Saturday, December 07, 2019

Offloading the Risk IIL ARAMCO IPO fails to reach target

The New Yok Times reports that the ARAMCO IPO fell short of Saudi expectations.

"Investors balked..."

It seems that my assessment of the viability of the oil industry is more widely shared than I thought.

Am I a cynic? Sure. Ambrose Bierce's definition: "Cynic, n: a blackguard whose faulty vision sees things as they are, not as they ought to be."

Friday, December 06, 2019

Offloading the risk II: Oil is cheaper than ever

The Guardian published a report today on possible further cuts to OPEC oil production.

The 2019 oil prices varied from $55 to $75. (1) The 1950 oil prices were about $28. In 2019 dollars, that’s $300. So the 2019 prices are between 1/6 and 1/4 of the 1950 prices.

Verily, “oil is sloshing around” the world (See Offloading the Risk). No wonder ARAMCO is going public. At such low prices their profits must be tanking.

And with such cheap oil, the incentive to convert to renewables is reduced. That’s not good.

(1) See this page on Macrotrends.  Since the latest prices is shown in current dollars, the cahrt is not adjusted for inflation. The highest price shown is $164.64 in June 2008, or $18 in 1950 dollars, about 65% of the 1950 price.

Monday, December 02, 2019

The cost of externals: An accumulating debt

Steel, concrete, and climate change: the price of zero-cost externals

New Scientist (November 16-22, 2019) has published an article showing the high carbon cost of making steel and cement, the two raw materials that make our techno-civilisation possible.

The article reports several projects to reduce the carbon cost. One is to use hydrogen instead of coal in blast furnaces. “If the economics work out”, that is. All these projects are priced at the actual costs of development and deployment. This makes them look expensive compared to traditional methods of making steel and cement. (1)

Steel and concrete are a prime example of how traditional economics has misstated the costs of our life style. Externals have traditionally been priced at zero. Thus steel and cement seemed to be cheap materials for making the things we want. In fact externals do have a cost. We just haven’t bothered to work out good methods for pricing them, still less for paying them. (2)

As a species, we have evolved to use our environment as a freely available resource for making what we want, eg, spears. The cost of making these tools was the labour of making them. The cost to the ecosystems was ignored. Our ancestors didn’t notice or care that the tree they destroyed to make sticks for poking game animals to death meant that the ecosystem had to make more trees. As long as humans were a small component of the ecosystems, the long-term effects our use of natural resources were minimal. (3)

However, the costs of externals accumulate. If we don’t pay them, they become a debt. Mother Nature always collects her debts. We either spend our resources now to mitigate and if possible reverse climate change, or we will pay with the loss of property and life.




(1) Concrete is made by using cement to bind the sand and gravel particles together. This process requires CO2, and so some of the CO2 used to make cement is recovered from the air.

(2) Zero-cost externals mean that the goods are underpriced. The market works efficiently if and only if prices express costs accurately relative to each other. Mispriced goods distort the market, which leads to market failure.

(3) Human effects were not balanced by ecosystem recovery: archeologists have found evidence that agriculture began the climate warming cycle at least 7,000 years ago.

Friday, November 29, 2019

Gary Larson. The Far Side Gallery 4 (1993) Another lovely collection of Larson’s cartoons. Two samples below. ****



Creepy Cartoons by Gahan Wilson

Gahan Wilson. Playboy’s Gahan Wilson (1973) Gahan Wilson died a week or so ago: see the New York Times obit. So I took out my copy of this collection, and spent a pleasantly lugubrious hour enjoying his work. I like his mix of the macabre, satirical literalism, and insight into the dark paranoia that terrorised our childhoods. Like cartoonists in general, his work is underrated. Here’s one of the many cartoons that stuck with me. Its riff on the brain-in-a-jar hints at the terrifying truth better than most: The brain needs a body in order to generate the conscious self. The speech of this one is beginning to fracture: The doctors...say...they’ve never... seen...another case...quite...like...it. This brain will not be sane much longer.
    I think that any collection of Wilson’s work is worth more than a cursory look. ****
R. Cobb. Raw Sewage: Unprocessed Cartoons (1970) No longer in print, but worth searching for, this collection reminds us of several things: The Cold War and the threat of nuclear annihilation. The increasing damage caused by our overproduction of material goods. The tight grip that unexamined ideas have on us. The morphing of political principles into religious dogmas. And so on. And while some details of Cobb’s cartoons  fail to foresee the future, the theses are as valid today as they were fifty years ago. Our consumerist capitalism will destroy us. A bleak vision, but a necessary one. ****
David Feldman. When Do Fish Sleep? (1989) Second in Feldman’s series of “imponderables”, which attempt to answer those nagging questions that  our high school classes didn’t cover. Such as the title question. Do fish sleep? Well, they do exhibit episodes of near-zero activity, which I suppose could be seen as sleep. Wrasses cover themselves in a thick blanket of mucus, not to keep warm, but to obliterate their odour, which would attract predators.
     A nicely done potato chip book, with an index, which makes it a useful reference for the times when you can’t be bothered to start up your device and search online. Online searching for fishes’ sleep patterns offers so many hits that deciding which one to open may be more trouble than opening the index in this book and finding the answer on page 161 to 162.
     I like these books (and many others like them, for example the urban legend compendiums), hence ***

Saturday, November 09, 2019

Offloading the Risk: ARAMCO goes public

Observing when private companies "go public", I've come to what (I think) is an obvious conclusion:

No one sells a business that they expect to provide risk-free cash for the foreseeable future.

Update 2019 11 15: CBC's The Current a few minutes ago aired a panel discussion about the ARAMCO IPO. One of the panelists pointed out that oil prices are depressed, and likely to remain so. He used the phrase "oil sloshing around".

Another thought (2019 11 22): If we manage to convert to non-fossil fuels in time to prevent our civilisation's collapse, demand for oil will collapse. If our civilisation collapses, demand for oil will collapse (and the  oil-transport infrastructure will cease to function). Either way, there will be no more profit for ARAMCO. On the other hand, Saudi Arabia has a lot of sun-soaked desert, ideal for solar power arrays.
     The only question left to answer is how fast the oil industry will decline to near-zero. That answer is included in the answer to how fast the climate will change, and how fast we can reduce the effects.



Thursday, November 07, 2019

Curious buit rarely useful advice

Ian Pindar, ed.  How to Cook A Hippopotamus (Folio Society, 2006) A collection of advice and instruction, ranging from how to cure a cold to how to practice ventriloquism. As for cooked hippo, you boil the chunk you want to eat, then “souse it in vinegar, with chopped onions and cayenne pepper.” In short, as with any wild meat, overwhelm its flavour with strong spices.
     Advice books are older than the Bible (which is a compilation and redaction of many earlier works). Following Gutenberg’s (re-)discovery of printing with movable type, one of the earliest international best-sellers was Castiglione’s The Courtier (1508-1529, yes, it took 20 years to write), which was translated into all the principal European languages, and influenced a slew of successors. That is, imitators shamelessly stole from it. That’s been the method of composing advice books ever since, and next to cookbooks, they form the most reliably profitable product of the great publishing houses of the Galaxy.

    This compilation will save the reader the tedium of searching for useful tidbits, and for that reason alone is worth seeking out. I received it as a gift, and have consulted it several times. I have, however, followed none of its advice. ***

Friday, November 01, 2019

Innumeracy rampant: Suppose average class size were 25

Innumeracy 2: If average class size were 25 students

Let’s suppose the Ontario Secondary Teachers took the Ford government at its word, and negotiated an average class size of 25 students. (1)

Given a high school of 1120 students (the number I used in Innumeracy 1).
Number of classes would be 1120/25, or 44.8, or 45 in round numbers. So we would need 45 teachers for those classes.

But in any one period, 1 in 5 teachers has a prep period (also used for “standby”, or emergency supervision). So we would need 45 x 1.25 = 56.25 teachers to cover a full timetable. We would also need a principal, a vice-principal, and three guidance counsellors. (2)

That comes to a total of 61.25 teaching staff. (The 0.25 teacher would be one hired to teach one class.)

That results in a student-teacher ratio of 1120/61.25, or 18.3:1. That’s well below the 22.5:1 that the Ford government decided to raise to 28:1. (3)

Footnotes

(1) In the past, school boards have resisted average class size numbers. They did the arithmetic, and understood what it actually meant.

(2) Some school boards would add a half-time vice-principal, which would bring the staffing total to 61.75, and a student teacher ratio of 18.2.

(3) Because some classes will be capped around 22 to 24 because of safety or limited facilities, the larger classes would be over 30.

Innumeracy rampant: Student-teacher ratio and average class size

Innumeracy 1: Why the Student-Teacher ratio is not the Average Class Size.

The Toronto Star and the CBC constantly use “average class size” when reporting education news. For example, the Toronto Star recently reported that the Ontario Minister of Education was offering to reduce the average class size from 28 to 25. He did no such thing. He offered to reduce the student-teacher ratio, which is something quite different.

Here’s an example showing the difference, using the 28:1 ratio that the Ford government initially mandated.

Given: A high school of 1120 students.

At 28:1, this school will be assigned 1120/28, or 40 teachers.

Of these 40 teachers, one is a principal, one is a vice-principal, three are guidance counsellors (1).

Thus there are 35 teachers available for classroom teaching. A teacher is assigned 4 teaching periods in a 5-period day. Therefore at any given time, 28 teachers are in class, and 7 have a preparation period (2). This means that the average class size is 1120/28, which is 40 students per class, not 28. (3) (4).

The 22.5:1 ratio that existed prior or the Ford government’s changes came about because of attempts to keep average class sizes below 30. Even so, class sizes above 30 were common.

Footnotes:

(1) The Provincial average is 396 students per guidance counsellor. In larger schools, there will be two vice-principals.

(2) If an emergency absence occurs, a teacher may have to do a “standby” during a prep period.

(3) Special education classes are capped at 20 students. Safety regulations limit lab and shop classes, generally around 24. Some other classes (music, arts) are limited by the available space and supplies, generally also around 24. Thus, the remaining classes will be well above 40 students per class.

(4) Senior students may qualify for “spares”, but these days most opt for taking additional courses instead, so as to be better perpared for university or college.

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