Why supply chains matter


Eugene Van Den Berg, Oct 2021

The Wallstreet Journal writes about the interconnection of supply chains, which most take for granted as we only see the end product and have a “sort-of idea” of the input materials.

In this article, although the complex procurement system supporting the manufacturing of hot tubs is used to illustrate it, and there are thousands of similar manufacturers in the world, it is an excellent example of the different processes at work to bring a final product to the consumer. The type of process is not limited to only the manufacturing of hot tubs. All products are supported by procurement and supply chains running effectively.

Supply chains are akin to the oxygen flow in your bloodstream. Constraint oxygen causes multiple problems.

Think back to the 1700 and 1800 small towns: one street, a few businesses along the main street. Supplies were sourced locally on the main borders of the city. Think about the general dealer and local horse smith and iron-works depicted in The Little House on the prairies. Live was simple.

Today, sourcing and procurement are complex. It’s driven by globalization and massive integration. The internet, transport modernization, access to information, online transaction processing, communication technology, etc., played a significant role in shifting procurement from local sources, as it was in the 1800s to thousands of miles away on the other side of the globe today

A question I am asking, is how would prolonged supply chain challenges impact working capital and funds flow for businesses? Can it lead to seizing up working capital because of liquidity constraints brought on by delays? What does that do to interim borrowing, capital management, financial restructuring? What does it do to the recognition of liabilities stemming from pending order fulfillment? All these aspects in their own right causes are crowding out effects, and they all share a single dominator, “unforeseen delay.”.

Energy crisis could threaten global economic recovery, IEA says – The Globe and Mail


Eugene Van Den Berg, Oct 2021

From the above article Reuters and The Globe and Mail states:

“A global energy crunch is expected to boost oil demand by 500,000 barrels a day and could stoke inflation and slow the world’s recovery from the COVID-19 pandemic, the economic recovery from the pandemic was “unsustainable” and revolved too much on fossil fuels. Investment in renewable energy needs to triple by the end of the decade if the world hopes to effectively fight climate change”

The article lacks expression about the true origins of the crisis. Since 2015 investment in oil and gas exploration declined sharply. That has led to an energy imbalance with demand exceeding supply.

Since the end of the first decade of the 2000s, climate activism and policy contributed to shutting in reliable electricity generation. The world is trying to take a short cut from coal, skip natural gas, and instantly land on utopia where solar and wind energy is the primary source to support base load, or worse even, as is the case with Germany, ditching nuclear for wind and solar. It did not quite work out as planned and Germany now is looking into the eyes of Russia to fall back on natural gas.

BIG MISTAKE! To have believed that natural gas and LNG are not a suitable replacements for coal fired powerstations.

Since April 2020 a commodity supercycle is unfolding. Growth in demand for commodities fuel the thirst for oil. That is because processing commodities rely on heavily industrial equipment and processes that drive the thirst for oil. Renewable Energy (RE) policy shifts too contribute to the rising demand for critical commodities used in RE component parts. On top of all this supply chain challenges are contributing to imbalances.

Without policy changes aimed at duality, and remaining stuck on policy that only supports ideology will not solve matters but instead grinding the crisis even deeper. The world cannot transition in a cost effective fashion without oil and gas. That view has nothing to do with climate denialism, it’s all to do with reality. Energy is mankind’s siamese twin. It’s inseparable, the two goes together like a horse and carriage. Energy sustain quality of life.

The challenge is up to solve RE reliability and storage. Without it net-zero looks pale.

When the world transitioned from horse and carriage to car over an approx. 50 year period, the world transitioned leveraging duality and transitioned to an energy source in unlimited supply. The notion that the wind and sun also provide unlimited, and even better, free, energy sources are true. The reality is the technology to make effective use of such free resources are lacking technological realibility and effective storage backup efficiency. Billions of dollars can be invested in more RE wind and solar over the next decade. If however investment is purely driven by constructing large energy farms and hoping that it will solve the problem, it is not likely going to achieve the desired outcome.

Wind and solar respectively yield approx. 17% and 25% of installed capacity. Quick math suggest to go all out wind and solar require 4x to 5x the amount of installed capacity that is required to get close to 100% yield of needed-installed capacity.

To support projected electricity demand to power a world driven by electric only energy would mean that the projected demand needs to converted to generation capacity and take that number and times it by 5 and from there configure the required generation and storage capabilities.

The Interstellar effect, as I call it. In the movie, for years mankind could not solve the math around defeating gravity on a cost effective basis. That illustrates that nothing gets solved doing the same thing and expecting a different outcome.

Why The Left Cancels Any Climate Questioning | Science Matters

Why The Left Cancels Any Climate Questioning | Science Matters (rclutz.com)


Eugene Van Den Berg, Oct 2021

Form the source the author writes:

“He who controls the language also controls reality, something that today’s left understands brilliantly, even devilishly. The language around climate change and the green movement is one more area the left wants to control, especially given that trillions of dollars in spending are on the line. Big tech is now doing its part to protect the Green New Deal and radical green ideology from dissenting views. Google and YouTube’s recent announcement that they now prohibit “climate deniers” to monetize their platforms” 

What exactly is a Climate Denier? Are you in denial when asking question about feasibility, reality, costs, value for money and returns, affordability, etc.?

The Google and Youtube ban comes into effect in November 2021. The ban will cover ads for – and the monetization of – content that contradicts the “scientific consensus around the existence and causes of climate change”.

To question is not denial. Denial means:

    • the action of declaring something to be untrue. “she shook her head in denial
contradiction, counterstatement, refutation, rebuttal, repudiation, disclaimer, retraction, abjuration, negation, dissent, disaffirmation, confutation, retractation
a statement that something is not true.
plural noundenials
“official denials”
    • the refusal of something requested or desired. “the denial of insurance to people with certain medical conditions”

The interesting words are: a) “content that contradicts the “scientific consensus”, b) “causes of”.

What happens if there are more evidence out there that reflect on the drivers of global warming not limited to Green House Gas (GHG) emissions only? There are reputable peer-reviewed research undertaken that focuses on all causes. What exactly is scientific consensus? A group of PhD’s that meet and drink tea and shake their heads in agreement with each other? Is scientific evidence not based on fact, hypothesis and proven theories. The boundaries with which science operate today is far different from the time of Einstein.  Steve E. Koonin’s “Unsettled” aims to explain the concept around consensus. This book received a lot of criticism. However, one need to maintain an open mind. Another great book “Inconvenient facts, The science that Al Gore doesn’t want you to know”, by Gregory Wrightstone

So by questioning the causes of climate change leading to people being banned, marginalized and de-platformed (seems to be the modern-day in-thing to do as we live in a snowflake and cancel culture) infringes directly on freedoms of expression.

No matter how we look at it ALL SCIENCE matter not only selective science (I am not talking about pseudo science. I am talking about science that can be backed up by fact). In addition to that, without energy live on earth cannot be sustained given the strong data correlations between energy consumption, growth, poverty eradication, improvement in life expectancy all driven by population growth. Are the Climate Activists next going to petition the culling of people given these correlations? 

The only way to bring all the pieces together is:

    • to focus on duality for the interim amid the current energy crisis;
    • vast effort and money to be invested in solving RE (wind and solar) reliability and battery storage efficiency for Electric Vehicles and RE (wind and solar); and
    • disconnect the aforementioned from hard emissions reduction targets. solve the conundrum in a piece-meal fashion. Not everything can be solved at once.

The first big energy shock of the green era

The first big energy shock of the green era from TheEconomist https://www.economist.com/leaders/2021/10/16/the-first-big-energy-shock-of-the-green-era

Eugene Van Den Berg Oct, 2021

From the above article, The Economist writes:

“Next month world leaders will gather at the cop26 summit, saying they mean to set a course for net global carbon emissions to reach zero by 2050. As they prepare to pledge their part in this 30-year endeavour, the first big energy scare of the green era is unfolding before their eyes. Since May the price of a basket of oil, coal and gas has soared by 95%. Britain, the host of the summit, has turned its coal-fired power stations back on, American petrol prices have hit $3 a gallon, blackouts have engulfed China and India, and Vladimir Putin has just reminded Europe that its supply of fuel relies on Russian goodwill.The panic is a reminder that modern life needs abundant energy: without it, bills become unaffordable, homes freeze and businesses stall. The panic has also exposed deeper problems as the world shifts to a cleaner energy system, including inadequate investment in renewables and some transition fossil fuels, rising geopolitical risks and flimsy safety buffers in power markets. Without rapid reforms there will be more energy crises and, perhaps, a popular revolt against climate policies.”

Over the past 30-years or so, Renewable Energy (RE) wind and solar failed to capture sufficiently enough energy marketshare to have stored off the current global energy crisis notwithstanding vast subsidies.

Contributing to the challenges are the demand for RE component parts stemming from critical commodities like Lithium, Copper, Cobalt and many more, that are used in manufacturing such parts. These commodities too experiencing demand that exceeds supply, and the last few years are only the start of a massive drive to accomplish energy transition goals. What will demand and pricing likely look like over the next few years.

Electric Vehicles (EVs) too showing strong growth and demands more copper and microchips than Internal Combustion Engines (ICEs). Microchip supply chains are under strain and so are the supply chains of other RE core commodities.

Rex Murphy: This energy crisis has been 30 years in the making. Why is anyone surprised? | National Post


Eugene Van Den Berg Oct, 2021

The current energy crisis playing out in large parts of the world is driven chiefly by the onset of a commodity supercycle that commenced in April 2020, combined with massive under investment in oil and gas since 2015. Such under investment causes demand for oil and energy commodities to exceed supply.

From the above article, The National Post writes:

The inevitable collision between 30 years of global warming hyper activism — the howling demonization of available, proven energy resources — and reality, is upon us. There is an atmosphere of semi-panic as many of the countries most committed to “getting off” oil and gas and turning their economies over to wind and sun find winter approaching and they, environmentally virtuous as they are, are wondering if they have enough oil and gas and even coal to get through it.”

Commodities in turn drive the demand for oil. Vast amounts of oil is needed to drive the machinery and industrial equipment used to process such commodities. This cycle compounds increases in inflation.

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