Populism in an age of scarcity

A number of candidates who prevailed in the last U.S. election can rightly be called populist in the 19th century "prairie populist" mold, opposing monopolies and concentrated power, championing the rights of the average citizen, and opposing tariffs which hurt farmers and consumers.

Perhaps the senator-elect from Texas, James Talarico, provided the clearest populist message by saying that the real divide in the United States is between the top and bottom of the income and wealth scale. That's a pure populist message.

The solution for a populist, of course, is to redistribute the wealth and power of society in ways that make the lives of average citizens better. That can be done by expanding and subsidizing such services as health care, transportation and education, making them more accessible and affordable. It can be done by increasing taxes on the wealthy, while leaving them unchanged or lowering them for those of middle and lower incomes.

Taking a break - no post this week

I am taking a break this week and plan to post again on Sunday, November 15.

Microplastics: What did the plastics industry know and when did they know it?

In June 1973 during a hearing on the Watergate scandal erupting around President Richard Nixon, Sen. Howard Baker, a Republican from Tennessee, uttered the most famous words of his entire career: "What did the president know and when did he know it?" It turned out that Nixon knew a lot early on, and that led to his resignation from the presidency a little more than a year later.

Since then, a form of that question has become central in investigations of many high-profile scandals including public health calamities such as those related to leaded gasoline, chlorofluorocarbons, asbestos and tobacco. Regarding the emerging public health calamity surrounding microplastics, we now have an answer to that compound question courtesy of the Los Angeles Times which gives us the precise date and location: the New York Academy Of Sciences Meeting in New York City held on May 10 and 11 in 1974.

At that conference, the plastics industry learned about the dangers of microplastics to human and animal health from Gerhard Volkheimer, a German scientist presenting at the conference, who "showed that tiny bits of swallowed plastic PVC [polyvinyl chloride] could slip through the intestinal lining of animals and travel through the blood and lymph to the brain, liver and other internal body parts," according to the Times. We know that many of the attendees at the conference were from industry because afterwords they wrote memos to their colleagues—now public thanks to the Times—memos bearing a distinct tone of alarm.

1974—Keep that year in your mind as we examine a similar question for other public health calamities.

The contrarian long view: AI, bonds, and oil

It seems that everywhere you look in the financial media these days there is persistent hype about artificial intelligence (AI) and the companies developing it. Right alongside this great investment boom is doom and gloom about the future value of bonds. Oil, too, is frequently covered for two reasons, the inability of oil futures prices—which seem suspiciously low—to reflect the long-term effects of what is happening in the Persian Gulf and the high prices of refined products such as gasoline and diesel where the real squeeze seems to be right now.

It's hard to resist the constant din of such news in order to arrive at an independent assessment. But that is precisely what we should strive to do in the face of what seems like the overwhelming consensus. However, I am not writing to give you financial advice which often requires precise timing to be of much value. In the financial markets—as I have learned again and again—being early is almost always the equivalent of being wrong. What I hope to do is to help you understand the financial news better. First, let me declare that I have no financial interest in anything mentioned in this piece lest you think I am "talking my book."

To be a contrarian with a long view requires a lot of mental armor as near-term events almost always contradict your prognostications. Trends in financial markets tend to go on longer than any skeptic can conceive. As famed economist John Maynard Keynes is quoted as saying, "Markets can remain irrational longer than you can remain solvent." Taking the long view, not surprisingly, requires not only patience but also fortitude.

Sulfur and the emerging food crisis

Sulfur has become an indispensable element for the modern industrial system including for agriculture. Before the outbreak of the Iran war, 24 percent of the world's supply of sulfur passed through the Strait of Hormuz. I can find no reliable information on whether sulfur is being shipped through the strait now after the Iranian government claimed control. I suspect the amount is close to zero.

The sulfur price at the start of the Iran conflict was approximately $500 per metric ton for sulfur originating from the the Middle East. It now sits above $800. Some customers paid more than $1,000 in June for Canadian-origin sulfur, a record. These high prices are threatening worldwide phosphate fertilizer supplies which depend on sulfuric acid for their production. To understand why this is happening, it's important to have some background.

In the densely interconnected web of global production, sulfur sits in the middle as the basis for sulfuric acid, a chemical that finds wide application in industry including for improving octane in gasoline; as raw material for detergents, resins, dyes, and explosives; for the "pickling" of metals, that is, the removal of oxidation from the surface; as an electrolyte in lead-acid batteries; as a laboratory reagent, that is, a chemical used for analysis and synthesis of chemicals; and for the production of phosphate fertilizer, an essential plant nutrient critical to obtaining high yields in today's industrial agricultural system. In fact, 50 percent of all sulfuric acid is used to make fertilizers, 42.5 percent to make phosphate fertilizer and 7.5 percent to make ammonium sulfate (a source of nitrogen) and sulfur fertilizer products. (Sulfur is an important soil nutrient by itself.)

Altman to humanity: Accept some bad things to get benefits of AI

The leader of the most visible company hawking the future of artificial intelligence (AI), Sam Altman, CEO of OpenAI, told Politico a little over a week ago that "the world should accept some bad things happening for the benefits of this technology." Let me provide additional context. Previously Altman has said the following:

1. "It is terrifying because of the power that superintelligent AGI wields to destroy human civilization, intentionally or unintentionally." -- Lex Fridman Podcast #367 (March 25, 2023)

2. "Mitigating the risk of extinction from AI should be a global priority alongside other societal-scale risks such as pandemics and nuclear war." -- Center for AI Safety statement (No date)

3. "I was very intent on not destroying the world before having kids." -- Vanity Fair interview (October 5, 2026)

I do not know for a fact that AI can destroy civilization, and I'm not sure exactly what Sam Altman means when he says that. But I do know one very important thing that bears repeating again and again: Any product or system that has a nonzero chance of destroying all of human civilization should be abandoned. There is no amount of benefit that can justify risking the destruction of the entire human project no matter how small the risk.

U.S. Supreme Court to decide whether climate suits can go forward

Tomorrow, the U.S. Supreme Court will hear arguments about whether a lawsuit filed in state court in Colorado seeking damages from two major oil companies for the climate-change related damage inflicted on Boulder County can go forward.

Here's the short version: The Canadian-based Suncor Energy Inc. and Texas-based ExxonMobil say that policies regarding climate change and any alleged damages resulting from it are matters for the federal government and courts only and that therefore the state suit should not be allowed to go forward. Boulder County says that it merely seeks compensation for damage done to Boulder and its residents by decades of emissions from these two companies. It is not seeking to change the policies of the federal government.

The energy companies contend that a victory for Boulder County would allow many similar suits to proceed and could bankrupt the oil industry by essentially creating a judicially ordered "carbon tax" in the form of damages.

Taking a break - no post this week

I am taking a break this week and plan to post again on Sunday, October 4.

All energy is local: The emerging physical delivery problem for petroleum fuels

Even as U.S. diesel and gasoline prices soared in the wake of the U.S.-Israeli war with Iran, both fuels remained widely available, just more expensive. Now, a few station owners are saying they are out of diesel though this appears to be an isolated problem for the moment. However, if the diesel and gasoline supply situation does not change, more and more stations may find themselves without one or both of these two crucial motor fuels.

Proximity to supply is starting to matter more and more. For example, in Texas (where many refineries and oil fields are located), the statewide average for diesel as of September 20 was $5.9779 per gallon. Regular gasoline was $3.9480 per gallon. In California (where refineries and oil fields are not as plentiful and air pollution rules complicate refining requirements) the statewide average for diesel was $8.4244 per gallon, while regular gasoline was $6.1533 per gallon.

And, it's not just ground transportation that is being affected, of course. Several airlines have announced they are cutting back on flights as a response to higher aviation fuel prices.

Pipeline "solution" to Strait of Hormuz closure gone in a flash

The East-West Pipeline in Saudi Arabia which delivers oil to the shores of the Red Sea has been an important workaround to the choking of tanker traffic by Iran in the Strait of Hormuz, the only exit for tankers from the Persian Gulf to the open sea. The Saudi government claims that 7 million barrels per day (mbpd) of crude oil can flow westward through the pipeline to the port of Yanbu though the current exports are thought to be lower (perhaps 5 mbpd) than that given infrastructure restraints.

But, now that pipeline has been bombed and put out of service. The Saudis are saying that the pipeline has been closed "as a precautionary measure." But that statement seems to underplay what has happened. Satellite images show that the attacks damaged at least two pumping stations. Repairing or replacing these stations may be more involved than simply replacing a section of damaged pipeline since the pipeline sits mostly above ground. And, of course, once repaired the pipeline could simply be attacked again. The 1200-mile length of the pipeline is not easily defended.

The oil-starved importers of the world have been gushing about how much oil has been getting out of the Persian Gulf right under the noses of a threatening Iranian Revolutionary Guard Corp (IRGC) who are standing watch with missiles and drones on the shores of the Strait of Hormuz. But even these surreptitious transits have carried volumes far below those transported before the war began, only 7 mbpd versus 20 mbpd. The East-West Pipeline became a crucial source of oil to the world after the Iranians closed the Strait of Hormuz.