Warning, social media anecdote ahead that may or may not be true.
The particular claim in question is from a US dairy farmer, who commented that he had been approached by about 25 firms looking rights his cow sh*t, in order to capture the methane.
Even if Farmer Brown inflated his claim, the fact remains that there is a massive demand for access to this material, a circumstance that will surely to go down in history with a head-scratching emoji beside it.
Inflation is a complex beast driven by many factors – money supply growth, forward price expectations, government policy, etc.
This topic was recently described in a brilliant manner by Lyn Alden Schwarzer, whom I encourage you to follow because if you don’t you will be dumber than you need to be.
In a recent article, she gave an example of the aspect under consideration here: price signals.
If a particular fuel goes into short supply, prices spike – those that need it most will bid the price up rapidly.
In this way, the market will rebalance itself at a new price and/or demand level until the pipeline can be repaired.
It is sending a price signal that the market could respond to on the supply side in various ways I suppose, but I don’t want to hear about them.
At the same time, as Europe is demonstrating in a master class, the market is sending some deafening price signals with respect to fuel – oil, natural gas, coal, firewood – pretty much anything that burns.
Recall, inflation can be caused by all sorts of things, but physical shortages are a different matter entirely than crappy monetary policy – they signal an instantaneous physical shortage, as opposed to a meandering upward pressure on, say, house prices.
Many facilities that process these metals are trimming production, and that will show up as a second-order consequence when you go try to buy one of the million products that depend on these substances.
In ordinary times, the price signal for basic inputs like hydrocarbons is a reliable motivator to producers to get on with it and produce more.
At some point, at least some producers will succumb to the temptation and begin drilling again, but the extent of this is not clear, nor is the timing, and running out of fuel is not a good thing, ever.
We are seeing inefficient allocation of resources on a mass scale – it is far easier to raise money for an NFT or cryptocurrency than an oil exploration program.
If you’re reading this site and presumably related somehow to the hydrocarbon industry, despite what has been bludgeoned into your skull for the past few years, be very glad that you are.
PS: Dear email correspondents, the email flow is wonderful and welcome, but am having trouble keeping up.