Econergy

According to Business Day, "A SHARP slide in the rand coupled with further increases in the cost of oil means that local fuel prices are poised to jump by nearly 8% next week, putting more pressure on inflation and reviving the risk of interest rate hikes."

Some private sector economists are still stubbornly predicting that the inflation rate will peak within a few months and gradually decline. They must therefore be assuming that the rand will strengthen and/or the price of oil in dollars will drop quite dramatically; or food prices will fall substantially. None of these looks likely to me. Other inflationary pressures will likely strengthen, since China is now experiencing rising inflation, which it will export to countries that buy its products. My view is that the inflation rate will continue to rise during 2008. Even if there is a severe recession in the US this year I do not expect it to spread to fast-growing countries too quickly - perhaps only by next year. My sense is that we are continuing down the road to stagflation (contracting real economies and higher price inflation). Everyone needs food and energy, so those prices won't come down much in a hurry.

On Friday President Mbeki unveiled the priorities for his last year in office (“President sets 24 sunset targets for last year “, Sunday Times). It appears to be very much a ‘business as usual’ plan – in fact many of the items have been on Mbeki’s agenda for most if not all of his two terms as President. There is little evidence of fresh thinking to tackle the host of persistent challenges facing the country (and some of its neighbours), let alone any acknowledgement of the approaching twin tsunamis of climate change and peak oil.

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Business Day reports that farming profits have risen notably, thanks to high commodity prices. So the pleas for government support for a domestic ethanol-from-maize industry really don’t have a leg to stand on.

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Business Day reports that "SAs main inflation gauge surged to 8,6% last month, a near five-year peak”. It points out correctly that “Price pressures have come mainly from rising costs of food and fuel, both global trends which monetary policy cannot address.” Then it claims that “the latest batch of inflation figures has complicated the Banks decision -making, suggesting that CPIX will peak at more than 9% next month.”  

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This is an article I had published in Business Day a few months ago.

Bids by Transnet Pipelines and iPayipi to construct a new liquid fuel pipeline between Durban and Gauteng received prominent coverage in the financial media recently. The pipeline is intended to address anticipated fuel shortages in Gauteng by 2010 and to enhance security of supply. However, a crucial premise needs to be interrogated: will sufficient oil imports be available and affordable over the pipeline's lifetime to ensure it is viable?  (More)

There has been lots of discussion about resource nationalism of late, with Russia and Venezuela being prime examples of countries that are nationalising their energy resources and industries. Could a similar trend develop in South Africa?

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Yesterday's Business Week carried an article called "The problem's not peak oil, it's politics." This looks like a follow-up to a guest article published by the same magazine just three days earlier titled "From peak oil to dark age?" The new article, by one Stanley Reed, tries to blow off peak oil as being of secondary (if any) importance compared to political developments in oil producing countries. Reed fails to see - or at least to note - the possibility that the two things (politics and peak) might just be linked.

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Today's Independent News in the UK carries an article titled "A world without oil." The author, Daniel Howden, talks about criticisms of BP's recently published Statistical Review of World Energy 2007, levelled by prominent members of the Oil Depletion Analysis Centre, the UK branch of ASPO. The subtitle is "Scientists challenge major review of global reserves and warn that supplies will start to run out in four years' time." It is really good to see a major newspaper prominently run a story on peak oil (as the Independent has done before), and raises hopes that we are getting closer to a tipping point in public consciousness about oil depletion.

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What stands out for me right now in the peak oil and climate change debates are two issues: the (related) peaks in various fossil fuels and uranium; and the relationship between fossil fuel depletion, carbon emissions and climate change. Perhaps the greatest threat the biosphere faces in the coming decades is the resort to large-scale use of wood for fuel, and deforestation to make way for biofuel production.

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Most economists I know are either unaware of Peak Oil, or have responded with some level of denial. No (other) economist in South Africa, to my knowlege, is taking it seriously enough to research it. At times this makes me wonder whether I've somehow been dreaming and have got it all wrong. But then I look again at the overwhelming evidence, and I recall the term used by peak oil experts like Richard Heinberg and James Howard Kunstler: most people are living in a "consensus trance".

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Published in Cape Times, Thursday 17 May

Fundamental changes in the operation of the global oil and gas markets are a key component of current geopolitical dynamics. These tectonic plate ructions could trigger the political equivalent of volcanic eruptions (i.e. wars) and the economic equivalent of tsunamis (e.g. waves of financial market volatility). Numerous conflict hotspots are already evident along energy fault lines– Nigeria, Iraq and Iran are prime examples. To mitigate negative fallout from rising tensions, greater international cooperation is required.

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Business Day reports that SAB is short of carbon dioxide for fizzy drinks - again. Last year they imported 1.5 million cases of soft drinks (from 10,000+ kilometres away) because of a lack of local CO2! The bitter irony of this occurring in a country with the 7th highest per capita carbon emissions leaves a decidedly bad taste in my mouth. (More)

The Accelerated and Shared Growth Initiative of South Africa (Asgi-SA) identifies biofuels as one of three strategic sectors requiring government support. In December 2005 Cabinet approved the establishment of an inter-departmental Biofuels Task Team, which completed a Feasibility Study in 2006. Based on this report, the Department of Minerals and Energy (DME) released its Draft Biofuels Industrial Strategy in November last year. Recently, the DME has hosted a series of provincial consultative road shows giving members of the public an opportunity to comment on the Draft Strategy.

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Business Day reports today that Siemens SA has landed a big contract to supply 54 wind turbines to UK company Centrica, the parent of British Gas. This is great news for Siemens, and builds on a Scottish wind farm that they previously supplied. This proves that an SA company can manufacture quality turbines - so why is Eskom and our government steadfastly resistent to expanding wind power generation in SA? Why do they insist on a second nuclear power plant and more polluting coal-fired electricity generation when we have considerable wind resources in the Western Cape? (More)

Oil is the quintessential commodity in the modern industrial economy. It provides more than a third of the world’s primary energy supply and over 90 percent of its transport fuel. In addition, industrial agriculture depends heavily on oil for the production of fertilizers, herbicides and pesticides and the manufacturing sector uses oil as a feedstock for a myriad of products from plastics to paints to pharmaceuticals.

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