Peak Or Peaked Oil?
Rob Mackrill - Wed 24 Oct, 2007
Another subject that just won't go away is oil. Not just the price hitting $90, but the question of supply. How much has the world got? How much have we used so far and whats left? Have we reached Peak Oil? The Energy Research Group says were running out and "peak oil" is using the wrong tense. Its "peaked oil". 2006 was the high point, say these German researchers and its all downhill from here. The author of the report Joerg Schindler concludes: "The world is at the beginning of a structural change of its economic system. This change will be triggered by declining fossil fuel supplies and will influence almost all aspects of our daily life."
The UK housing market reports just keep coming...
It’s getting a little monotonous. We’ve heard from the IMF – ‘it’s looking iffy’ - and we’ve heard from the Ernst and Young Item Club – ‘no crash’. But this time it’s Kate Barker, so in my book, it’s worth paying attention to.
Kate Barker is a member of the Bank of England Monetary Policy Committee. A highly regarded and long-serving member, she is an acknowledged guru on the housing market.
She is the author of two reports on the subject, with the 2004 Barker Report making recommendations to solve the chronic supply problem in UK housing. A problem which can only get more acute over time if immigration forecasts prove accurate. The UK’s population is expected to swell from around the 60m mark to over 70m by 2031.
Back to Kate Barker. She gave a speech to the Institute of Chartered Accountants on the emotive subject of house prices. Her view? She’s wary. Buy-to-let, which accounts for 12% of the market, could be a “source of weakness” and “dampen” the market. It could be “vulnerable to a major change in expectations about future prices”, says Barker.
Mmm, “a major change in expectations...” That would be quite a change. A shattering of the myth that property prices only ever go up for a whole generation. If I were Gordon Brown, I would be praying the housing balloon doesn’t pop. He could find a vengeful middle England on his hands if it does.
*** Another subject that just won’t go away is oil. Not just the price hitting $90, but the question of supply. How much has the world got? How much have we used so far and what’s left? Have we reached Peak Oil?
Recently we mentioned ex-Fed chief Alan Greenspan’s view. It’s not the geology, it’s the politics, says he. He believes geologically there are enough proven reserves to see us right for some years. The problem is, much of the world’s reserves belong to countries not overly sympathetic to the needs of Western 4x4 drivers.
A bleak report today disagrees. The Energy Research Group says we’re running out and “peak oil” is using the wrong tense. It’s “peaked oil”. 2006 was the high point, say these German researchers and it’s all downhill from here. Production will now fall 7% year on year, and will halve by 2030. Says founder Hans-Josef Fell:
“The world will soon not be able to produce all the oil it needs as demand is rising while supply is falling. This is a huge problem for the world economy.”
Price is only one part of the potential impact of diminishing supply according to some. Environmental economist David Fleming tells the Guardian:
“For government, industry and the wider public, just muddling through is not an option any more as this situation could spin out of control and turn into a complete meltdown of society."
The author of the report Joerg Schindler concludes:
"The world is at the beginning of a structural change of its economic system. This change will be triggered by declining fossil fuel supplies and will influence almost all aspects of our daily life."
One solution for future bikers out there could the Suzuki Crosscage, a hydrogen fuel-cell powered motorbike. Clean and green, but with one small snag, where can you fill up with hydrogen?
*** Another subject we keep coming back to is food. Prices have been going up in wheat, dairy, and meat. In the most recent CPI number the headline inflation figure held steady at 1.8%, but food prices within that were up over 6%.
It’s not just a UK problem, it’s become an ‘international issue’, says the FT. Russia is introducing price controls on some breads, milk, cheese, eggs and vegetable oils until the end of the year after rising food prices have seen inflation rise above the 8% target. It is also considering introducing a 10% tax on wheat exports.
Still, when there’s an election to win, political expediency takes priority over economics. And the bruising business style of Putin’s Russia comes through loud and clear from one unnamed Russian food exec quoted in the FT:
“We were told in no uncertain terms that we have to freeze prices on certain products. Everyone understands what the government is doing. It is part of their election campaign.”
Listen, Comrades, we’ve got inflation under control...
*** Another financial lifeboat launches… America’s largest mortgage lender, Countrywide, has caved into political pressure and agreed to help bail out struggling sub-prime borrowers to the tune of $16bn of outstanding debt, says The Times. This after the numbers filing for bankruptcy in the US leapt 23% last month.
Regards,
Rob Mackrill
The Daily Reckoning UK
This article is from The Daily Reckoning. The Daily Reckoning digs deeper than your newspaper ever dares to bring you the real truth about the stock market...the gold price...oil supply...property trends...interest rates...the US dollar…China's bubble…commodity prices…and much more. And you can sign up FREE!
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This article is from The Daily Reckoning. The Daily Reckoning digs deeper than your newspaper ever dares to bring you the real truth about the stock market...the gold price...oil supply...property trends...interest rates...the US dollar…China's bubble…commodity prices…and much more. And you can sign up FREE!
Interested in discovering the next sector set to blast off? How about learning the specific shares the experts see as the most profitable in 2008? Attend The World Money Show London and hear from 50+ investment experts as they reveal their profitable strategies and provide their specific stock picks. The World Money Show London is being held 30 November - 1 December at The Queen Elizabeth II Conference Centre and will feature 14 panel presentations and leading investment product and service providers. Call today to register for The World Money Show London at 00 800 1414 8888 (international free phone) between 10.30 am -10.30 pm EXCEPT from 28 October to 4 November when hours will be 9.30 am to 9.30 pm because of the daylight saving time difference. Don’t forget to mention priority code #009376. Or visit: http://www.worldmoneyshowlondon.co.uk/main.asp?scode=009376
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