If you read the press, you will hear that "Queensland (Australia) is losing up to A$100 million ($131 million) a day in coal exports because of the unprecedented floods". The reality is far less tragic, for a number of reasons:
1. Coal exporters and consumers have come to expect disruptions to coal supply. For this reason most coal consumers have 60-90 days of inventory capacity to meet their immediate needs. The implication is that, if we assume they each have an average of 70 days capacity utilisation, then the consumers have over 2 months to receive supplemental coal supplies in order to ensure normal power, steel or cement plant operation.
2. Coal producers have long and short term contracts, and those contractual obligations are set at market price, so there is no incentive to go elsewhere.
3. Coals from different mines vary in quality, so consumers do not like to disrupt supplies necessarily unless there is some commercial or supply reason to do so, otherwise they are creating technical/operational difficulties they don't need.
The implication is that Australia is not losing that amount of money; those exports are simply being deferred, though not without cost. So what costs can we expect? Well, ships are going to sit idle for 2 weeks, and for the next few months after, they will be fully booked rebalancing consumer stockpile inventories. Money will need to be expended by Queensland Rail to rehabilitate those sections of track damaged by the flood. These companies might need to employ people on overtime, however they will also have insurance to cover them for such events. The media reported that 100's of kilometres of track were destroyed...more likely just submersed....though there will be considerable damage where there is flow because saturated soil loses its cohesion, so track is more easily ripped up by flowing water.
The biggest loss is of course to agriculture and the destruction of property. It strikes me as silly that insurance companies only cover people for the effects of rain, and not flooding. I know that there has been this response before by insurance companies when houses on the South Coast of NSW were flooded. Is not the intent of insurance to protect a person from unforeseen events, and that the insurance companies are the ones to identify them, since it is a technical risk, which they are in the business of assessing. i.e. They are not fulfilling the spirit of their role. This is where you get ambivalent court rulings, because the law does not clearly establish whether a judge should rule:
1. With the letter of the law, i.e. The law is a dogma, held out of context. This is the basis of statutory law, and explains why bureaucrats are so unthinking in your dealings with them. Its the policy, and they have no power to interpret it 'in context'.
2. With the spirit of the law, i.e. The law is a philosophical construct, that it is based on principles, and those principles are held in context. This is the basis of common law, where judges make new law by applying the law to specific contexts.
If you appreciate that statutory law is being called upon to fill the 'perceived gaps' in common law, it will be apparent that we are being a more unthinking society because of such creeping dogmatism. This can continue until we finally march 'with pride in democracy' towards fascism. I would already argue that we are already there, but its a matter of degree. Some of you might want to wait until Comrade Rudd is marching with the band down Anzac Parade, but I just consider that a huge opportunity cost, more of a concern than our 'deferred' exports.
You can read more about these issues on my political blog or even my judicial website.
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Andrew Sheldon www.sheldonthinks.com
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