Oil May be Dropping, but Cappuccino is Doing Well

21 Jan

All this energy people put into talking about oil prices! It’s a sorry waste of time, and, even worse, I think they are losing sight of important facts in the whole commodities debate. Let’s begin by crunching some numbers. Okay, I don’t drive a car, but last time I did I think I paid about $1.70 for a litre of lead-free. I mean, that is one cheap commodity. Let’s analyse the stages of the production process…

First the oil companies have to get their hands on a drill about two or three miles long with a chunk of industrial diamond at the tip; possibly they have to transport the long and very heavy drill-cable on a ship, and then keep hundreds of workers in food and wages for months while they poke about, frantically punching through the seabed, looking for a vein. The crude oil has to be pumped up and all the waste water separated and kept in special tanks until it can be pumped back down once the well is empty. It’s not even over there. The crude oil has to be taken to refineries and processed into high-grade fuel, and the finished product must then be transported all over the world in prodigiously expensive pipelines or on enormous oil tankers captained by men with gold epaulettes on their shoulders. In the end, after all that work, a litre of fuel will earn them $1.70 before tax. No wonder Russia and Venezuela are going bust. It’s time they learned some basic lessons of economics.

Western governments keep telling us it’s important not to invest excessive public funds into support schemes for solar power and other renewables, in case this creates an uneven playing field.  And yet, if oil was not so heavily subsidised, it would retail at prohibitive prices. This would be disastrous in regimes such as Russia and Venezuela, where the political elite can only continue enriching itself by throwing hunks of bread (or bottles of vodka) to the vulgar crowd. Russia, the moribund giant, spends in the order of $85 billion per year subsiding oil exploration and other aspects of oil provision. In fact, all countries including the major economies in the EU (Britain, for instance) spend enormous sums backing the oil industry – hardly an impoverished sector, one might think.

So, to go back to the cappuccino economy. In Berlin a litre of cappuccino would retail at about twelve bucks, though it’s more commonly sold in smaller amounts of about 25-30 dl. This seems a high price, considering there is no need to drill for coffee or construct pipelines to bring it to the consumer. Frankly, even mineral water does better than oil. Last time I checked, a half-litre of the natural variety was selling for just short of $2 – more than twice as much as oil. Recently at one of Berlin’s airports I noticed a vendor selling a half-litre of the most basic water brand for $3.75, and so we are now seeing a development where even water is outpacing oil by a factor of 4:1, a quite remarkable performance by this see-through commodity.

The good news for the economy is that the cappuccino sector is holding up in spite of plummeting oil prices, stagflation, and squabbling in Brussels about quantitative easing. Berlin has taken a robust approach to the troubles: nobody works here, instead people just start cafes. If a street is filled with coffee shops, and if everyone in that street owns a coffee shop, an amazing recycling of money is going on. A hundred euro invested at one end will generate literally millions of euros in total sales. Shall I explain? Okay… a guy walks into a cafe and buys ten cappuccinos for $35, whereupon the owner of the said cafe goes next door and buys cappuccinos and ham and cheese toasties for the same sum. Already that original sum of money has grown by a factor of two. The net effect on the GNP of Germany is massive economic growth. Scaled up, this provides alluring insights into the German economic miracle, which is still going strong.

Even better, in order to provide an efficient cappuccino delivery system, you need a decent building filled with appropriate furniture – usually banana boxes tastefully spray painted, an assortment of 1950’s dentists’ chairs, exposed floorboards, possibly a couple of parrots swinging from a trapeze, and a large number of rusty advertising hoardings from the 1920’s. Already you are talking about construction specialists, antiques dealers, Dow Fruit, and reliable parrot breeders. The trickle-down economic benefits are massive. Such retailing outlets have a tendency to attract thousands of tourists, whose mimetic instincts suggest that they wish to be a part of this trendy world of art and melted cheese sandwiches. It doesn’t take long for them to get their wallets out.

The strange thing about the cappuccino trade is that at the production end of it, I mean during the actual coffee bean-growing stage, there is hardly any expense for a modern cappuccino retailer. The beans can be acquired cheaply from South Americans, who are usually willing to sell large sacks at pretty affordable prices. Each sack has the financial power to generate literally billions of dollars of profit. Berlin is really taking off as I write this. There are many industries that seem to go from strength to strength.

Tattoo parlours are another cappuccino sideline, because serious coffee drinkers in Berlin like to roll up their sleeves and show off their latest motifs.

There’s also an almost limitless demand for silly glasses. Artists everywhere need to demonstrate their artistic prowess by impressing others with the outlandish designs of their spectacles. Woody Allen started it, but others have followed suit. Actually, the Marx Brothers sort of preempted Woody. Silly glasses are an essential piece of kit for the modern artist, especially if pursuing a career in film, media, and advertising. Tim Burton has made a point of never leaving the house without a pair of pilot’s goggles fitted with his trademark pink lenses. The strategy has served him well. For this reason, there are thousands of opticians’ shops slotted in among the coffee shops.

It sounds obvious, but artists lazing about in coffee shops need computers and iPads to make inane comments on Twitter and update their blogs. These same consumers are often seen photographing their feet under the table, or lumps of dog excrement, reflections in puddles, and similar, which they like to upload to their Instagram accounts or send to the museums that will shortly exhibit these works of art. The cappuccino economy thereby takes on a technological edge, which, for obvious reasons, gives it an industrial base.

But we are not only talking about technology here. The cappuccino economic framework also creates demand for bulk cargoes such as soya milk, spelt flour, quinoa and other staples. The Berlin economy generates millions of pages of unpublished novels and unmade feature films every month, and this obviously results in a healthy demand for A4 paper and printer cartridges – not to mention printers.

All in all, I’d say it’s time for Moscow and other traditional regimes intent on pursuing arms manufacture, space exploration, nuclear power, religion and other old-school heavy industries, to start recognising the economic benefits of cappuccino drinkers, a broad grouping that includes cross-dressers, ballet dancers, screenwriters, installation artists, dissident, gays, tourists and other creatives. Even pastors have been known to drink cappuccinos here. The resulting marginal benefits for cash-strapped economies should not be sniffed at.

At the same time it should be firmly stated that negative effects posed by such consumers on traditional dictatorships are not serious. Dissidents are mostly artist types who would like to be left alone while drinking their cappuccinos and writing sarcastic blog pieces. In return, they can generate great cash wealth in impoverished oil regimes all over the world.

Dictators who fail to learn this important lesson will find that they are a part of the old world. Should they wish to enter the new world, they will quickly find that they are wearing the wrong clothes. They will not only be scorned and unworthy of anyone’s love; they will also be decapitalized and written off like a bad tax debt.

Click here to find out more about my recent novel “The Maggot People”.

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