in a particular instance; this is how the system works. They have redefined 24 hours to mean “some unspecified time over the next week”.

Last Thursday I logged into their online banking system. I clicked the relevant buttons to make a transfer from a deposit account to a current account. This process “should take 24 hours to complete”. So, in a world where bankers aren’t in charge of defining units of time; a world – in other words – where a modicum of sanity prevails; that means the money should be in the current account some time on Friday. Makes sense, right?

Well, it’s Monday afternoon and I’ve just spent 15 minutes on the phone with a nice lady at Bank of Ireland who, through no fault of her own, found herself insisting that 24 hours from Thursday afternoon can actually – under certain circumstances – mean Tuesday morning. It seems that when it comes to time distortion, the Bank of Ireland could teach Doctor Who a thing or two.

Bank of Ireland

Remarkably, during our conversation, she explained that when I make an online transfer between a deposit and a current account, I’m not actually setting the transfer in motion. I’m effectively sending a message to someone in a Bank of Ireland office to do it for me. That’s right, despite the shiny web interface and claim that I’m engaged in an “online transfer”, I might as well be mailing them a letter requesting they carry out the transfer for me.

As I pointed out to the nice lady at the end of the phone, if I’d popped down to my local branch on Thursday afternoon and withdrawn the cash at the counter, then deposited it directly into my current account, the transaction would have taken less than 5 minutes. Instead, thanks to the magic of modern technology, I’ll be lucky if it takes less than 5 days.

2 comments  |  Posted in: Opinion


9
Jan 2014

The Right’s not what it seems either

Just as our notions of The Left have shifted dramatically in the past forty years, a story caught my eye today that illustrates how The Right (and I’m talking here about the mainstream right) has made a shift of its own. The story is ably summarised by the headline: Firefighters In Tears As 10 Stations Close In London.

Few stories so perfectly demonstrate the Thatcherite transformation of the British Conservative Party. A transformation that itself helped galvanise a terrible global trend. Not so long ago, the Tory Party stood for two things… money and tradition. And while “money” would often win out – it did lose a surprising number of battles and certainly didn’t get things all its own way.

Then Thatcher came in and ripped “tradition” out of the Tories. Now it’s all money.

I’m not saying the Old Tories were a better breed of economic oppressor (in many ways they weren’t) but they were a very different breed. Yet the British media has allowed them to retain the appearance of a party that stands for “tradition”. Just as the media still calls Labour “left wing”.

This matters of course, because it permits people to be hoodwinked into supporting politicians they otherwise wouldn’t. The Conservative Party, pre-Thatcher, would never have expedited the closure of London’s oldest Fire Station – a grand old institution that served the city through the Blitz and more – and then added insult to injury by allowing it to be replaced by something so crass as “a block of luxury flats”. There are people out there who still vote for Boris Johnson and his ilk because they represent “the Britain of old”, something to be cherished, steeped in a history of True Greatness. Whether you agree with that view of British history or not is irrelevant, the point is – the modern Tory Party don’t. And lots of people still vote for them because they hide that fact.

Boris Johnson
Talk of budgetary constraints would have been seen as vaguely treasonous to the Conservative Party of fifty years ago. The survival of that fire station (and others like it) would be considered a top priority to those who take genuine pride in the history and traditions of Britain. A group of people that demonstrably does not include Boris Johnson, David Cameron or George Osborne.

So yeah, British friends… vote for the tories if you’re already very rich. That’s fair enough, they’re on your side. But don’t vote for them because they’re the party of your grandad who fought in the war. They really aren’t any more.

(and neither are that UKIP bunch)

2 comments  |  Posted in: Opinion


9
Sep 2013

Today I Thunk: Mac Vs Windows

“Today I Thunk”… kind of like “Thought For Today” but with less gravitas.

Mac Vs WindowsScanning through my twitter feed this morning I encountered not one, not two, but three separate tweets insisting (using clever little analogies) that Apple Mac Computers are better than Windows Computers. “My computer is better than yours!” they wailed (I’ve always felt Mac users protest a little too much, to be honest, but that’s another discussion).

Are these people children? Or have they reached adulthood without managing to grasp the notion of personal preference? For the vast majority of people, they are most comfortable using whatever computer they first spent time with. Mac? Windows? It makes no difference.

I can do literally everything (I need to do) on a Windows system that an Apple user could do on their Mac. More than that, years of use have made me comfortable with Windows and not with Macs, so if you were to ask me to do the same thing on a Mac I would take twice as long because I’d be struggling with a system I’m unfamiliar with. But I’m pretty sure I could do anything I need to do on a PC in roughly the same time as someone familiar with Macs could do it on their system.

The need of some people to tell the world how much better their computer is to your computer or my computer is a need rooted in playground insecurity. It’s weird, it’s adolescent and people should really get the hell over it. I use Windows because I’ve used Windows for 20 years now. It is the best system for me. When I hear someone tell me that actually their system is better, I picture that person running up to a concert pianist and insisting that the guitar is a better instrument for making music.

Seriously, that’s how much sense you’re making with this weird computer one-upmanship you’ve got yourself involved in. Put an end to it now and embrace the adult realisation that other people don’t feel exactly the same about everything as you do. Sheesh.

1 comment  |  Posted in: Opinion


22
Jul 2013

A new age of censorship

David Cameron gave a speech today in which he called on British Internet Service Providers (ISPs) to implement filters on the internet in order to block pornographic content. Certain types of pornography would be banned entirely (obviously those that are already illegal, but also “simulated rape” imagery) while other legal forms of pornography would require a person to explicitly “opt in” with their ISP in order to be able to view it.

Now, this is obviously a sensitive subject (particularly when we’re talking about something like “simulated rape”) and it’s not something I want to spend a huge amount of time on – the blogosphere is full of commentary on the subject and I probably don’t have a great deal to contribute to the debate. However, I do want to add my voice to the calls for extreme caution with regards to this issue.

I’m not going to deal with the moral issues surrounding pornography. They are ably covered, from all sides, by a myriad different writers. However, I would like to request that those who are calling for filters and bans, define their terms. Because nobody seems very willing to do so. A ban on “simulated rape imagery” would obviously cover some deeply depraved stuff. The kind of stuff that would turn the stomachs of most of us.

SRIBut such a ban would also ensure that a whole host of films and TV shows are banned from our screens. Jodie Foster’s powerful Oscar-winning performance in The Accused would clearly never be permitted in Cameron’s Britain. If you claim the film does not contain “simulated rape imagery” then you have not seen it. The same is true of Platoon, Pulp Fiction, A Clockwork Orange, The Outlaw Josey Wales and dozens of other excellent films (plus probably thousands of films that are less excellent but I’d argue are a long way from being worthy of a ban).

Hell, even Akira Kurosawa’s acknowledged masterpiece, Rashômon, while showing very little of the crime that forms the heart of the film, nonetheless contains what can only be described as “simulated rape imagery”. The entire film – as with The Accused – centres on the aftermath and consequences of a rape. Are we suggesting the subject is entirely off limits? Or that it can only be obliquely referred to as an off-screen event?

On the (very few) occasions that defenders of the proposed ban have tried to define exactly what it is they are banning, they fall back on the “intent” of the film or scene. If the simulated rape is intended to titillate or arouse a viewer, then it should be banned. Which means these people are willing to allow – nay demanding – the government be given the power to ban films based on their interpretation of the film-makers intent. If that’s not close to the definition of a slippery slope, then I don’t know what is.

I know, I know, there will be clear cases where a simulated rape scene is obvious pornography. But how do you write that into law in such a way as to ensure that the government cannot decide to use that same law to ban The Sopranos, Twin Peaks and Breaking Bad from our screens? And as someone has already pointed out on Twitter, David Cameron himself owns the TV series ‘24‘ on DVD. Yep, you guessed it, “simulated rape imagery”. Nobody is arguing that there aren’t deplorable things out there; things I don’t want to see and I suspect the vast majority of those reading this don’t want to see either. But I want to be able to draw that line for myself. I certainly don’t want David Cameron or Enda Kenny or any politician drawing it for me.

1 comment  |  Posted in: Opinion


12
Jul 2013

Solar activity Vs anthropogenic Climate Change

I read the news today, oh boy.

New research has been published indicating that solar activity has been in steady decline since the 1940s. This suggests that there is a tug-of-war currently under way between the effects of reduced solar activity on the climate (making the globe cooler) and the effects of human carbon (and other) emissions on the climate (making the globe warmer). Right now, it seems humanity is “winning” the battle.

Solar ActivityHowever, it does seem possible that might change if solar activity continues to drop as is predicted by the new research. Far from offering ammunition to climate change sceptics (how long before fossil fuel companies seize upon this as a marketing opportunity?) this presents an even more terrifying prospect for human (and other) life on this planet. Because it seems to me that this research conclusively demonstrates that we have passed the important tipping points with regards to atmospheric changes; the worst effects of which may have been masked by the decline in solar output.

So even if we do find ourselves drifting into a mini-Ice Age, the historical precedent for this drop in solar activity seems to suggest it will pick up again after a relatively short period of time (there was an 80 year period in the 17th century during which solar output went through the same kind of decline). One assumes the atmospheric changes we have wrought with our industrial output will be massively magnified once the sun starts to ramp up again. From Ice Age to near-global desertification in the space of a century?

We need not only to radically cut our emissions, but we need to return large areas of arable land to uncultivated woodland in order to capture some of the carbon we’ve already released. I suspect that’s politically impossible right now… let’s hope for a more enlightened tomorrow.

4 comments  |  Posted in: Opinion