Sunday, June 24, 2018

OPEC production increase shows it's still fighting U.S. shale oil

It felt like opposite day as traders bid up the price of oil last week even as OPEC announced an increase in oil production that should have sent prices downward. The cartel decided it had room to move because of outages in Venezuela, Libya and Angola amounting to 2.8 million barrels per day (mbpd). The increase apparently wasn't as much as traders had expected.

Even though oil prices have drifted upward from the punishing levels of three years ago, OPEC is still interested in undermining the shale oil industry (properly called "tight oil") in the United States which it perceives as a threat to OPEC's ability to control prices. So, it is no surprise that OPEC has chosen to increase output in the wake of lost production elsewhere. OPEC does not want prices to reach levels that would actually make the tight oil industry's cash flow positive.

You read that correctly. The industry as a whole has been free cash flow negative even when oil was over $100 per barrel. Free cash flow equals cash flow from operations minus capital expenditures required for operations. This means that tight oil drillers are not generating enough cash from selling the oil they're currently producing to pay for exploration and development of new reserves. The only thing allowing continued exploitation of U.S. tight oil deposits has been a continuous influx of investment capital seeking relatively high returns in an era of zero interest rate policies. Tight oil drillers aren't building value; they are merely consuming capital as they lure investors with unrealistic claims about potential reserves. (Some analysts have likened the situation to a Ponzi scheme.)

Sunday, June 17, 2018

Leaked U.N. climate change report shows inverted thinking on growth

The Reuters news service managed a genuine journalistic coup by getting an advance copy of a U.N. climate change report not due out until October. Given what the report says—it's dire—and the fact that the climate isn't going to stop changing while the report gets reviewed, somebody decided to get the ball rolling.

Reuters has so far chosen not to make the entire draft available. But from its reporting we can see already the contradictory thinking that remains a barrier to facing up to climate change, to wit:

Global warming is on course to exceed the most stringent goal set in the Paris agreement by around 2040, threatening economic growth...

This kind of thinking is so obviously inverted, and yet the inversion is entirely invisible to most people. While it may be true that global warming threatens economic growth, it is far more salient to say that economic growth threatens us with global warming.

Sunday, June 10, 2018

Plato's dream and our modern nightmare

In a recent conversation a friend of mine described our modern understanding of the world around us as a conspiracy theory of the grandest proportions.

We posit theories which tell us that the phenomena we witness are merely ephemera resulting from an underlying structure of whirring particles—not even atoms anymore, but subatomic particles in such categories as bosons, leptons and quarks. This conspiracy gives us the theater that is our everyday experience, experience that cannot be explained in its own terms, but must be understood to be the result of forces hidden from our eyes and ultimately from all our other senses. The surface of things cannot be trusted.

The ancient Greek philosopher Plato gave us the first version of such a world in his theory of forms. Everything in our everyday existence is a pale imitation of ideal forms in the real world, he said. The perfect tiger exists in a different dreamlike realm where it offers a template for an actual tiger. The perfect chair in this other realm acts in a similar way. Our world is not the real one, but a mere ghost orchestrated by the real world which we can never know directly.

Sunday, June 03, 2018

Taking a short break - No post this week

I'm taking a short break from posting this week. I expect to post again on Sunday, June 10.

Sunday, May 27, 2018

The toxic price of convenience

As many as 110 million Americans may be drinking water contaminated by a toxic class of chemicals that according to the U.S. Environmental Protection Agency (EPA) are used in "stain- and water-repellent fabrics, nonstick products (e.g., Teflon), polishes, waxes, paints, cleaning products, and fire-fighting foams (a major source of groundwater contamination at airports and military bases where firefighting training occurs)."

The chemicals, referred to as per- and polyfluoroalkyl substances or PFAS, were detected by EPA-mandated testing of U.S. water supplies between 2013 and 2015. The full results of that testing have not been made public. An analysis done by the Environmental Working Group using available data uncovered the widespread contamination. The group's analysis was released last week.

Firefighting foams are a major source of the contamination, primarily from their release during routine training drills at both civilian and military airports. But the desire of consumers for nonstick pans and stain- and water-repellent clothing and carpets brings direct contact with the toxic chemicals.

Sunday, May 20, 2018

Genes, synecdoche and the possibility of editing ourselves

Margaret Atwood's 2003 novel Oryx and Crake depicts the evolution and aftermath of a bioengineered global catastrophe. Whether Atwood at the time was privy to insider knowledge that genetic alteration would become easy to do and ubiquitous or whether she just thought it would make a good premise for a novel, I do not know.

What we have now, however, is a world moving ever forward toward what is being called the democratization of genetic engineering or biohacking for short. Anyone with a credit card and a mailing address can now order their own genetic engineering kit. Meanwhile, in major research laboratories around the world visits from awed reporters are bringing the possibility of fabulous advances in medicine to the attention of the public.

Some 6,000 diseases are thought to be linked to our genetic structure. Could these diseases not only be prevented in newly forming humans in utero, but also cured on the fly in fully fledged humans through means that alter their DNA? The preliminary answer is possibly.

Sunday, May 13, 2018

America's 'Cadillac Desert': Is there a substitute for fresh water?

Thirty years after Marc Reisner penned Cadillac Desert: The American West and Its Disappearing Water his prophesy is being fulfilled. As the chalky rings which mark previous higher water levels around Colorado River reservoirs grow ever wider, Grist reports that major disputes are now afoot over the remaining water supply.

Modern economists have long told us not to worry about resource scarcity. Higher prices will bring on new supplies whenever resource supplies decline. And, if a resource truly is becoming unobtainable, then we'll always find a substitute.

When I hear this, I often counter: "There is certainly some truth to what you are saying. But, please tell me what the substitute for potable water will be." The response is usually to change the subject—for the obvious reason that there is no substitute.

Sunday, May 06, 2018

Information overload, sustainability, and the emerging organization

Nafeez Ahmed, an exceptional journalist who writes at the intersection of resources and society, understands the complexity of the ecological predicament we humans face. In a piece he wrote last year, Ahmed asserted that our current arrangements are approaching a convulsive crisis point. One reason for this is as follows:

[T]he system faces a crisis of information overload, and an inability to meaningfully process the information available into actionable knowledge that can advance an adaptive response.

If he's right, is there anything we can do? The short answer is maybe. The great human ecologist William Catton pointed out in his 2009 book Bottleneck that the mass media has become a conduit for propagating bad or at least inconclusive information. In short, the feedback we humans need in order to run our society in a sustainable way is dangerously lacking.

But what if we could reorganize society to better handle the information available and act on that information quickly, decisively and appropriately? Management consultant and author John Hagel may be able to shed some light on this. (Regular readers will recall that I was channeling Hagel in last week's piece.)

Sunday, April 29, 2018

Is the CEO obsolete? A look at the emerging organization

Recently, the writer of a guest editorial in The Guardian Weekly proposed a solution to what ails the world's business schools: Shut them down. The author, Martin Parker, claims there are 13,000 business schools on the planet and he says that's 13,000 too many. He says the reason he knows a total shutdown is the only remedy that will actually work is that he's taught in business schools for the last 20 years.

His detailed critique covers a lot of territory, but I found one part of it particularly interesting in light of what I've been reading lately. Parker wrote: "If we want those in power to become more responsible, then we must stop teaching students that heroic transformational leaders are the answer to every problem[.]"

At first blush it seems as if we need more such leaders. But I think the point here is the same point which management consultant and author John Hagel is making in his book, The Power of Pull: This kind of thinking leads to passivity rather than the creative engagement which our society so desperately needs.

Hagel explains that what he calls "scalable" collaboration and learning are now the essential ingredients to have broad impact on society.

Sunday, April 22, 2018

The global village and the surveillance society

Media savant Marshall McLuhan coined the term "global village" in 1962 in his book The Gutenberg Galaxy. Today, we take the concept of an electronically connected global population with instant access to practically every plugged-in person on the planet as a fact of life.

We often see our global village as a force for good, creating understanding and binding people across cultures regardless of distance. McLuhan saw the downside as well. In his book he notes:

Instead of tending towards a vast Alexandrian library the world has become a computer, an electronic brain, exactly as an infantile piece of science fiction. And as our senses have gone outside us, Big Brother goes inside. So, unless aware of this dynamic, we shall at once move into a phase of panic terrors, exactly befitting a small world of tribal drums, total interdependence, and superimposed co-existence.

It turns out that the global village has many key similarities to an actual village or small town. Fellow villagers and small town neighbors are much more likely to know about each other's personal lives (often including many of the intimate details) than those who live in a large city. The anonymity and privacy today which so many prize and enjoy in the big city is quickly being eroded in the new surveillance economy. Living in the global village can now subject us to the same kind of scrutiny which those in small towns and villages have long been accustomed.