08 March 2018
Lens on the Week
UK
BREXIT: Mrs May’s big speech on the Friday setting out the government breaks at strategy seems to have averted any immediate breach in the Parliamentary Conservative Party.
WIGGINS: A report of the Digital, Culture, Media and Sport Committee of the House of Commons states that Bradley Wiggins and the Sky News team crossed an ethical line by using drugs to enhance performance rather than to deal with a medical condition. Wiggins denies this vigorously and there are features of the committee process which might make one uneasy. The use of anonymous evidence for one thing, but there is a little more to it than that. If you read the report of a Parliamentary Committee dealing with a subject in which you are expert you realise how distortive their proceedure is. For example when Margaret Hodge’s committee enquired into tax avoidance, their perfectly sound overall conclusion was blemished by quite a number of misunderstandings. It is possible of course that committees are accurate on those subjects we know nothing about, but inaccurate about those in which we are expert. Hmm.
JUDGING CORRECTLY: The powers that be have issued a 422-page guide which is designed to encourage judges (instruct them?) to be more sensitive in court. That means that terms such as “homosexual”, “Jews”, and “ethnic minority” are to be banned. Other words which should be shunned include “lady”, “postman” and “immigrant”.
It is to be hoped that these guidelines will not be extended to other areas. What happens if an immigrant from Nigeria, who is a lesbian, wants to work in the post office? Perhaps she will be refused employment on the grounds that the authorities will implode by trying to find a suitable job description.
MEDIA: The BBC can always be relied upon to provide excitment. The recent series “Civilisations” has attracted much criticism, which, in turn, has caused the presenters (or at least two of them) to respond vigorously. The BBC’s Arts Editor, Will Gompertz, described one episode as a “tepid dish of the blindingly obvious and the downright silly”. Camilla Long of The Sunday Times also wrote a scathing article in that paper.
Both Professor Mary Beard and Simon Schama leapt to the defence of their programme on Twitter. One can only hope the spat continues, thereby ensuring hours of fun for all the family.
International
ITALY’S NORMAL STALEMATE: Support for the governing centre-left Democratic party collapsed in last Sunday’s general elections: it won only 18% of the vote. Its leader – ex-prime minister Matteo Renzi – resigned. Most of the other votes went to non-mainstream, populist, anti-euro, anti-EU parties.
The Five Star Movement is claiming victory; the anti-establishment, anti-corruption protest party secured about a third of the votes, more than any other single party. However, the alliance of right wing parties – Silvio Berlusconi’s centre-right Forza Italia, the far right League and the extreme right Brothers of Italy – together secured slightly more of the vote than the Five Star Movement; so the League’s leader Matteo Salvini (his party is now the biggest of the three) is also claiming victory.
But neither of them would be able to form an effective government, which requires at least 40% of the seats in the lower house. It’s also difficult to see how either of them could form partnerships to secure the required majority: the Five Star Movement has always insisted that it would never go into coalition with another party; and the mainstream centre-left Democratic party would not be able to find any common ground with the far-right alliance.
Before the election, it was reported that Silvio Berlusconi’s real aim was to form a coalition government between his centre-right Forza Italia and Matteo Renzi’s centre-left Democratic party. If so, he has blundered; the reduced Democratic party and Forza Italia (which also fared badly) together would secure fewer seats than the Five Star Movement. Indeed, it looks as if Silvio Berlusconi is the real loser in this election; he has even lost control of his right-wing alliance to the League’s Matteo Salvini, as the League won more votes than Berlusconi’s Forza Italia.
Reports are suggesting that the EU’s leaders are extremely anxious about this triumph of anti-EU populism and the collapse of the mainstream. They shouldn’t be. This is simply business as usual in Italy; Italy, as ever, has secured a result which will guarantee a political stalemate, the normal state of politics in that country. Politics will continue to be a business of horse-trading between parties and individuals which pre-empts any real political initiatives or effective government. Nothing will change. Even if the president has to call another election, which is quite probable, then it is unlikely that the result would be much different to last Sunday’s.
On the other hand, patience in Europe and around the world may finally be running out as it becomes even clearer that no effective government will ever be forthcoming to sort out Italy’s deeply troubled economy (the third biggest in the EU following the UK’s departure); the election results plunged Italian shares to a six month low.
GERMANY HAS A GOVERNMENT AT LAST: Just as Italy descends into political chaos following inconclusive elections, Germany comes out of it. The membership of the centre-left Social Democratic Party voted to accept the coalition deal thrashed out between their SDP and the centre-right Christian Democratic Union over six months of fraught negotiations. President Steinmeier nominated the CDU’s leader Angela Merkel as chancellor; she will take office with her new government in what will be her fourth (and almost certainly final) term on March 14. Friction between the two parties remains, however, and both party leaders were damaged by the deal; the SDF leader Martin Schulz has already resigned, and Chancellor Merkel is not expected to serve a full four year term. Last week she named Annegret Kramp-Karrenbauer (president of the federal state of Saaland) as the new general secretary of the CDU, a move seen as an indication that Ms Kramp-Karrenbauer is Ms Merkel’s personal choice to succeed her as party leader and Chancellor; but the conservatives in her party insisted that right-winger Jens Spahn should be included in her cabinet nominations, suggesting perhaps that he would be their choice.
Of course, the most serious consequence of the SDP’s return to government is that the far-right Alternative for Germany is now the official opposition. It was fear of further electoral gains by AfD which persuaded the SDP to throw in their lot with the CDU and thus avoid another election.
Business
ENIGMATIC VARIATIONS: AN OIL SPECIAL: It may not be so for much longer, but the mystical movements of the oil price continue to be of vital importance to western economies. Regular readers will have followed the price of a barrel of crude from over US$100, down to below $25. At that point commentators, looking at the rapid growth of alternative sources of renewable energy, and the danger of a world glut, forecast next stop at $20. But the supply side shut off faster than any forecast as Russian and Gulf suppliers turned their taps to “slow flow” and American suppliers followed them, or went bust. Up went the price in pretty smart order to over $50; since then oil has rather vanished from the business headlines – but it continues to get more expensive and has now broken the $60 barrier. But maybe, don’t rush out to buy an oil well yet. Recent research (collated by the FT) has looked at the US market, in particular at on-land wells and fracking (mainly in shale beds). No surprise to know that drilling rigs are switched on and off as the price goes up and down, but what the research does reveal is that rig and well owners are very sensitive and quick with the on/off button. At the moment they are in full flow to get as much of that $60 price as possible.
Shale operators are less sensitive to price. Fracking costs have dropped hugely – not least for the simple reason that frackers now drill sideways in the productive layers rather than vertically through bands of unproductive rock. As a rule of thumb, five years ago a fracker needed $50 a barrel to break even; now a mature drill (one that is proven, has a good anticipated lifespan, and has already covered its start-up costs) can work at not so far above $35. There are still considerable risks in new drillings and not all investment in fresh sites will be remunerative, but at the moment the supply of proven resources is ever lengthening. The effects of this turn around are startling – the USA is now the second largest oil producer in the world (Russia being the largest). The implications for the US economy probably do not need spelling out – plentiful energy sources suggest the present boom could long continue.
But life is never that simple. The current level of oil prices not only brings forth more oil – it gives renewable sources a boost, making many of them economically viable without even considering any environmental benefits. The green energy investors have been grumbling about erosion of government support for their schemes but do not be too sorry for them; many investments – in particular solar panel farms – are now comfortably profitable (windfarms continue to face challenges on efficiency of output and costs of maintaining pylons and blades). Costs are coming down and green energy supply grows much faster than anybody anticipated. So although in the short term, economies such as Britain face continuing challenges relating to power availability, that looks like a problem that within three or four years could be solved. It is true there are local problems on transmission that restrict supply to major users such as IT and data centre operators, but sufficiency of supply itself looks promising.
So; to pose two more energy significant questions: How quickly will growth in electric transport (especially cars) create extra demand for power by cable? And what happens to the enormously expensive Hinckley Point nuclear power station, now underway, if the price of electrical units goes down rather than up?
