The Market Rules And The Government Cannot Stop It

I was seventeen when the Yom Kippur War broke out creating the oil price shock that plunged the West into industrial crisis.By kind permission of Raedwald I reprint his article of yesterday-


I can't find anyone arguing that oil at $100bbl is not here to stay; no-one is calling it a blip, and no-one is expecting it to drop back to $40bbl. And few are arguing that it will stay at $100. Now the dreaded
$200bbl is being mooted; it may not be this year, or next year, but maybe by the next election it will be with us. Our economy may still be bumping along the bottom, but elsewhere China and India are growing at
up to 10% a year; tar sands and deep water wells take time to come on stream, and investments are only now being made on the basis of a stable $100bbl price level. So can we live with oil at $200bbl?

Natural gas for space heating and power will become more important. Gas is about a third the cost of oil per btu, so investment and capacity in our gas handling, storage and distribution system will be key over the next
few years; CNG by sea, with a Navy to protect the trade routes, will also be critical. 

The major impact will be on travel and transportation costs. As we import over half our food, this will have a direct inflationary effect. The cost of animal feed and fertiliser domestically, dependent on oil, will also rise. Food's going to be expensive. The supermarket model, with an intensive distribution network of national depots, will cost a lot more to run, making truly local produce sold locally more competitive. 

The era of cheap low bulk value materials from China and SE Asia will be over. This will hit the cost of building products; the big European building products firm that set up a new plant in Thailand a few years ago to manufacture structural cement particle board was based on transport costs of £20/m2. At £40/m2, it won't be competitive. The same for Chinese granite, now so cheap and ubiquitous that every shopping street in England is being paved in it, and every mediocre new commercial building clad in it. Of course cement, steel, gypsum
products, clay bricks and blocks and other domestic building products that are high-oil to make will also increase in cost. As will road bitumen, so expect fewer repairs. 

High vehicle fuel prices will hit car owners, rural ones disproportionately so. The cost advantages of alternative fuels - synthetic diesel, natural gas, hydrogen - will become real. Sales prospects will be bad for Landrover, good for the domestic manufacturer of a cheap volume runabout with a 750cc engine that does 60mpg.  And scooters. 

Now's also the time to buy forests. Wood chip and wood pellet burners are set to take off; currently the plant is sized for District Heating and blocks-of-flats scale, but a domestic heater using the Stirling Engine is not far away, and demand for deliveries of bagged pellets may be equivalent to the old coal deliveries in time (those still with coal cellars will be especially lucky ..)  



All in all, I think we're probably better placed than the US, with it's sprawling cities with suburbs stretching 40 miles or more, to face the crisis, but not as well placed as France. The key will be our adaptability - and we Brits have always been fairly good at that.

Thirty seven years ago we still had a manufacturing base that rebounded into the eighties, we do not have that, we have a managerial fabian system that cannot even react to getting British Oil workers out of the Libyan Revolution. Clegg went skiing for God's sake and Cameron went off with a gaggle of arms dealers to the Middle East.





The times are a changing, and big government cannot help you other than introduce rationing at Tescos