Russian Gas and the Forcing Function

Earlier this month we published the post A Forcing Function. In that post we compared the potential for cuts in Russian gas supply to the principles of lean management. We said,

A principle of lean management is to reduce intermediate inventories of goods and spare equipment. Companies do this, not because inventory is a bad thing in and of itself. They do it because the lack of intermediate inventory forces managers on both sides of the fence to make their operations more efficient. In other words, these companies do not increase efficiency to reduce inventory, they reduce inventory to improve efficiency.

Recent news suggests that this theory is to be put to the test. This week Russia stopped the flow of natural gas to the nations of Bulgaria and Poland, and is threatening to broaden the embargo to other European countries.

If they are to avoid a wrenching economic recession Bulgaria and Poland have three choices.

1. Drastically and swiftly reduce energy consumption;

2. Find alternative sources of natural gas; or

3. Develop alternative sources of energy.

If these nations can succeed in meeting the challenge then the lessons that they learn may do more for mitigating climate change than the gradual programs that are advocated by governments and international bodies.

The importance of how these countries respond to this crisis cannot be overstated. If they succeed with Option #1 then we have a real chance at avoiding the worst of climate change. If they go with Options #2 or 3 then they have kicked the can down the road.

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