How do we measure up?

Lord Kelvin, that famous Victorian Scottish physicist used to say that if you can measure something and express it in numbers, you know something about your subject; but if you cannot measure it, your knowledge is of a very meagre and unsatisfactory kind. From this wise observation developed a management mantra thought to be essential by managers and those advising them everywhere.  They changed Kelvin’s observation into “if you cannot measure, it you cannot manage it”, thereby removing the qualifications that Kelvin found important in his observation; Kelvin did not say that you know nothing about unmeasured things, but only that you know a lot less about them. From this mantra we have now developed a habit of measuring everything in the hope of managing. This habit is beloved of governments who are now becoming expert in trying to measure everything about our lives and who do need the hope that it gives them.   You hear of people who are asked questions that provide Government with information about their ethnicity. Clearly the government feels that this information will help them manage the business of governing and administration, even when dealing with the administration of rubbish collection. Is my personal rubbish (being someone of Greek-Czech ethnicity) more easily dealt with because the administration knows my ethnicity? I think that the best example of measuring everything in the hope of managing is the proposed climate change legislation, and the carbon emissions trading scheme. In both cases we have targets, all based around unmeasured things or false measures and in both cases most of the resources are going into measurement rather than into measures to reduce carbon emissions. Ultimately the only way to reduce carbon emissions is to emit less carbon – that sounds too simple to be helpful, but we do have to get down to fundamentals and we have to make sure that the Government is down there too. Some measurements are useful like the 381ppm of carbon in the atmosphere, virtually double the pre industrial revolution levels, but that measure does not tell us how to reduce carbon emissions and neither will an emissions trading scheme founded on inaccurate yardsticks and false weights. The only things worth counting will be the measures – the area of new solar panels installed each year, the number and size of wind turbines, the heat pumps the photovoltaics and the like – and the tonnes of coal and barrels of oil used each year. 

I rather like Professor Einstein’s observation about measuring – “not everything that counts can be counted and not everything that can be counted counts.”  That should be emblazoned on every ministerial red box.

Oil prices are rising

Today crude oil has reached a new high of $96 for one barrel. That amounts to over $703 for a metric tonne of oil, the highest price that it has ever been. Why is the price so high?

Well, I am sure that speculation has played a part, but speculators in commodities bet on what will happen as a result of known facts, just like you would bet (if you do bet) on say a football team winning a match by taking into account the strength of the players, the weakness or strength of the opposition and all sorts of other factors. Why are speculators betting that oil prices will rise and thus driving the oil price up?

I think that look at two major factors. First there is the demand for oil. Here they see that there is an ever increasing demand for energy as the developed world demands more luxury (more products, more holiday flights, and more buildings) and as the developing world seeks to raise living standards to those of the developed world. It is perfectly possible that in ten years time we shall no longer consider India and China as developing countries but as highly developed countries, like our own, and that will come at an energy cost, which will mean more oil is needed. Populations are growing and with them the demand for energy will grow.

The second factor that they will examine will be the supply of oil. Most of the world’s easy to get at oil has been discovered and there are finite stocks of it. Most of this is in politically unstable regions and that may affect supply. There are oil reserves in very hard to get regions and these will cost much more to find, drill and process, so that factor adds to the supply equation.

All these factors make it likely that we shall see an oil price in excess of $125 a barrel before too long.

In Europe we have been largely insulated from these high prices because oil is priced in US dollars and the US dollar is at present a weak currency, trading at well over $2 to the £1 and at historic lows against the Euro. If the US dollar was stronger we would be feeling the real cost of these oil prices much more sharply. Of course the high oil price, even in dollars, will work its way through to our own energy costs. Natural gas prices seem to follow oil prices so prices for heat will rise.

The obvious solution is to forward purchase your energy. Of course, I think that the sensible way to do this is to get a Genersys thermal solar system, so that you can at least be sure of some energy, regardless of the oil price and regardless of who really can turn off the energy tap.