• Yesterday’s IIP release was preceded by a mistake. Mint says: On Monday, the government was guilty of a similar error in its factory output data. Till it corrected the number pertaining to capital goods output, analysts were left scrambling for explanations as to how this had grown 25.5% while overall factory growth had shrunk 5.1%. (The answer: it hadn’t, and had actually shrunk by 25.5%).
• On 9 December, we discovered there were important mistakes in the exports data.
• In December 2010, RBI modified the numbers that it releases about its trading on the currency market.
• In September 2010, there was a mistake in the quarterly GDP data released by CSO.

The Energy Report: You have said you don’t believe in peak oil, Porter, because as oil prices rise, the entrepreneurial spirit will lead people to find ways to extract oil either in new places or with new technology. With prices running between $80 and $100/barrel (bbl), is the era of cheap oil over? And if so, what will be the impact on economic growth?

Porter Stansberry: I feel the same way about peak oil as I do about deflation. It shows massive ignorance of economics and human nature. In regard to oil prices, you have to separate the price from the currency, because in Swiss francs and gold, oil prices haven’t changed much in 50 years. Yes, the price of crude oil is volatile; it goes up and down. But in 1950, it took 2.5 grams of gold to buy a barrel of oil. Today, 2 grams of gold will buy you a barrel of oil. Thus, if you take the loss of the dollar’s purchasing power out of the equation, you’ll find that the price of oil has remained very flat.

So I would argue that despite massive increases in consumption, the real price of oil has remained unchanged. Going forward, that will almost certainly remain the case. Why? Because geology doesn’t create oil; capital creates oil. The more capital you put toward oil, the more of it there will be.

TER: But the cost to extract the oil is increasing. We don’t have “easy oil” anymore.

PS: No, that’s not true. Just as with any other economic activity, the more experience we have in oil extraction, the more efficient we become at it. In fact, the real price of oil would go up considerably if the true costs of extraction were going up as well, and as I explained, the real price of oil has been flat.

Let’s be very clear—you can’t measure these things in dollars because the dollar has lost 90% of its purchasing power since 1971. It’s lost 50% of its purchasing power since 1990. Measuring the oil industry in dollars gives you a very warped view. Pick a sound currency such as Swiss francs or gold grams and look at the oil business through that lens.

I believe that what’s happened with the U.S. dollar over the last three years has resulted in an enormous mis-pricing of oil. Speculators are rushing into oil and fleeing the dollar, which is producing an unsustainable demand for oil. Because this demand is investment-based and not economy-based, it is stimulating production that exceeds real demand by a wide margin.

TER: And where will that take us?

PS: Over the next 18 months, I expect a major correction in the price of oil and gas, with oil falling back to $40/bbl. It won’t stay there long, but it will be a big correction.

TER: What’s the extent of the stimulated production you mentioned?

PS: What’s happening onshore in the U.S. with oil and gas production is amazing. We’re setting new records for hydrocarbon production in the U.S. this year. Obviously, you can’t have record levels of hydrocarbon production if you’re supposedly running out of oil, so serious proponents of peak oil have their heads in the sand.

One more thing about peak oil. . . Look at a great book, The Prize: The Epic Quest for Oil, Money, and Power, by Daniel Yergin, cofounder and chairman of Cambridge Energy Research Associates. It’s a whole history of the oil industry. For example, war-related demand made oil prices soar during World War II, and lots of production ensued. Then big debates erupted over whether domestic use of oil should be tightly regulated because oil was a scarce, strategic commodity needed more for tanks and battleships than cars. Those favoring the tight controls argued that we were going to run out of oil, that all the major supplies of oil in the U.S—and likely in the world—had already been discovered. That was in 1946, before Saudi Arabia had really ramped up production.

You see this in the oil industry time and time again. Fears that we’ve found the last oil, that we’re going to run out, pop up constantly. And soon afterward, because the price goes up, huge new reservoirs are discovered. Always. They’re discovered because the capital is there for the exploration.

TER: You noted earlier that experience in oil extraction leads to further efficiencies, and U.S. Department of Energy estimates suggest that horizontal drilling alone can lead to increasing reserves from existing oilfields by 2%.

PS: Horizontal drilling is a fantastic technology that’s leading to a renaissance in the oil and gas industry in the U.S., and you’re going to have enormous amounts of new production come online in the decade ahead. That will, of course, force the prices back down. And inevitably, in 25 to 30 years when the prices go back up, we’ll again hear, “Oh no, we’re running out of oil.” It’s a constant cycle. It’s human nature. It’s economics. Really, if people just read a little bit more history, they wouldn’t fall for such antics.

TER: If we’re now at a point in this constant cycle where capital infusion will find additional oil supplies, will oil equities drop correspondingly?

PS: Obviously. As oil and gas prices fall over the next 18 months, it will reduce oil and gas company earnings and their stock prices will fall. They may not drop as much as they ordinarily would, however, because many of these companies are in the midst of enormous expansions of their proven reserves. Oftentimes, as you know, oil and gas companies are valued more on the basis of reserves than on current earnings.

TER: So is this the time to short them?

PS: No. There are too many other easier targets to short—European banks, newspaper companies, hard-drive stocks are some of my favorite shorts. I wouldn’t short oil and gas companies now because, as I said, they’re in this period of massive discovery. If you’ve been following the onshore shale companies the last six months, you know they’ve been doubling and tripling proven reserves, which is making their stock prices jump even though oil prices have been falling for the last several months.

TER: Shifting to natural gas, one of your recent newsletters points out that U.S. natural gas is 75% cheaper than oil, with prices at roughly half of the world’s prices. Extrapolating from there, you say that such a dramatic difference in the price of the same commodity—that commodity being energy in this case—won’t remain for long, because somehow traders will arbitrage and either oil will come down or natural gas prices will go up.

Why would the spread between oil and natural gas, which has existed for quite a few years, begin to reach equilibrium now?

PS: The spread between oil and gas, and between onshore gas and foreign gas, really began to widen in 2008 and basically has continued to widen for the last three years. It hasn’t been arbitraged away yet because it takes a long time for various consumers of energy to make those kinds of changes. Many coal-fired power plants are being decommissioned or switched over to natural gas, but that takes a long time.

It will take five to 10 years to arbitrage away that spread. Meanwhile, the biggest fortunes in oil and gas over the next decade will be made by efforts to arbitrage the global price of energy from America to the rest of the world. These spreads presage a massive change in the oil and gas business in America from acting as a large energy importer to becoming a net energy exporter. This must make peak oil people tear their hair out because why in the world would we export any if we’re running out of it? But enormous efforts are being put toward exporting energy.

Big liquefied natural gas (LNG) export facilities are being built, and there’s some irony to this. One company that I’ve shorted successfully and mocked for almost a decade is Cheniere Energy, Inc. (LNG:NYSE.A). Cheniere Energy existed to borrow a billion dollars and build an LNG import facility. Then it decided that maybe we’re not running out of energy in America after all and changed its port from an import facility to an export facility. That gives you an idea of the sea change that’s happened in the domestic onshore oil and gas business. I haven’t heard any other analyst talking about that kind of change yet, but the realization will soon dawn on the market that America has vast energy resources and will have vast energy surpluses going forward.

TER: We’ve fought wars over the fact that we’re importing energy.

PS: I’m not saying we’ll stop importing energy. We may continue to import oil, for example, because it’s cheaper to produce it in Saudi Arabia and ship it here than it is to produce it here. That doesn’t mean that we can’t be a net energy exporter, though, especially if we export an even larger volume of natural gas.

TER: The Casey organization, Marin Katusa, in particular, follows natural gas, LNGs and its use in Asia. Marin’s recommendations for LNG companies include many located in Indonesia, for instance, because it’s so close to the primary user, China. Given that the U.S. isn’t yet exporting natural gas and that dollars are going into Southeast Asia to build all of these natural gas LNG facilities, have we missed the opportunity?

PS: I don’t think so. Marin is a very good energy analyst, but I think the best way to play Asian energy demand will be American natural gas. I’m not saying that his stocks won’t do well or that there won’t be foreign competitors to American natural gas—there surely will be.

Nevertheless, America’s natural gas infrastructure is an order of magnitude larger and more sophisticated than any other of our competitors in this business. Even though the U.S. doesn’t have export facilities completed yet, that’s a minor piece of the puzzle. What we do have is tremendous amounts of supply and very low prices compared to the rest of the world. We have enormous storage and production facilities that can guarantee supply for decades at fixed prices. No one else will be able to compete with that.

TER: You mentioned earlier Cheniere Energy is part of the shift from building LNG facilities for import to export. Are some other companies interesting to you in the energy export market?

PS: Yes, but first I have to tell you one more thing about Cheniere because it’s so ironic. Guess how many LNG import facilities have been built in the U.S. throughout history? Four. Guess how many of them eventually went bankrupt? All of them. And why?

Because America is the Saudi Arabia of natural gas. We have the world’s largest reserves of natural gas, and the world’s most sophisticated production and storage facilities, by a wide margin. Coming up with a business model to bring natural gas into the U.S. would be akin to a sheik in Dubai importing sand from Chile. It just doesn’t make any sense. It never made any sense, and yet banks gave Cheniere a billion dollars and investors gave it hundreds of millions in equity. When I wrote about it, the newsletter headline was “Madness.” It was completely insane, but it was manna for a short seller because there was no possible way the business could succeed.

Getting back to your question, I know of only two publicly traded ways to play this export LNG business. I’m sure that more of these endeavors will be launched in the next 12 months. For now, ironically, Cheniere is one of the two publicly traded companies in that space, but I’d advise against investing in Cheniere because its capital structure is so impaired by the billion dollars it lost trying to build an import facility.

The other company is Dominion Resources Inc. (D:NYSE), a large integrated power company that has both regulated and unregulated subsidiaries. One of the unregulated subsidiaries owns a facility in Cove Point, Maryland, originally built in the 1960s as an LNG import facility. Of course, it went bankrupt; they all do. Now, Dominion is retrofitting Cove Point to be an LNG export facility. It’s also connecting pipelines from the Marcellus shale in West Virginia and Pennsylvania directly to this export facility. As a result, it’ll be able to take very, very low-cost natural gas out of the Marcellus and export it to the world.

TER: In what timeframe?

PS: The export facility is scheduled to open in either 2014 or 2015. The construction timeline was like five years. These are very massive facilities.

TER: Moving on to nuclear energy, what’s your outlook? Does the post-Fukushima controversy translate into a contrarian investment opportunity in uranium?

PS: I’ve been a big fan of nuclear power, although not necessarily a uranium bull. In fact, I was very bearish on uranium in the 2006–2007 timeframe because I thought it was a bubble. It eventually did collapse, so I was right about that. I can’t say that I’m part of the nuclear bull crowd now, either, but it’s because I’m more and more convinced that growth in conventional energy resources will be greater than people expect, which will continue to marginalize the nuclear power footprint in the world. I’m not saying that it’s going away, but I don’t think there will be as much growth there as everyone else expects.

TER: What does that mean for uranium prices then?

PS: I’d be neutral on uranium, and relatively neutral on large users of nuclear power such as Exelon Corp. (NYSE:EXC), which is a stock I’ve owned in my portfolio and covered in my newsletter for almost a decade. It’s a very safe and sound company, a good way to get a 5% dividend yield. It’s not a bad investment, but I’m just not particularly bullish on it the way I was prior to Fukushima.

Quite frankly, I’m surprised and disappointed that the modern safety standards that we have across these power plants throughout the world didn’t perform better. There’s s no margin of error. You cannot afford to have an accident at these plants.

I’m not saying that we can’t get there, but the facilities we’ve built over the last 40 years have proven to be unsafe. The public is right to be skeptical, and that’s generally going to reduce the construction of new plants. Less construction will cause demand for uranium to disappoint, probably over the next several decades.

TER: What will replace nuclear though?

PS: I’m very, very bullish on natural gas consumption, incredibly bullish, because I think the price is going lower. As the price goes lower, people will use more and more of it. The conventional wisdom now is that natural gas will go from around 20% of global energy consumption to maybe 25% over the next decade. I’m more optimistic than that—I think we’ll see natural gas go to 35–40% of all energy consumption. It could even go higher. It really depends on how cheaply it can be delivered around the world. The greatest opportunity the energy complex has over the next several decades lies in exploiting the technologies that are enabling shale gas production.

TER: And on that good-news note, Porter, thank you so much for taking the time to share your insights and opinions with us.

After serving a stint as the first American editor of the Fleet Street Letter, the oldest English-language financial newsletter, Porter Stansberry began Stansberry & Associates Investment Research, a private publishing company, 11 years ago. S&A has subscribers in more than 130 countries and employs some 60 research analysts, investment experts and assistants at its headquarters in Baltimore, Maryland, as well as satellite offices in Florida, Oregon and California. They’ve come to S&A from positions as stockbrokers, professional traders, mutual fund executives, hedge fund managers and equity analysts at some of the most influential money-management and financial firms in the world. Porter and his team do exhaustive amounts of real world, independent research and cover the gamut from value investing to insider trading to short selling. Porter’s monthly newsletter, Porter Stansberry’s Investment Advisory, deals with safe value investments poised to give subscribers years of exceptional return. You can learn more about Porter and his ideas by clicking here.

Second, the idea that U.S. economic difficulties hinge crucially on our failures in international economic competition somewhat paradoxically makes those difficulties seem easier to solve. The productivity of the average American worker is determined by a complex array of factors, most of them unreachable by any likely government policy. So if you accept the reality that our “competitive” problem is really a domestic productivity problem pure and simple, you are unlikely to be optimistic about any dramatic turnaround. But if you can convince yourself that the problem is really one of failures in international competition—that imports are pushing workers out of high-wage jobs, or subsidized foreign competition is driving the United States out of the high value-added sectors—then the answers to economic malaise may seem to you to involve simple things like subsidizing high technology and being tough on Japan. [Emphasis added.]

A:  Paul Krugman (Pop Internationalism p. 16 [1996], The MIT Press, Cambridge).

In spite of his remarkable daily stupidity, Krugman actually correctly recognizes the problem of American competitiveness in international trade.  What hampers America is not foreign trade, but domestic productivity.  And one of the biggest hindrances to domestic productivity is government, both at the state and municipal level, and particularly at the federal level.  Thus, if one wants to know why Americans are losing manufacturing jobs, one need only look at domestic policy.  The federal government has increasingly hamstrung manufacturing jobs over the past several decades.

One of the most interesting and highlighting puzzles to resolves is which features contributed to the rise of democratic revolutions sweeping across the entire region. In fact, MENA region is world’s largest exporter of oil, enjoying the largest oil reserves in the world. Saudi Arabia, Qatar, Algeria, Libya and Kuwait constitute more than 42 percent of world oil reserves. In recent decades, MENA region experienced a growing degree of macroeconomic stability with low and stable inflation rate and steady economic growth. Large oil inflows, driven by the growing oil consumption in emerging markets such as China and India, boosted local currency appreciation and current account surpluses. The rates of growth in recent decade were remarkable, reflecting the growth of domestic demand as well as robust investment as the engine of growth. Countries in the MENA region also enjoyed favorable demographic conditions with low old-age dependency ratio and high share of working-age population, resulting in a demographic dividend which brought robust economic growth.

The indices of political change in the MENA countries prior to the outburst of the political protests in Tunisia and Egypt were nearly impossible to predict since a variety of macroeconomic, demographic and structural indicators facilitate the course of political change in developing countries, shifting from authoritarian political leadership towards a democratic political institutions with free press, free election and a vibrant civil society. Prior to the onset of the protests against authoratic governments in the MENA countries, the latter experienced benign levels of economic freedom. In the MENA region, the majority of countries experienced rampant corruption, heavily regulated labor markets, financial underdevelopment and inefficient legal systems. Bahrain, Qatar and Saudi Arabia enjoyed the highest degree of economic freedom in the region while Yemen, Syria and Algeria were already suffering from institutional paralysis and bad governance which brought these countries on the brink of failed states. If political change could be predicted on the basis of the level of overall economic freedom, Yemen, Syria, Algeria and Libya would experience the highest likelihood of political protests that would eventually lead to the political change.

Prior to the independence from France, MENA countries have been plagued by authoritarian governments given the extensive reserves of oil and natural gas. The absence of market institutions based on the rule of law under good governance and independent judicial systems eventually intensifed the rise of hybrid political regimes prone to corruption and poor governance. Even though corrupt military rule and political dicatorship precipitated the rise of the protests against authoratic rule, the pattern of structural change could be easily seen from the changing demographic landscape across the MENA region.

For most of the 20th century, countries in the MENA regions experienced rising income per capita levels. In fact, the growth of per capita incomes in North Africa surpassed the regional average given the fact that North African countries enjoyed high relative levels of income per capita at the beginning of the 20th century compared to Sub-Saharan Africa. For instance, in 1913, Tunisia enjoyed higher per capita income than Mauritius. The change in the demographic structure of the population began after 1950s. In all countries of the MENA region, the fertility rate decreased substantially. In Syria, the fertility rate almost halved between 1950-1955 and 2005-2010, from 7.30 to 3.29. The same trend in the fertility rate swept across the entire region. In Libya, the fertility rate between 2005 and 2010 fell below 3 children per women while Tunisia’s fertility rate dropped below 2 children per women in the same period. The astounding drop in fertility rates strongly reflected the growth in per capita incomes which boosted domestic consumption of durable and non-durable goods. In addition, oil-exporting countries such as Libya and Bahrain have experienced a substantial increase in export earnings. Large inflow of oil earnings, in fact, unleashed the income effect, brining higher spending on education and infrastructure. The distribution of literacy rates across countries (link) shows that literacy rates in MENA regions are remarkably high. In fact, Bahrain and Turkey boast of 88 percent literacy rate. Libya remained the North African leader in literacy rate (86.8 percent), ahead of Tunisia, Egypt and Algeria which, given the fragmentation and dichotomy of the population, enjoy literacy rates below 80 percent of the total population.

Countries from the MENA region differ substantially in the demographic projections of old-age dependency ratio. The estimates by the UN suggest that by 2030, the dependency ratio in North Africa and the Middle East is expected to experience a persistent rise. In fact, under constant fertility rates, the share of the population 65+ is expected to increase by 25 percentage points in Bahrain, 24 percentage points in Libya, 23 percentage points in Tunisia, 20 percentage points in Algeria, 15 percentage points in Syria and Saudi Arabia and 14 percentage points in Egypt. In Turkey, favorable fertility assumptions predict 7 percentage point increase in old-age dependency ratio until 2030. The empirics behind the clear explanation of fertility dyanmics across the MENA region reveals a persistent shift towards rapidly aging population across the entire region. The expedience of high fertility rates boosts the demographic dividend alongside the growth in income per capita until the break-even point when the pressure of aging population raises public pension expenditure and the introduction of social security schemes. These schemes, in fact, do not pose a systemic threat to the long-term solvency of public pension system as long as high fertility rates boost stationary population growth. The remarkable decrease in the fertility rates in the MENA is partly beared by the increasing amount spent on education. For instance, Tunisia’s education spending amounted to 7.2 percent of the GDP. The ratio is higher than in many advanced countries in the world. In 2007, Italy spent 4.3 percent of GDP on education, the same ratio as Algeria in the year later. The increasing amount of education expenditure, in both absolute and relative sense, reflects robust literacy rates for middle-income countries of the MENA region. In fact, the increasing amount of education expenditures per inhabitant boosted the information awareness by driving up reading, mathematical and computer literacy. Higher literacy rates, compounded by free access to various Internet applications, could substantiate hypothetically greater awareness of the public demanding political liberties, freedom of assembly and free press.

The demographic transition in the Middle East and North Africa is remarkably uneven, reflecting the variation in income per capita across the region. One of the key drivers of the demographic adjustment is the changing immigration landscape. Traditionally, North African countries have boosted one of the highest outward migration rates, particularly into Italy and France where Muslims account for about 9 percent of the population, the highest share in Western Europe. In addition, with 2.01 children per women, France enjoys one of the highest fertility rates in Europe. A brief overview of the ethnic fertility rates in France shows that French women of the Muslim origin boost significantly higher fertility rates compared to immigrants from Western countries. For instance, the fertility rates for women of Algerian and Moroccan descent exceed the fertility rates of Spanish and Italian immigrants by almost three times. In the next decade, income per capita across the Arab world is expected to increase robustly. Higher incomes would mean a shift towards the increasing amount of expenditures on durable goods. The change in the consumption pattern would be accompanied by a robust decline in the relative amount of income spent on food and other non-durables. Hence, the assumed fertility rates would converge to the Despite the prolonged decline in fertility rates across the Arab world, the demographic transition could precipitate the subsequent decline in robust economic growth rates which exacerbate the rapid rise in per capita incomes in the MENA region.

The peculiar feature of the majority of countries within the MENA region with the exception of Turkey is the presence of natural resource barriers. The abundance of natural resources, such as oil, phosphate and natural gas, is a major constraint on the quality of public sector governance replaced by the seizure of the state by powerful political elites such as the military regime during the Mubarak rule in Egypt prior to the 2011 revolution. Unless accompanied by democratic institutions and systemic constraints on the executive power, the political revolution can eventually result in the organic evolution of the failed state with a strong persistence of the old elites pushing for the status quo to protect the privileges preserved under the old system. The Arab awakening signaled the beginning of the demographic transition with decreasing fertility rates and slowly growing old-age dependency ratios. Hence, diminishing returns to demographic dividend and the gradual relative decline of the share of the working-age population both indicate a tendency towards greater democratic governance.

My estimate then was that a 40′ container filled with Fiji water would cost roughly $5000 to deliver from Suva, Fiji to Cambridge – I came up with the estimate based on a variety of statistics about international shipping that I bent and welded into a Fiji/Massachusetts estimate. At $5000 a container and 24,000 kilograms per 40′ box, it would cost $0.21 for a liter bottle of Fiji water to make the 8,000 mile journey. Not free, but a small fraction of the retail price of a bottle of “premium” imported bottled water.

I had occasion to return to this blogpost today – I’m working on a book, and this Fiji example features in it. So I decided to recalcuate the numbers and see if I could find an answer that’s more defensible and satisfying.

Turns out I got a few details wrong. First, the 24,000kg figure applies to smaller, 20′ containers – the limit for 40-footers is 30,480kg. And the price from Suva to Cambridge for a 40′ container is just slightly higher – $5,540.30. That comes out to $0.18 per liter, three cents less than I calculated six years ago.

These new figures come from my new favorite toy, Maersk’s online shipping rates calculator. The Danish superfirm A.P. Møller – Mærsk Gruppen is the largest shipping group in the world, with offices in 135 countries, 120,000 employees, and roughly 600 container ships, capable of carrying more than 2 million 20′ containers at any given time. They’ve also got a thoroughly badass IT system, which they’ve now made accessible to the general public.

Okay, it’s not exactly Amazon.com, or even Fedex. To use Maersk’s calculator, you need to register with the site, download a client browser certificate and accept three server certificates from Maersk before you can access their secure site. But once you do, it’s just a few short clicks before you can calculate the cost of shipping a 20′ container of “umbrellas, sun umbrellas, walking-sticks, seat-sticks, whips, riding-crops and parts thereof” (yes, that’s one of the available categories, along with “bone and meal”, “ores, slag and ash” and “straw, esparto, other plaiting materials and articles of straw, esparto, other plaiting materials) from Auckland to Dubai: $2451.02

The main thing I’ve found playing with Maersk’s calendar: distance doesn’t matter as much as demand. Americans buy a lot of atoms from China. The Chinese don’t buy nearly as many from the US. A 40′ container filled with household goods, shipped from Shanghai to Houston, TX costs $6169.93. Reverse the trip and ship the same container from Houston to Shanghai and the cost is $3631.07. That’s because 60% of containers on ships coming from the US to China are empty, which means Maersk and other shippers are desperate to sell container space.

(The 2006 New York Times article that offers that 60% empty container statistic suggests that lots of full containers are coming to China from raw-materials rich countries like Australia, Brazil and the Middle East. That suggests we should see the opposite pattern – expensive containers from Sao Paolo to Shanghai and cheap ones in the other direction. Nope. $5101.70 from Shanghai to Sao Paolo, $1930.59 in the other direction. Perhaps containers from China to Brazil are riding the same ships as those to the US and paying the same premiums?)

Maersk also offers a set of maps that help you get a sense for how these trade routes actually work. It’s a four day trip from Suva to Auckland on the Pacific Islands Express, and then the bottles of Fiji water are transfered to OC1, the Oceania Americas Service. The Pacific crossing is a long one – 18 days to the Panama Canal, a quick stop in Cartagena, and we’re in Philadephia 25 days out of Auckland. It’s a truck ride from Philly to Cambridge, and that short hop is responsible for $950 of the total transit cost.

As I poke through these maps, schedules and tariffs, I feel like I’m glimpsing a secret world. Part of it may come from the sheer poetry of the names. Shipping routes include “The Boomerang” and the “The South China/Australia Yo-yo” and connect ports like Tin Can Island (Apapa, Nigeria, the main port for Lagos). And part comes from the sense that these routes and rates, the infrastructure that supports an economy where transPacific bottled water is possible, are the ley lines of globalization, radiating a mysterious and sinister power.

In the ferocious height of the Delhi summer, Akbar setup a mechanism whereby horses started out with ice in Kashmir and rode south. The ice was handed from one horse to another, keeping it constantly on the move. In the end, what reached him was a few kilos of ice.

(I’m unable to recollect where I read this, and google doesn’t seem to have heard about it. Please do tell me if you know something about this.)

The Indian ice trade

In 1833, merchants figured out that it was profitable to transport ice from the US to India. The existing technical skills enabled the production of low-grade ice in Calcutta for six weeks of the year at a price of 4p per pound. Transport by sea made possible perfect Boston ice, available round the year, at a price of 3p per pound. Ships would start out with 150 tons of ice and reach Calcutta with 2 tons of ice.

`Ice houses’ were built to store ice. The ice houses in Bombay and Calcutta no longer exist, but the ice house in Madras, built in 1841, still exists [location].

In 1878, manufacturing of ice began with the formation of the Bengal Ice Company, and this transport of ice from America dwindled away. By 1882 — a short four years later — it had ended. In 1904, there was an ice plant in Peshawar.

Sources: Better than Hooghly slush by Jayakrishnan Nair, in Pragati, June 2010.

The world’s largest refinery on the coast of Jamnagar

India’s biggest company, Reliance Industries, runs the world’s largest refinery off the coast of Jamnagar. Crude oil is imported here, products are made, and re-exported. Here’s my interpretation of what’s going on. The natural place to put a refinery is in the Persian Gulf, but the political risk in that region is too great, given that the fixed assets in question amount to Rs.2.3 trillion.

What’s the most efficient way out? To transport crude oil on the shortest possible hop from the Middle East to a place with political stability. That takes you to the coast of Gujarat.

A new trade: Alaskan water

I just read a story by Sambit Saha in the Telegraph about a new frontier in trade. A firm named True Alaska Bottling has obtained rights to transport 11.34 billion litres of water (i.e. 11.34 million tonnes) out of a lake in Sitka, Alaska. This will be transported to a plant near Bombay, which will be run by a firm named S2C Global, thus yielding bottled water to be sold in India and in the Middle East.

This seems to me to reflect an extension of the themes above. If you want to deliver product into the Middle East, it is better to build a factory in India given political stability and low labour cost. In this sense, it’s a bit like Reliance. And, it reminds me of the old ice trade; except that this time we’re transporting water.