Why release emergency oil stocks? Because Opec never does the right thing
Observers of oil politics have been wondering why the Paris-based International Energy Agency, which represents 28 member states including Britain, has suddenly decided to start releasing oil from its emergency reserves. What do they know that we don’t? This is a rare move for the IEA — the last time was after Hurricane Katrina. The amount of the release, 60 million barrels, is enough to fuel the world for about 19 hours, which sounds insignificant, but is also equivalent to 42 days of pre-war production from Libya, which is more relevant. Current oil stocks are apparently ample on both sides of the Atlantic, though prices have stayed stubbornly high — over $100 a barrel for Brent Crude despite the IEA action and what one oil analyst calls a ‘soft-patch scenario for the economy’.
That price behaviour is partly due to the propensity of financial speculators to create short-term supply scares, and partly to lack of faith in Saudi Arabia and other Opec members to raise production to compensate for an extended Libyan conflict and an anticipated rise in demand in the third quarter. The impact of speculators — so I’m told by Leah McGrath Goodman, author of The Asylum, a well-spiced account of the lifestyle of oil traders on New York’s Mercantile Exchange — is tough to monitor because there is such paucity of data as to who owns how much oil at any given moment. But the core problem in the oil world, as so often in the past, is that Opec sheikhs are incapable of reaching co-ordinated, intelligent decisions which play to their own long-term interests by fostering economic stability in the west. The IEA is signalling them to try harder.
Return of the Rock
Neither Sir Richard Branson’s Virgin group nor the US private equity firm Blackstone seems to me the right buyer for Northern Rock, which the Treasury is now preparing to sell off. Even if it’s unfair to condemn Blackstone because it once owned Southern Cross care homes, any private-equity buyer would look wrong for the rescued mortgage lender: the raison d’etre of private equity is to buy and sell within five years or so, squeezing out a fat profit on the way through but often leaving a traumatised business behind. But what’s needed in retail banking is stability, plus variety of offering and ownership, and a greater degree of localism. For those reasons, every effort should be made to return the Rock to its roots — as a building society, under mutual ownership, strongly focused on the north-east and acutely conscious of its social role there. What a welcome reversal of history that would be.
Speaking of north-eastern assets, I’ve been to the Sage again — how I pity you culture-starved southerners — and this time it was to see Das Rheingold. As the hours rolled pleasurably by, I tried to turn the plot into a parable about the euro. The gods who are so pleased that their mountain-top castle has been completed are the European elite who hailed the triumph of the single currency; but the price they have to pay is the sacrifice of economic virtue to the giants, representing international bond markets. The underground dwarves are the Greeks, condemned to an eternity of toil to pay off their debts; and the Rhine maidens are German taxpayers, who end up mourning the loss of their gold and declaring that the glory of the gods was all an illusion.
Well, it almost works. And it suggests to me that an avant-garde composer of today — Mark-Anthony Turnage perhaps — should create a work that encapsulates the monumental vanity, deceit and blindness to fate that has brought the eurozone to the brink of the abyss, just as Lucy Prebble’s Enron so vividly caught the essence of that scandal. But how would you resolve the plot? Greece can only be ejected from the euro, as many British pundits are urging, if its creditors are prepared to accept the write-off of most of its external debt — with incalculable domino effects — since much less of that debt could be repaid in devalued drachma than might one day be repaid in euros.
Yet Greece surely cannot be allowed to wreck the entire euro project by remaining an irredeemably delinquent member, with its debt ratios continuing to rise; even if the Greek parliament votes for austerity measures this week, no one seriously expects them be put into full effect. The EU’s approach of muddling through, bailing out and denying that alternatives exist merely defers — for a few months at best — the climactic shock of political and market upheaval, whatever shape it may take. Rheingold is the first of four mighty Wagnerian episodes, and that’s about where we are in the euro cycle.
Send Bob to Athens
I decided to give this year’s conference of the National Union of Rail, Maritime and Transport Workers a miss only because it’s in Fort William, and I couldn’t face such an epic journey across our broken-down railway network, manned as it is by RMT members spoiling for a fight in support of their brothers in the public sector. But I shall be following every word of RMT leader Bob Crow’s pronouncements throughout the six-day jamboree. He kicked off by conjuring up the image of a ‘scab army’ of ‘Etonians and debutantes’ being deployed in the spirit of 1926 to break strikes by teachers and nurses in the coming confrontation with coalition ‘fiscal-fascism’. ‘Taking inspiration from our comrades on the streets of Athens, RMT pledges its full support for every group of workers engaged in this battle…’ I’ve always said union leaders are a dull bunch these days, but Crow is the exception — worth every penny of the £150,000 a year he costs his members as the useful idiot whose job is to remind us that socialist militancy is fundamentally reactionary and antisocial, and that’s why we rejected it as a nation a generation ago. Someone should offer Bob a first-class freebie to Greece: he’d have the crowds howling for privatisation and fiscal rectitude in no time.