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Despite what you hear, inflation is growing

http://peakoil.com/article10081.html

But Sean noted a couple of recent stories. One cited Royal Dutch Shell as struggling with enormous cost overruns at a number of large projects. A second discussed chemical producer Celanese, which is abandoning plans to build a new plant because construction costs have risen by "30% to 50% over 18 months." He also pointed out that shipbuilding yards have doubled lead times. Sean said "the list goes on" (which it does) and then shared the following:

"The inescapable conclusion is that this whole damn system is stretched tight from top to bottom -- all the past years of underinvestment are coming home to roost at once, and the situation is being exacerbated by the petrodollar boom. … We need more steel to build more equipment to dig more coal so we can feed new power stations, and use the extra energy to mine and refine more copper, which we need to wire new shipyards so we can launch more dredgers, so we can improve port facilities, so we can move more iron ore to the expanded railways, so we can make more steel. …

"Yet, there is a downside to all this. Namely, that because of our diseased financial system, half the new production is based on zero (negative?) real cost of capital in China, and half the demand is based on credit, not income (whether at the household or the government level) in the West. If and when the wheels come off all this (are they in short supply, too?!), it is going to be truly horrendous!"

To answer Sean's question: Yes, tires, too, are in short supply, as I learned at a recent board meeting. Tires for mining and heavy-construction vehicles appear to be sold out through 2007.


http://peakoil.com/article10081.html

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