Welcome to ... the Altruistic Vigilante

This blog has mostly been about economics, so for a change let's have a crack at some philosophy. Political philosophy, at least.

Norman Lewis has drawn my attention to an FT article about wilful damage. Activists break into an arms factory, smash the place up, but are acquitted in court. The logic is that harm was done, but to prevent further harm, and in the eyes of the law that is acceptable.

So far so good. But what's interesting here is that guilt is established subjectively. The test is not whether your action has actually minimised the damage, but whether you believed that it would. It doesn't matter if you were right, just whether you honestly thought that you were.

Let's drag this back to energy and climate change. What are the implications? Could you break into my house and turn out my lights or smash my tumble dryer? Could you slash the tyres of my car? Or sneak in secretly at night and insulate my loft?

I think we have just invented the Altruistic Vigilante. The floodgates are open. Remember, you read it first here.

Oil prices down 10% since the BP spill

We all know what the oil spill is doing to the environment. But have you seen what it's done to the market? I thought I'd take a look, and the answer is ... wait a minute, nothing at all??

The explosion was on April 20. On April 16, a barrel of light sweet crude cost $83. And 140 million spilled gallons later, it costs $75. Contracts for 2015 have also come down about 10% (see chart). 

How is that possible? The answer is: although the spill is massive, the market is massiver. I estimate that the spill so far is worth about 1% of 1% of the 21 billion barrels of proven reserves in the US alone. And of course Deepwater Horizon was an exploratory well, so the market never even knew this oil was there.  

I think traders are more interested in global economics. If prices have cooled off since April, it must mean the outlook for global growth has done the same. (Think public sector deficits, Greek debt crisis, Chinese currency appreciation ... ). 

All this makes sense, but there is one more observation. Prices for December 2015 are about $10 ahead of today's spot prices, so the market does expect oil to be more expensive in 5 years time. For most of June, this gap looked like it was rising to about $15, presumably because a proper approach to safety would make production costlier in the future. 

But in the last few days, the gap from spot price to Dec 2015 price has dropped back to $10 again. So much for talk of a safety premium. Happy 4th of July folks.

Energy prices are from the EIA and futures are from nymex.

Black cabs running on chip fat

So, I don't know enough about biofuels. But I think from what I do know, we'd be better off with Plain Old Electric Vehicles.

Even so I can't help liking Uptown Oil, a company which collects used chip fat from restaurants, cleans it up and sells it back to cabbies for about 10% less than diesel. At least it stops all that bad stuff going down the plughole: apparently we're pouring 400 tonnes of fat down London drains each month, and 500 tonnes at Christmas. So that's the market size right there, if they can collect it.

Somewhat disgustingly, Thames Water have put a video of this on youtube. Follow the link if you want to see what 400 tonnes of Turkey dripping looks like from the inside of a London sewer.

Eeyughk.