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1.31.2011

New Brunswick: A banana republic*?

By Roy MacMullin

True or False? Our common heritage, the natural resources of the province, is being managed in a competent manner by the government. Recently, I looked at the money being received by the province from natural gas production. Here are the results of my investigation.

A royalty is a payment to the owner of an asset for its use. For example, if you pay rent of $900 per month on an apartment that is worth $80,000 per unit, that’s effectively a royalty of 13.5% per year that you pay for the use of that asset.

To develop a natural resource, governments often assign a block of land based on a bidding process, prospective sites are drilled by a company, connected to a pipeline and the gas produced is sold until the wells are empty. So the valid questions seem to be – First, are we getting a fair price for our non-renewable gas resource? Secondly, how fast is the resource being depleted and will there be any left for our children and grandchildren? In other words, are we using the resource in the best possible manner?

In the years from 2003 to 2010, the major producer of natural gas in New Brunswick, Corridor Resources paid royalties of between .5% and 8.2% when expressed as a percentage of natural gas revenue. The average over the period has been 5.3%. Typically, one would compare royalty regimes with other jurisdictions as a basic sanity check.

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An era of cheap food may be drawing to a close

Source: Reuters

U.S. grain prices should stay unrelentingly high this year, according to a Reuters poll, the latest sign that the era of cheap food has come to an end.

U.S. corn, soybeans and wheat prices -- which surged by as much has 50 percent last year and hit their highest levels since mid-2008 -- will dip by at most 5 percent by the end of 2011, according to the poll of 16 analysts.

The expectations may also strengthen importers' resolve to build bigger inventories after a year in which stocks of corn and soybeans in the United States -- the world's top exporter -- dwindled to their lowest level in decades.

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1.24.2011

Global food system must be transformed 'on industrial revolution scale'

The existing food system fails half the people on the planet, and needs radical change if world is to feed itself, report warns


Source: www.guardian.co.uk, Monday 24 January 2011

The world will not be able to feed itself without destroying the planet unless a transformation on the scale of the industrial revolution takes place, a major government report has concluded.

The existing food system is failing half of the people on Earth, the report finds, with 1 billion going hungry, 1 billion lacking crucial vitamins and minerals from their diet and another billion "substantially overconsuming", leading to obesity epidemics. Stresses on the food system are reflected in price spikes but the cost of food will rise sharply in coming decades, the report adds, which will increase the risk of conflict and migration.

"The global food system is spectacularly bad at tackling hunger or at holding itself to account," said Lawrence Haddad, director of the Institute of Development Studies and an author of the Global Food and Farming Futures report. An expanding world population combined with the need to stop over-exploiting natural resources such as soil and water means there is a compelling case for urgent action, the report states. Food is responsible for up to 30% of global greenhouse gas emissions.

"We need to act now," said Caroline Spelman, the secretary of state for environment, food and rural affairs, whose department co-commissioned the report from the government's futures thinktank Foresight. "Farmers have to grow more food at less cost to the environment."

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1.19.2011

How sustainable is growth with triple-digit oil?

Source: Globe and Mail, January 18, 2011
Author: Jeff Rubin

With oil prices (CL-FT91.620.240.26%)within spitting distance of triple-digit levels, it may be time to reconsider just how long this recovery will run.

The fact that we’re seeing oil at triple-digit prices in this cycle should come as no surprise. After all, that’s where oil prices ended up last cycle before deep-sixing the global economy. But to see triple-digit prices again this early into what by all historical standards has been a painfully slow global recovery must be disconcerting to a world economy never hungrier for growth.

If merely getting back to pre-recession levels of global industrial production has oil knocking at the gates of triple digits, where do you think crude will be trading should we be fortunate enough to sustain this economic recovery for another year?

If anyone doubts how vital oil is to economic growth, just look at what happened last year. Global oil demand grew at two and a half per cent from the year before (almost double the International Energy Agency’s original forecast for 2010).

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As oil nears $100 mark, threat to nascent recovery grows

Source: Globe & Mail, January 18, 2011
Authors: Shawn McCarthy and Nathan Vanderklippe

Rising oil costs are putting the squeeze on transportation companies and consumers, raising concerns that the fragile global recovery is in danger as prices veer toward $100 (U.S.) a barrel.

Airlines and trucking companies say they are absorbing higher costs that are difficult to pass on to consumers, even as households have to spend more of their disposable income on gasoline and home-heating fuel.

In the United States, consumers are only beginning to shake off the effects of the deep recession, and the rising pump prices will hurt their confidence and their wallets, said Chris Lafakis, an economist at Moody’s Analytics in New York.

For every one-dollar increase in crude (CL-FT91.710.330.36%), American consumers face an added $1-billion in higher energy costs, Mr. Lafakis said. “That’s money that could be spent elsewhere – it could be used to pay down debt or it could be saved.”

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1.17.2011

Metro residents have say in plan for future

Source: Times & Transcript, January 17, 2011

If we were asked our opinions on a document called the 2011 Municipal Plan, most of us would feel our eyes glaze over.

But if we were asked what we wanted our community to look like, feel like and work like next year, in the next five years, and even the next five decades, most of us would have something to say.

If you live in Moncton, you are soon going to get that say. And your city's not just offering you the right. It's asking you to take the responsibility.

More details will become available at tonight's regular public meeting of city council, but ahead of that, City of Moncton spokesman Paul Thomson says updating the municipal plan, something the city tries to do every five years, is critical work.

"It's about the look and feel of our city looking forward. It may seem like it's just zoning stuff, but it's way more than that," Thomson says.

"It's also about what we want our buildings and neighbourhoods to look like. It has to take into consideration everything, environment, lifestyles, culture, events."

The environment is a particularly good example of why municipal plans need to be regularly refreshed. Even 15 years ago, there was much less civic concern for reducing our footprint on the world, and much less thought given to the changes a changing environment will have on how the city operates.

When a barrel of oil reaches $150 again, or goes above that, there's no denying that is going to have an effect on not just small concrete matters like how the city paves and plows its streets, done now with oil rich asphalt and gas guzzling heavy equipment, but it will also have an effect on the very way our city spreads out - or doesn't.

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1.11.2011

For the first time, the world is facing a real food shortage

Source: Times & Transcript, published Tuesday January 11th, 2011
By: Gwynn Dyer

If all the food in the world were shared out evenly, there would be enough to go around. That has been true for centuries now: if food was scarce, the problem was that it wasn't in the right place, but there was no global shortage. However, that will not be true much longer.

The food riots began in Algeria more than a week ago, and they are going to spread. During the last global food shortage, in 2008, there was serious rioting in Mexico, Indonesia, and Egypt. We may expect to see that again this time, only bigger and more widespread.

Most people in these countries live in a cash economy, and a large proportion live in cities. They buy their food, they don't grow it. That makes them very vulnerable, because they have to eat almost as much as people in rich countries do, but their incomes are much lower.

The poor, urban multitudes in these countries (including China and India) spend up to half of their entire income on food, compared to only about 10 per cent in the rich countries. When food prices soar, these people quickly find that they simply lack the money to go on feeding themselves and their children properly - and food prices now are at an all-time high.

"We are entering a danger territory," said Abdolreza Abbassian, chief economist at the Food and Agriculture Organization, on Jan. 5. The price of a basket of cereals, oils, dairy, meat and sugar that reflects global consumption patterns has risen steadily for six months, and has just broken through the previous record, set during the last food panic in June, 2008.

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1.10.2011

Car maker dilemma

It looks like the Big3 Detroit automakers are betting on electic cars. Based on the experience of the last couple of years, it seems consumers will buy them...but only if oil is expensive. If oil is cheap, North American consumers will prefer trucks and SUVs (vehicles that are clearly not the focus of the attention at the 2011 Detroit Auto Show). Could it be then that the big 3 are secretly hoping for expensive oil? Say they get what they wish for and start selling electric vehicles like hot cakes, won't that be their success and their demise both? Cause the more electric cars they sell the higher the likelihood oil demand (and prices) will dwindle.

Yet another example of how long term business planning will be extremely difficult in a Peak Oil world.

Oh..and where will the electricity to power this fleet of vehicles come from again?

PCGM

1.09.2011

Crise alimentaire en Algerie

Source : Liberation.fr

Le gouvernement a annoncé samedi soir des mesures pour faire baisser les prix du sucre et de l'huile dont la flambée a provoqué des émeutes. Le bilan depuis jeudi est de trois morts 400 blessés, dont 300 policiers.

Le gouvernement algérien a annoncé samedi soir une série de mesures pour faire baisser les prix du sucre et de l'huile dont la flambée a provoqué des émeutes qui ont fait depuis le 5 janvier trois morts et quelque 400 blessés, dont 300 policiers, selon un bilan officiel.

A l'issue de plusieurs heures de réunion interministérielle autour du Premier ministre Ahmed Ouyahia, le gouvernement a annoncé l'exonération à titre temporaire de 41% des charges imposées aux importateurs, producteurs et distributeurs d'huile et de sucre.

Dans son communiqué, le gouvernement précise qu'il "attend des producteurs et des distributeurs d'en répercuter en urgence les effets sur les prix de vente aux consommateurs" dans ce pays considéré comme un important acheteur de produits alimentaires.

Il a également annoncé la tenue d'une réunion urgente "dans les prochaines heures" entre le ministre du Commerce Mustapha Benbada et les opérateurs concernés.

Ces mesures, applicables rétroactivement depuis le 1er janvier jusqu'au 31 août 2011, sont destinées à "faire face à la hausse subite des prix de certains produits alimentaires de base" à l'origine d'émeutes qui se sont poursuivies samedi dans plusieurs régions.

1.06.2011

Peak oil means massive sovereign default

Source: www.jeffrubinssmallerworld.com (Jan 6 2011)

2010 left us all with a mountain of debt. Whether you’re a taxpayer in the UK, Ireland or the US, it must already be pretty clear that you’re on the hook for a lot of IOUs borrowed from your future. You may not have borrowed the money yourself, but your government has already done it on your behalf, running up massive, record-setting deficits. What’s not clear is exactly how your government is going to pay that debt back.

With students already rioting in London over huge tuition increases, and general strikes the order of the day in places like Athens and Madrid, chances are slim that incumbent governments will survive long enough to cut their way to fiscal solvency. That’s not to say the fiscal brakes aren’t on (they are—at least everywhere but in the US). But the deficits are so gargantuan (as an example, Ireland’s is equal to one third of the country’s GDP) that the twin tasks of slashing spending and hiking taxes could last decades, provoking all kinds of social and political push-back during that time.

Given austerity’s slim chance at success, you might ask why government borrowing rates in the bond market, though rising, aren’t much higher. History would suggest that the yield on a ten-year US Treasury bond should be close to double what it is, given the size of Washington’s borrowing program.

The reason it’s not is that creditors and debtors both share a common belief that a powerful economic recovery lies just around the corner—one so powerful, in fact, that tax revenues will suddenly fill government coffers and let bondholders be paid the huge sums they are owed while at the same time sparing taxpayers an otherwise draconian fate.

The only problem is that the economic growth everyone is counting on is powered by oil. And as you’ve probably noticed, that’s getting more and more expensive to burn.

The minute global industrial production recovered from the recession, oil prices were suddenly on the verge of triple digits. That’s not an accident, since the two go hand in hand. Global oil demand is up 2.5 million barrels per day from last year. Any further increases in oil demand and oil prices will be trading comfortably in triple-digit range.

That suddenly makes all that government debt very energy intensive. It will take huge amounts of energy, particularly oil, to achieve the growth rates that all the near-bankrupt governments around the world need to even service their debt, let alone repay it.

So consider just how sustainable economic growth would be in a world of oil prices of $100 to $225 per barrel. Because those are the price parameters we’d be facing in the unlikely event that we actually see the kind of economic growth that bond markets and public treasuries around the world are so desperately depending on.

1.05.2011

Food prices hit record high, Australia floods add to fears

Source: Globe & Mail, January 5th, 2010

World food prices have hit their highest on record, and there are fears that the devastating floods in Australia could push them even higher.

The Food and Agricultural Organization, an arm of the United Nations based in Rome, said today its food price index climbed in December to its highest since it began collecting data in 1990. The measure, which tracks costs of items such as rice, wheat, corn, sugar meat, rose more than 4 per cent from a month earlier.

That will raise fears over the possibility of another crisis like that of 2007-2008, when countries such as Bangladesh and Haiti were the scene of riots, The Financial Times reports. The index has now topped those levels.

There are also fears that the flooding in Australia, a key producing region for sugar, for example, will boost prices even more.

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