by Michael Arbow, MBA
Partner, RSD Solutions Inc.
With these words Chief Engineer Montgomery Scott (Scotty) of television’s starship Enterprise would warn Captain Kirk of the ship’s limits and capabilities. These very same words are being said again but this time in China where the providers of electric power are warning China’s industries to expect massive rolling black outs and power restrictions this summer. With subsidies in coal (where industrial users pay 1/10th the price of oil) and oil, Chinese industry burns through the stuff with near hopeless abandon. The subsidies may end, eventually, but in the interim expect the demands for energy making stuff – like coal, oil, uranium and equipment like windmills, solar cells, generators to increase. Assuming you don’t work in the oil industry or at General Electric; sadly what is China’s problem is our problem. Commodities will continue to rise as will the currencies of those who produce the goods and this will be over a number of years. In the short term look for another spike in energy prices this summer.
While this may sound like a broken record, I fear and sense that many industries and governments are not fully preparing for the shocks and have not put in place risk reduction measures. Some of these will be long term (energy efficient buildings and infrastructure like public transit) and some will be short term (hedging strategies). The past is past and we are entering a new dynamic environment – has your risk perspectives and handling changed to better suit this new world?
For Jeff Rubin’s thoughts on this subject, click on the link:
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