Increasingly, we live in a world of stupidity. I was recently watching the TV (now, a rare event) and the first advert at the commercial break was for a food delivery app. You know the kind of thing; junk food at the press of a button brought by a kid on a moped. The following advert was for bespoke dog food where owners could actually specify the ingredients, thus enabling targeted nutrition for their animal. The irony was not lost; the dog eats like royalty while its owners consume rubbish and can’t even be bothered to unglue themselves from the sofa to obtain it. Perhaps the dog should be in charge of feeding the human?
A couple of weeks ago, Professor Susan Jebb, Food Standards Agency chairwoman, suggested that bringing cake into the office is as harmful as passive smoking. She said workers should think twice before bringing unhealthy treats into the workplace which might tempt colleagues. Jebb, a professor of diet and population health at the University of Oxford, said she was frustrated by delays in introducing a TV watershed for junk food advertising. Adverts were “undermining people’s free will”, clearly oblivious to the oxymoronic nature of her comment. Jebb, now on a (sausage?) roll, continued “at the moment we allow advertising for commercial gain with no health controls whatsoever and we’ve ended up with complete market failure because what you get advertised is chocolate and not cauliflower”. Mmmm …. who would have thought it? Advertising is apparently for commercial gain. As for cauliflower, who might pay to advertise it? Cadbury’s, Lindt, KFC? On second thoughts, I reckon there’s a massive untapped market just waiting for Kentucky Fried Cauliflower.
Professor Jebb represents a growing trend of professional idiocy; not just in the UK but in the Western world in general. Here’s US Vice President Kamala Harris “The issues that are present in the climate crisis are varied and it requires us to be present and to be in front of each of the iterations and variations that include extreme weather that produces a lot of water and extreme weather that produces drought.” I suppose we should just be grateful that she’s a little more coherent than her boss.
Which, once more, brings me back to the subject of energy and particularly, fossil fuels. Recent results from BP and Shell brought forth plenty of comment from the political sphere and beyond. Ed Davey, Liberal Democrat head honcho, said in the wake of Shell’s record profits “…. no company should be making these kinds of outrageous profits out of Putin’s illegal invasion of Ukraine” and called for oil and gas companies to be ‘taxed properly’. The current rate of total taxation on UK extraction amounts to 75%. How much more should the state take? Where does the incentive for Shell to pump oil become so small that it doesn’t compensate for the risks involved in exploration, infrastructure construction and transportation of a commodity that is vital to the global economy (yet the likes of Shell have absolutely no control over the market price)? I’d be very interested to hear how much effort Mr Davey might commit to a venture under similar circumstances. But that’s the thing; if we depended on politicians for fuel, we’d be gathering twigs and using a horse and cart. When oil companies were losing money and the spot price of oil briefly went negative during the pandemic, there wasn’t a peep out of Davey.
Furthermore, the average price of Brent crude in January 2022 (the month before Putin’s invasion of Ukraine) was over $86 a barrel. In October and November 2021, it was $83.50 and $81 per barrel, respectively. As I write (early February 2023), it is $82. It is true that between April and July 2022, the price was well over $100 but since September, the situation has reversed. Consequently, before the invasion, the price was in the $80s per barrel and that is exactly the situation today. Whatever benefit Shell gained from exorbitant summer prices has long gone and at this juncture, those record results look unrepeatable. Perhaps Mr Davey would do better asking himself why the price of crude seems to return to the $80s per barrel? Maybe (just maybe) it’s because worldwide energy demand is still rising (particularly in Asia) but due to the demonisation of Big Oil by the likes of him, it has little incentive to prospect for new supply. Would even more windfall taxes likely a) increase or b) decrease supply further? Sir Ed describes himself as an economist which is, I suspect, why he’s oblivious to its most basic tenets.
I find it baffling that almost the entire developed world’s political class, together with a proportion of their electorates, appear wholly ignorant to the importance of fossil fuels in their daily lives. Their superior calorific properties have transformed living standards over the past century or so and they still represent over 80% of our primary energy consumption. During the past decade, there has been approximately $4 trillion of investment in wind and solar yet fossil fuel consumption dropped from 82% of primary energy use to 81%. That comparison represents the scale of the problem we face. Furthermore, the intermittent output from renewables is not suitable for the generation of base load electricity supply. Oil, coal and gas are, as is nuclear, but the latter requires years of planning and construction before entering service. Returning to my theme of professional idiocy, witness Germany’s decision to can its nuclear plants, become dependent upon Vlad’s fossil fuels and is now burning more lignite (brown or dirty coal) to keep power supplies at functioning levels.
When do high energy prices (pretty much a ‘given’ with tight supply and rising demand) begin to semi-permanently weaken consumer demand, thus provoking the stagflationary economic conditions we already see? The West is simultaneously destroying both its economic capability and its citizens’ living standards. If climate change is important to you, bear in mind Asia (and other parts of the developing world) will do what’s economically expedient for them. So, whatever we do, will play second fiddle to whatever the likes of China and India do; both are currently hoovering up heavily discounted Russian oil which, I suspect, gives a stark insight into their collective mentality.
You may conclude I’m a cheerleader for fossil fuels but it’s not so. I’m simply a realist and appreciate that modern economies with the choices they offer and the living standards they deliver are based upon the rich energy density conferred by oil/gas. The transition to cleaner energy and increased oil/gas supply does not have to be mutually exclusive. I shouldn’t have to labour the point but how does that box of cornflakes find its way to Tesco? How is Kansas corn planted, irrigated, harvested, stored, transported, processed and exported? If you aren’t asking these questions then you should because workable electric tractors, heavy trucks and ocean going vessels don’t exist. Populations need to ask themselves whether they are prepared to accept meaningful reductions in living standards in order to accommodate an energy transition that is not going to be completed within the allotted timescale in any event. Politicians are living in a make believe world and as for Joe Public, it takes a particular level of conceit to attend a climate change demo and not consider where the synthetic material for your waterproof, wind resistant Rohan (other brands are available) jacket come from.
I’ll leave the last idiotic word to that denizen of Davos, Emmanuel Macron, “The best energy is the energy you don’t use”. Sounds great; presumably the best meal is the one you never ate, the best holiday is the one you never took and the best girlfriend the one you never dated?
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John Newsome can be contacted on 01423 705123 or john.newsome@williams-im.com. Williams Investment Management LLP is authorised and regulated by the Financial Conduct Authority.
