Monday, March 11, 2013

State hedging of oil price risks

OK. So what it seems to come down to is this: the oil price cannot be predicted years in advance with absolute certainty. Let's agree that the price of oil varies from time to time. So what do you do? Do you give up any aspiration because uncertainty equals hopeless, unmanageable chaos? No. Lack of absolute certainty is nothing like the same as being powerless. That's the counsel of the coward. Most independent analyses of the world economy, and the oil industry's own spending, suggest the price is only going to go up. I remember a few years back someone (I think it might have been "Doctor" John Reid) wisely pointing out that the days of the giddy heights of $50 a barrel would never be seen again. It's now $91.40. That's in the midst of a world recession. As and when the economy recovers, demand for oil will grow. New discoveries, in the US and elsewhere, are expected to "keep a lid on the price" , as a welcome a counter-balance against a price explosion.

Still, you can't know for sure, I accept. So what does the sensible government do?

Simple. It hedges.

Sunday, March 10, 2013

Too rich, too small, too stupid

The Herald: "SCOTLAND'S payments to the European Union could rise from £124 million to £673m under independence, official figures suggest."

Me: Oh no! That's awful. Why?

The Herald: "An independent Scotland, with oil reserves, would become the third richest country in the EU in terms of GDP per head. "


Me: OK. I see. But...

The Herald: "It is feared this would push up payments."

Me: Yes I get that bit but isn't....

The Herald: "It is said payments would rise as an independent Scotland, with oil reserves, would be among the wealthiest EU countries in terms of GDP per head. Only the Netherlands and Luxembourg would be better off. "

Me: Yes, yes, ok. But isn't being wealthy good and paying more into the EU a sign of, and a result of, being wealthy? And a good and proper thing, too. What you're doing is like telling someone they'd be a fool to take a better job, with a massive pay rise, because they'd have more tax to pay. Are you not, for some reason I can't grasp, searching for a way to present what is essentially an argument for independence as an argument against it? Perhaps in the hope people won't read past your headline?

Friday, March 1, 2013

Separation anxiety

A 19.5% swing to UKIP at Eastleigh. In the words of Nick Robinson, they'd have won if they'd just thought it possible. By God, they'll think it possible now. Ladbrokes will this morning give you evens - evens! - on the Great British public voting for separation from the EU before 2018. If you're a betting person I'd grab those odds now.