Paris Plop

Heading into the final hours of COP21 – even with the traditional 24 hour extension – it is pretty apparent that:

• there will be no legally binding agreement – John Kerry himself has finally acknowledged that he couldn’t get it through Congress
• that the West is not actually willing to give the less developed nations of the world trillions of dollars to deal with “climate change” and the damage already suffered due to so called “historic emissions”
• that whatever agreement is finally signed – and there is always an agreement even if it is only to meet again – the wind has gone out of the climate alarmist sails
• that this entire exercise is not about science and it is barely about climate, rather it is about using a scare to force the West to transfer massive amounts of money to the developing world

The amusing part of the entire charade is that, when you look at the world relative to its state in 1992 when the whole climate madness began in Rio, the less developed world has radically developed.

India had a purchasing power parity GDP of 1124 billion in 1992, it was 7375 billion in 2014.

China had a purchasing power parity GDP of 1438.13 billion in 1992, it was 17617 billion in 2014.

Unsurprisingly, India is none too eager to stop buring fossil fuels and China’s great concession has been to accept unlimited growth in emissions until 2030 when, it really does promise to start reducing emissions.

Whack-a-doodle warmists and greenies will, as per usual, be sad when the Paris Conference ends with a non-enforcable damp squib of a not-a-treaty agreement. The more intelligent of them will be very depressed indeed because the wheels continue to fall of the science as the Pause lengthens, the models depart further from the observations and, oops, Arctic ice extent is the highest its been in a decade.

The “science” behind the climate hysteria is crumbling and the green dream of a reversion to horse and buggy days is collapsing faster than the price of oil. The fake consensus is under attack, the models are failing and, despite the great and the good all claiming that we’ll all be baked, the general public has turned away from global warming alarm.

A thought

The King of Saudi Arabia is dead. His successor is rumoured to be suffering from dementia. Saudi’s oil war is reducing revenue to the Kingdom. ISIS has already begun border attacks and there is rumour of fifth column activity in the Kingdom. Yemen is under Iranian backed Shi’te pressure with its capital overrun. In the Eastern province, where the oil is, there is a pro-Iranian Shi’te majority.

At this point the survival of Saudi Arabia in its current form is in some doubt. Certainly ISIS has no reason not to continue to attack. Running the table from Medina to Mecca looks like a stretch but that takes the loyalty of the Saudi Army and Air Force for granted. Are they loyal? And it is no stretch to note that the non-royal Saudis are not over enthusiastic about their lot in life. Less so when cuts to the Saudi welfare state occasioned by the reduction in oil revenues begin to bite.

ISIS is now in a stalemate in Iraq with the Iranian backed militias and the Iraqi army holding a line West of Baghdad. For ISIS to continue it needs to keep its momentum and wheeling south may be the best way to do that. Hitting the sacred territories of Islam could draw recruits and, weirdly, Saudi money from people who will back the perceived strong horse.

The derisory airstrikes of the anti-ISIS coalition have damaged but not destroyed ISIS. The logic of their strategic position combined with the politics of the Caliphate may make Saudi the right target at the right time. Which could make the entire situation radically more dangerous.

It might be time for the West to think more seriously about how and why it is conducting war in the Middle East. Air war is clean, low casualty and somewhat effective;it is not, however, decisive. Does it make sense to put boots on the ground and, if so, whose? Or are there other strategic options. China has a large Army. And buys a heck of a lot more Middle Eastern oil than the US.

Oil Wars

If you want to understand the future a look at the price of oil is never a bad place to start. That price is down and pixels are dying in their billions with commentary as to what that means for Russia, Iran, fracking, IS, Canada and your car’s gas bill.

Oil prices have fluctuated significantly for years and I expect they will continue to do so. What interests me is the implication of a low oil price for the longer term prospects of the West. And, in general, there seem to be more positives than negatives.

When oil prices are high there is a rush of investment into oil based enterprises from multi-nationals to frackers. No bad thing but there is always a real danger of over investment leading to the exploitation of very marginal resources. A lower oil price will strand some of that investment and, just as importantly, postpone a great deal of it. Which frees up investment for other, potentially more useful, purposes.

The second thing which happens is that governments become addicted to the joys of relatively painless oil royalties. This looks like revenue but, because it is drawn from a diminishing resource, is actually a rather dangerous drawing down of capital. A lot of oil “revenue” is seen as general revenue and is spent on non-capital expenditures. With a booming oil sector governments are tempted to think the exaggerated revenues are available for general expenses and will continue to be. Which means that government budgets are set based on a purely extractive draw down of a province’s or nation’s capital. This is a poor idea.

Not to take anything away from the bright guys who are fracking and mining their way to oil fortunes, the reality is that extracting oil does not leave much in the way of useful, secondary industry, much less innovation. Which, in turn, means that when the oil is no longer profitable to extract there is no residual, non-oil, economy left behind. If a government spends the oil revenue as it comes in, or worse uses it to secure loans, when the oil revenue dries up there is nothing to cover the spending or the debt.

(The polar case here is Saudi Arabia. If Saudi oil dried up tomorrow, other than terrorist and Islamoloons, what else does Saudi make? Take a look here for the answer. And here is Canada by contrast.)

The “bingo” of high oil revenues has been largely wasted by governments. This is not intentional, it is just what government, confronted with a big pile of money does. From Russia to Iran to Alberta, government grabs the money and spends it on day to day operations. There is virtually no way to stop this so long as we have politicians with month ahead horizons. However, the current crash in oil prices means that there will be less money to squander.

The golden lining of additional pressures on nasty states like Russia, Iran and Venezuela is likely not as significant as the prevention of malinvestment and governmental squander. In time, as various emerging economies continue to grow, demand will drive the price of oil upwards again. With luck investors and governments will not make the same mistakes twice.

(One unalloyed good arising from the collapse of the price of oil is that so called clean energy renewables like wind and solar look even sillier with their present technology. I suspect wind will always make zero economic sense; I have more hope for photo voltaic solar as new materials promise significantly higher efficiency. And those same materials in a different configuration promise radical gains in battery efficiency for that daily occurrence known as darkness. Again, a low oil price will dampen the insane over investment in these marginal technologies.)