Inflation Dominates the Age of Peak Finance

Different week, same three “Fs”. Food, fuel, and finance. We mentioned a few weeks ago that these three investment themes intersect, interconnect, and generally get all tangled up. Expect more tangling this week. Let’s try to untangle them a bit for you today.

First, fuel. Crude oil reached US$119.41 on the NYMEX. That’s a nominal record. The latest big story is that British Petroleum shut down a key pipeline from the North Sea that carries nearly 40% of the U.K.’s daily oil output.


The company shut down the pipeline because of a strike at a refiner that supplies nearly one-tenth of Britain’s refined fuels. The strike at the Grangemouth refinery is important though, because the refinery also produces power that goes to a neighbouring facility which processes oil coming on land from at least 70 oil wells off shore in the North Sea.

A strike shuts down power. Power shuts down the refinery. And if the refinery ain’t refining, you don’t pump crude oil to it. It all makes perfect sense in its own way.

The strike at the refinery is a ‘finance’ issue. The employees apparently want better pensions. The company who runs the refinery, Ineos PLC, does not seem willing to oblige. The resulting impasse has led to 15 straight days of higher fuel prices for British motorists.

Daily Reckoning