Electricity Options

The recent power failures in Texas led me to think about a topic I had not thought much about since my electrical engineering undergraduate days -- electricity transmission and generation. In this article, I discuss big picture options for electricity, both from a technology and electricity markets/regulation point of view.

Negative Oil (Futures) Prices!

As somebody (I forgot who) noted on Twitter, this crisis has obliterated yet another standard chart: that of the front month West Texas Intermediate futures price, which went negative. For people who are not familiar with the strangeness of financial markets, this may be quite puzzling. For such readers, this does not mean that you will be paid to fill up your car. Rather, it probably just means that one or more funds (using the immortal phrasing of Big Jim and Billy Sol) "blowed up real good."

UPDATE 2020-04-21: The collapse in oil futures prices has continued, and widened. My tone here was perhaps too complacent. It looks like production needs to get slashed pretty quickly, and/or people need to go for drives to get their mind off things. That said, this may still be a continuation of the meltdown of financial commodity players. 

Oil Price Spikes And Recessions

(This article is a short unedited excerpt from my manuscript on recessions. I just added the section, as I found that it was a key missing topic of discussion. I discussed this subject in my earlier book - Interest Rate Cycles: An Introduction.)

Peak Oil And The Cycle

One of the things that are often misunderstood about "Peak Oil" is that it is not a prediction that oil prices will rise up in a straight line. Recent events have definitely thrown cold water on that interpretation. I will make a brief explanation why "Peak Oil" is not proven incorrect by the latest price swoon, and some comments on the economic effect of cheaper oil. I do not know whether the positive or negative effects are greater for the United States, but I think the reaction of the Canadian dollar provides a good read on the situation in Canada.

Drill, Baby, Drill!

One of the developments in the North American real economy which is of extreme importance for forecasting is the surge in oil and gas drilling activity. Although the number of people directly employed in drilling is minuscule, there are multiplier effects along the supply chain. What is ominous about this activity is the track record of fixed investment in North America since at least the early 1980s - every large surge in fixed investment turned out to be a bubble that precipitated a recession when it deflated.

Book Review: The End Of Growth

Jeff Rubin's book The End Of Growth is a good introduction to the impact of Peak Oil on the economy and markets. It was published in 2012, and the Kindle version has been updated since then (note that I did not read the updated version). Although the book is not perfect, I think it has some advantages over other analyses of Peak Oil. Although Peak Oil has been proclaimed to be dead, I explain the advantages of starting to analyse it now - you want to understand the concept before it rises again from the grave.

Sustained Growth On A Finite Planet

In recent years, it has been increasingly popular to make statements along the line that exponential* economic growth cannot forever in a finite planet. (One of the more popular examples of this argument was the essay Exponential Economist Meets Finite Physicist, by Tom Murphy, an Associate Professor of Physics at the University of California, San Diego.) I follow what I would describe as a minimal Peak Oil viewpoint, but I believe that this framing of the issue in terms of a finite planet is largely incorrect in terms of analysing the economy. My reading of the situation is that under a non-catastrophic Peak Oil scenario, economic growth in the developed world will continue much as it has been doing for a fairly long horizon (30 to 50 years?). Much longer horizons (100 years, for example) is when very serious problems would show up in the economic data.