Quotulatiousness

May 3, 2010

The end of a monopoly

Filed under: Economics,Europe,Science — Tags: , , , — Nicholas @ 12:00

Wine bottles have been sealed with natural cork for hundreds of years. It is an extremely good, natural product that has been used by almost all wine producers because it was better than every other economic sealant available. But cork has a problem that, as a natural product, it is subject to certain risks, the worst of which from a wine viewpoint was contamination with the chemical compound called 2-4-6 Trichloroanisole (usually abbreviated as TCA).

It only takes a tiny amount of TCA to ruin a bottle of wine: and it occurs naturally in the trees from which the cork is harvested. Wine producers and consumers were demanding a solution (wine writers have estimated that between 10% and 15% of all wines suffer from TCA tainting). As monopoly suppliers, however, the cork producers did very little — where else were wineries going to get their bottle closures?

Enter the competition:

By the 1990s, retailers and wineries were clamoring for a solution to wine taint but the cork industry didn’t respond. “No industry with 95% to 97% market share is going to see its propensity to listen increase —and that’s what happened to us,” says Mr. de Jesus from Amorim.

The outcry was just the opening needed by Mr. Noel, a Belgian immigrant who in 1998 began making what he calls “corcs,” he says in part to avoid lawsuits from cork producers, in his North Carolina plastics factory.

Mr. Noel, whose company had specialized in extruded plastics such as pool noodles, named the new business Nomacorc LLC. He eventually built a new, highly automated factory that does nothing but churn out the plastic stoppers, 157 million a month.

The business took off as wineries, desperate for closures that wouldn’t cause cork taint, lined up to buy his product. Nomacorc now has plants on three continents, which produce 2 billion corks a year.

I’m not a big fan of plastic corks — I’m starting to prefer modern Stelvin twist-off closures — but at least with a plastic cork, there’s almost no chance of TCA contamination. I don’t buy very expensive wines, so the most expensive wine I’ve lost to cork taint was only about $60, but that’s still more money wasted than I’m willing to put up with.

If you’ve ever had a glass of wine that smelled of mouldy cardboard, you’ve had TCA-contaminated wine.

April 2, 2010

QotD: The KGBO, er, I mean LCBO

Filed under: Bureaucracy,Cancon,Law — Tags: , , , — Nicholas @ 00:03

Because we live under a monopoly regime that has no intention of loosening restrictive laws, we will never see “wine bar/stores” like this. Americans are jaded to these luxuries of free market access to wine and loads of selection. You read magazines where they tell you to talk with your retailer about finding the best wines from out of theway places and dedicated small producers, and the knowledgeable Ontarian’s reaction is “Yeah, right not in my lifetime will I see that.” While in the U.S. the ‘little guy’ whose passion for wine you can feel the moment you walk in the door and engage in a “which wine should I get” conversation. A recent discussion with an ex-pat American wine collector and drinker (just recently moved north of the 49th parallel) elicited disgust about the LCBO and its selection. “I’m from Chicago,” he tells me, “and I can’t find a decent bottle of wine up here and the selection is . . .” he trails off and shakes his head. Ontarians are used to it. We’ve grown up with Big Brother’s iron fist clamped firmly around our throat and his sweaty palm covering our eyes to what the world outside our borders is doing with booze (wine in particular).

I usually urge you to take a trip to wine country, but this year I want you to take a trip abroad, not to a wine country or region, but to a U.S. wine retailer or specialty shop, a grocery store will do in a pinch (yes I did say a grocery store). Check out, not only the selection but the price, what’s on sale and for how much, wines for under $4, 2 for 1, 3 for 1 or sometimes more for one low price. Discounts for multiple purchases, sale prices that actually seem like you are saving money and not just a dollar or two off. Pay attention to what you see, then ask yourself, “why don’t we have that here in Ontario?” You know the answer, it stares at you with big white letters on a big green background and they go by a four-letter acronym (do I really have to spell it out?) How about this, their first letters are L.C., although they should be K.G. If you are any kind of oenophile, be it novice or pro, you’ll realize that a trip across the border is enthralling and liberating — but then it’s back to the oppressive world of Ontario with Big Brother’s hands shielding you and stopping you and then you tell me honestly, which system would you like to live under?

Michael Pinkus, “Is it a Shop or is it a Bar? Whichever it is, I want one here”, Ontario Wine Review, 2010-04-01

February 25, 2010

“Ontario will have the highest electricity rates in North America”

Filed under: Cancon,Economics — Tags: , , , — Nicholas @ 12:32

Parker Gallant is quite disturbed by the most recent annual report from Hydro One, Ontario’s government-owned electrical transmission corporation:

No major media reported on Hydro One’s annual statement to “investors,” as the company puts it, even though the report is a dog’s breakfast of warning signs and bizarre trends that spell trouble.

[. . .]

As debt rises, Hydro One’s debt-to-equity ratio weakened from 1.71:1 to 1.91:1. It borrows money to pay for capital costs surrounding the province’s Green Energy Act and puts the company at risk of a debt ratings downgrade, which will drive borrowing costs up.

Return on equity is down to 8.7% from 9.7% in 2008, indicating an overall decline in the value of the company. Return on assets fell to 3% from 3.5%. As a result, the dividend payment to the province was $188-million, down 27.4%. But the CEO says the company is “on target.”

Even though revenues and costs are rising, and profit falling, Hydro One handles less electricity — 139.2 terawatts, a decline of 6.4%. The cost of distribution per terawatt was up by 14.9%. Operations and maintenance costs keep rising as power transmitted declines. The number of employees rose 7.7%. Since 2002, when the company had 3,933 employees to distribute 153.2 terawatts, total employment has jumped 38% to 4,400 to distribute 9% less power. Are these additional 1500 staff working in the field or at head office working on rate increase applications?

February 5, 2010

Amtrak’s odd pricing policies

Filed under: Economics,USA — Tags: , , — Nicholas @ 13:09

Jason Ciastko sent this tale to one of the mailing lists I’m subscribed to:

Go to www.amtrak.com

One way ticket from Erie PA (ERI) to Elkhart IN (EKH)… One adult passenger, no discounts or anything else… The day I picked happened to be tomorrow, but it should not matter….

Now your options should be train 49 (Lake Shore Limited) that departs Erie at 0136 and arrives in Elkhart at 0825 or train 449 (Lake Shore Limited again) that departs Erie at 0136 and arrives at 0825… Those observant will notice this is the same train… 49 is the New York to Chicago section and 449 is the Boston to Chicago section… They are combined into the same train in Albany New York (well before Erie PA…

The riddle is I got a ticket cost of $47 for train 49, and $59 for 449… Probably be in the same seat…

One heck of a way to run a railroad…

I’m sure there’s a rational explanation for this . . . but I can’t come up with one.

January 27, 2010

Where Virginia is headed, will Ontario follow?

Filed under: Bureaucracy,Economics,Law — Tags: , , , — Nicholas @ 12:31

January 15, 2010

Why China won’t be able to corner the rare earth market

Filed under: China,Economics,Technology — Tags: , — Nicholas @ 08:36

Tim Worstall looks at the importance of rare earth to the modern electronics industry, and why China’s ongoing attempt to corner the market won’t work in the long run:

The Chinese government is trying to corner the rare earths market and that isn’t good news for the tech business. Those with good memories of Chemistry O Level will know what the rare earths are: the funny little line of elements from Lanthanum to Lutetium at the bottom of the periodic table, along with Yttrium and Scandium, which we usually add to the list.

The reason we like them in the tech business is because they’re what enables us to make a lot of this tech stuff that is the business. You can’t run fibre optic cables without your Erbium repeaters, Europium, Terbium and Yttrium are all used to make the coloured dots in CRTs, the lens on your camera phone is 25 per cent Lanthanum oxide (yes, really, glass is made of metal oxides) and without Neodimium and Dysprosium we’d not have permanent magnets: no hard drives nor iPod headphones.

[. . .] it is still true that we get all of them – apart from Scandium, which is a rather different little beastie – from the same ore. In fact, we tend to get them not just from the same ore, but from the same mine: Bautou in Inner Mongolia (that’s the Chinese part, not the independent country).

And that’s where our problems really start. Over the past couple of decades China has been cracking down on small mines, usually in the name of environmental policy. That even may have been the real reason, as rare earth mines can be messy things. The outcome is that now 95 per cent of the earth’s supply comes from this one mining complex and the Chinese Government has just announced export restrictions.

So, if they have a monopoly on 95% of the world supply, why won’t it hold up? Because in spite of the name, they’re not as rare as all that . . . and there are substitutions that can be made for some or all of the current application needs. By restricting the supply and/or driving up the price, China will spur new competitors to enter the field and new sources of rare earths to be developed. In the short term, it will definitely create price increases (which, of course, will be passed on to the consumer), but in the medium-to-long term they will create a vibrant competitive marketplace which will almost inevitably drive the prices down below current levels.

Isn’t economics fascinating?

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