The Pin Factory Blog

Should we be worried that the price of oil is over $100? Of course, dollars aren't worth very much these days, so the price is illusory. But it's still high. In the 1970s, when the oil price quadrupled overnight (but that's government cartels for you), the shock to the developed economies was enormous. The current price rise is more down to markets - like strong demand from China - but still alarms many people.

However, high oil prices make it worthwhile to invest in other sources of energy such as solar, wave, and wind power. (So why, you may rightly ask, do government feel they have to subsidize such alternatives?)
Higher oil prices induce consumers to cut back - to install more efficient domestic boilers and move to lighter, more fuel-efficient cars, to turn down the thermostat a notch, or to car-pool to work.

And high prices make it worth looking for more oil - which exists in sands and shale all over the place. And even the Middle East, which has 70 percent of known oil reserves, it relatively unexplored. Only 3 percent of the world's oil exploration has occurred there, according to Pete Geddes of the Foundation for Research on Economics & the Environment. Fewer than 100 new wells were drilled in the Persian Gulf between 1995 and 2004, compared with 15,700 in the United States (which has very much leaner reserves). And apart from the North Sea and a few other places, hardly any of the world's ocean floor is explored at all.

The trouble with oil is that 90 percent of it is controlled by non-democratic governments. It's not a market at all. And the existing producers have every incentive to keep the price up, and no incentive for new exploration. The only answer to the world's energy needs is to create an oil market - which can't happen until democracy and private enterprise is spread much more widely around the planet.

How come America has to choose from just two people to run for president but 50 for Miss America?

As we know there's a lot of screaming and shouting going on about how Gaia is about to kill us all and that in order to appease her we should be burning taxpayer's money at the shrine of renewable energy sources. Given that in the day job I might benefit from such sacrifices made by you all I thought I'd better check in with Jeremy Leggett, the doyen of those running companies which would benefit from subsidies and also calling for greater such. Sadly, I find that his arguments actually prove that I shouldn't get rich at your expense.

Second, subsidies for renewables, or their policy equivalent, are not
needed for long. Costs for renewables are generally falling, just as
the costs of traditional power are rising. When the two trends cross
for a particular technology, in a particular market, a mass market will
emerge, and dynamic new industries with it. The timing for this is
measured in years, not decades.

Hmm, OK, so renewables are going to be directly price competitive in the very near future (even earlier than Bjorn Lomborg said!) so there's no real need for subsidies at all. Its'a gonna happen anyway so why spend money on it? Jeremy has thought of that one:

The issue is whether UK plc will be a player, with strong domestic
industries and domestic job creation, or miss out, having to import
everything and support overseas jobs. As things stand we are set to
miss out.

We're going to miss out are we? Miss out on what? Lessee. We'll miss out on producing our own renewables instead of buying them from Johnny Foreigner and we'll miss out on creating lots of jobs at home....sorry, I've been listening to too many politicians again. "Creating" lots of jobs at home is of course a cost to us, we lose whatever else it is that those people would have produced instead. Making the machines instead of buying them from others is also a cost to us: there's no guarantee at all that we would have an advantage in their production (indeed, given that most silicon fabs are elsewhere in the world, along with the associated expertise, it's most unlikely that we would). For remember, in trade, it's the imports that make us richer, not the exports. And by waiting a year or two we also allow J. Foreigner to pay all of the subsidies needed to make the process economically attractive rather than having to do so ourselves.

Mercantilist arguments for public subsidy were never going to make someone at the Adam Smith Institute all that excited but even when I might be a beneficiary of them I still need to point out that they actually prove the opposite, that we should stop all such subsidy immediately.

Sigh, I'll just have to find another way to shake you all down, won't I?

A virtual pantechnicon has delivered a new 2008 delivery of virtual books to our online bookstore. A title that caught my eye was How to Get Seriously Rich While Failing in Business: A Fat Cat's Guide to Management by Philip Sadler. You can buy it at a knock-down £5.99+pp (the normal price is £9.99 so that's quite a saving).

Looking at the vast pay-offs that go to FTSE-100 managers when they get fired, it certainly seems that you don't need talent to pocket the odd half million. But there's an art to it: you have to be sneaky and negotiate a package of perks and bonuses that will leave you rich without you having to do anything to justify them.

The Sunday Times called this witty commentary on business life 'A book dedicated to the not always popular themes of greed... and good old-fashioned fat-cattery.'

Buy it here, from the ASI bookstore. 

This idea of training Ministers won't work: it ignores incentives and the economics of structure.

Another way of looking at things. If fuel poverty is when more than 10%of income is spent on fuel, then are we all tax poor because we spend more than 10% of our incomes on tax? 

Perhaps we should ask the same question of Gordon Brown here. Which of his Cabinet should have got a 5 year jail sentence for smoking pot? If none, why should the drug be reclassified? 

Looking at the news that people actually read , rather than what they are presumed to want to read, or ought to read, leads to the conclusion that William Boot should have been working for The Daily Bestiality.   

Things are still grim up north. 

Things are not all they seem in the arguments about the UK, trade and the EU. Well, OK, we knew that, but wouldn't it be interesting if a Minister were actually to use the proper facts?

And finally, the only sporran of its type in the world. 

Today the UK government is expected to announce that it will resume the building of nuclear power stations. This is good news for the environment. Nuclear power plants are very clean. They produce very little of the carbon dioxide that fossil fuels produce. In emissions terms, one nuclear power station replacing a conventional one is the equivalent of taking thousands of cars off the road. Almost all the waste is recycled. A well-designed nuclear plant actually releases less radioactivity into the atmosphere than a coal-fired plant.

The bad news is it will take several years to get them up and running, and in the meantime Britain is increasingly dependent on foreign gas supplies. There could well be an energy crunch before the new plant is ready to take the strain.

So the question is: why has the government allowed this to happen. And the answer is: a bit of political ideology and a lot of political cowardice. Nuclear plants produce over a fifth of the UK's electricity, but many are getting old and inefficient. So they are being shut down, and by 2023 - under the policy up until now - only 4% of the UK's electricity would come from nuclear energy. Any sensible approach would have had new building programmes in place so that the power would be there long before the lights start going out.

But this is politics. Energy ministers like Michael Meacher were delighted to consign nuclear energy to oblivion: they hate it just as they hate nuclear weapons, and they loved the thought of wind and wave power doing the job instead. Which it can't.
The political cowardice stems mostly from planning. Politicians fear that local people would object to new nuclear stations being built on their nice coastlines. Maybe they would. But the fact is that nuclear stations have a great deal of support from places that already have them, where they provide much-needed jobs. So rebuild and refurbishment on the same sites would not have been unpopular.

Now, however, the damage has been done. If the global warming scaremongers are right, maybe by 2015 we'll all be sweltering on a Cambridge beach rather than turning up the heating, so there won't be an energy crisis. But I'm not so sure.

I saw a woman wearing a sweat shirt with "Guess" on it.

So I said "Implants?"

She hit me.

6. "Nuclear power is uniquely dangerous and should be banned."

Most forms of energy production are dangerous. The number of deaths or serious injuries caused by the generation of nuclear power is very limited, even including those caused in the Soviet state-sector Chernobyl disaster. The numbers which result from other power sources are documented.

Coal mining, for example, kills several hundred each year throughout the world in mining accidents. It kills thousands of miners from lung diseases. It kills hundreds of thousands from its acidic and polluted smoke. Oil and gas kill their numbers in fires and explosions, and from suffocation. Hydro-electric power claims its victims as dams burst upon villages. The generation of electricity kills by the air-pollution which power stations cause, however they are fired. If solar power, wind power or wave power ever could be developed to supply a sizable fraction of the needs of an advanced economy, no doubt they, too, would claim their victims in various ways. Remember: wind power is not pollution free. It takes energy and materials to make and install those windmills.

Nuclear power may not be 100 percent safe. It is not, however, uniquely dangerous, and is safer than many of its rivals. It offers a relatively clean, cheap, and safe source of power. It is, in the form now being used, a renewable source. The new reactors use fuel more efficiently and are safer, and new and more secure methods of waste disposal and storage are continually being developed.

It would take many, many mishaps for nuclear power even to approach the coal industry in terms of damage to life and health. And nuclear power could never have the environmental impact caused by the burning of coal, especially of the dirty coal which is easier for developing countries to afford. Fusion power is probably the best future possibility, if it can be done, but until then nuclear power is a relatively clean and safe option.

"Economic growth imposes a hectic form of life, producing overwork, stress, nervous depression, cardiovascular disease and, according to some, even the development of cancer."

– from Histoire du XXe siècle, a three-volume set of texts memorized by French students preparing for university entrance exams.

Hap-tip to Stefan Theil in Foreign Policy magazine. 

And he's back! The NHS Blog Doctor that is, and with a very scary quote from a Professor of Paediatrics:

You know, if I were suddenly taken ill, I would be terrified to be admitted to a British NHS Hospital.

As ever, Douglas Adams has an explanation for why the system is the way it is:

"You mean they actually vote for the lizards?"

"Oh yes," said Ford with a shrug, "of course."

"But," said Arthur, going for the big one again, "why?"

"Because if they didn't vote for a lizard," said Ford, "the wrong lizard might get in."

It's at least possible that the numbers on the amount of tropical forest being cut down are wrong. At the very best the statistics seem very confused.

Geothermal energy seems like something for nothing. But as a mining engineer points out, that's something you only get very rarely. 

There are payday loans and Payday loans, but the logic is the same in each case. 

The WalMart model really was different, right from the very beginning. It started with logistics. 

And finally , time travel with the aid of your wi-fi router. Really, no, it's possible.