When I wrote last week that we needed to see some input from the grown-ups into the question of energy policy and security, I was working on the basis that there were some grown-ups around. Sad to say, I think I may have been over-optimistic; the evidence of the last few days shows what looks like a disturbing mass hysteria amongst a large part of the population of the UK.
How else to describe the queues waiting outside petrol filling stations, prompted by headlines screaming that the country was on the verge of running out of fuel? Of all the variety of numbers and statistics wheeled out, the one that seems to me to sum the whole nonsense up most succinctly is one produced by a fuel transport company, who pointed out that petrol and diesel demand over the last weekend was up by 500% against a regular weekend. That, more than anything else, is surely the root cause of the problem; and that only comes about through sensationalist reporting and broadcasting. And yes, I am feeling quite smug, as I effortlessly switch my hybrid cars into electric mode and accelerate past the static queues…..
Underneath all this, of course, we are in an environment of rising energy costs, attributable to a global economic recovery and a greater awareness - in places - of the need to change the balance of power generation, although still the price of oil is the dominant factor, even with attempts to reduce our dependency on it. Among the metals, the most energy-heavy production is of aluminium, and the price of that metal has surged in recent weeks, in tandem with oil. There is a glib statement that aluminium is like solid energy; but that’s not really quite true, because although a great deal of energy is used in its production, you can’t in fact release that energy back again. What you’re really doing is using energy today because you think its price will rise in the future. The aluminium doesn’t actually store the energy for you, but the benefit comes because it’s cheaper to produce now than it will be in the future; so you have consumed the energy, and aluminium is really a proxy for its storage, anticipating a parallel price increase. My suspicion is that this is relatively short-term, and that the real beneficiary metals of the rebalancing of the world’s energy usage and electrical consumption will still be, as I have said several times before, copper and nickel, given their role in power transmission and battery storage. But, as ever, I’m very happy to admit I could be totally misguided.
One other issue where I have picked up some whisperings is the fate of the LME. There are seemingly rumours - very faint rumours, I must stress - that a change of ownership may again be back on the table. Could CME want to take another bite at the cherry that eluded them last time? My guess would be that the price might be a tad less steep, if it were to happen again - but, once again, I could be totally wrong……