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Friday, October 24, 2008
Thoughts on OPEC and petrol prices in Barbados
A long, long time ago (feels that way, doesn't it?), the price of a barrel of oil dominated the news. Then, the sub-prime/financial/economic crisis hit. Fears of a slowdown in the business/economic climate reduced demand for this commodity, and the price of oil fell from a high of $147 to around $63 (at the time of this post).
In Barbados, where petrol is pumped by the litre, prices are now $2.20 BDS per litre (1 USD = 2 BDS). This is the third drop in fuel prices in two weeks.
Low oil prices are obviously a 'bad thing' for OPEC (and oil companies as well). So, what does OPEC do? They cut back on oil production.
OPEC's position:
"The prices at this time, being affected by the financial crisis, (are) very low," OPEC Secretary-General Abdalla Salem El-Badri said. "We have to bring the prices up."
OPEC ministers decided to cut production by 1.5 million barrels a day because that is the amount of oversupply in the market, he said. The cartel's current production ceiling is 28.8 million barrels a day.
In announcing the cut, OPEC President Chakib Khelil said member countries had no choice but to slash production.
"What choice do they have -- see the oil price go down to the lower levels?"
OPEC cuts oil output to halt price collapse (CNN.com)
He may be right, but for the rest of the world, it's a bitter pill to swallow. Like it or not, they (i.e., OPEC and others), are operating 'for-profit' businesses.
Over the years, I learnt that businesses existed to make a profit (unless it's a non-profit organization where profit may not be the only/final goal). If the business (or any other activity), is not generating a positive return (not only in terms of money), for the person involved, then he should take his time, money and resources and invest them elsewhere.
This thought of mine was refined further during my finance classes and is essentially now: 'to create or maximise shareholder value.' Any activity in the business, no matter how small or large, be it directly or in-directly related to revenue generation, should adhere to this.
Back to OPEC. I am not defending OPEC, nor any other country, or commercial entity that produces/distributes oil. They have a product which is essential, in demand and, for the time being, doesn't face any major threat from substitutes (i.e., solar, bio-fuel, wind, etcerta).
Members of OPEC earn money from the sale of their oil and use it for, among other things, the development of their respective countries (i.e., infrastructure, education, health, security, etcetera).
On a related note, I wonder how much trade these OPEC members engage in with the rest of the world? In other words, they export/sell oil for money, this money can be (is) used to purchase goods and services that they themselves cannot produce (or don't want to).
So if you take away OPEC's oil revenues, or reduce them, it should, I think, reduce the amount and monetary value of trade that occurs between OPEC members and the rest of the world.
If this happens, could this not cause a problem for those countries that benefit (via trade), from OPEC's wealth? I mean a slow-down in business for the companies that produce and sell goods and services that end up (directly or in-directly), in OPEC member countries.
That's not good for the shareholders and employees of those companies. Nor is it good for the other businesses that provide services to those companies (the ones that depend on sales to OPEC members), nor is it good for the governments that depend on taxes revenues from those companies (and individuals) that then use those taxes to provide services (i.e., health, infrastructure, education, etcetra) to its citizens.
I'm grateful for the reduction in prices at the pump (it means I can spend my money on other things, which in turn generates business activity and benefits the local economy). Also, tourism is a major foreign exchange earner for Barbados, and here is where low oil prices help: there are only two ways to get to Barbados, either by sea, or by air. Both methods require fuel and high oil prices make it more costly for tourists to get here. High oil prices translate into high ticket prices and tourists may end up staying at home, or spending their money elsewhere.
In conclusion, I'm mindful that while high oil prices may not be good, there are usually two sides to any issue and in this case, I have to also wonder what 'high' is, and who is it not 'good' for? Everything, it seems, is relative. But what do I know? After all, IANAE (I Am Not An Economist). ;-)
In Barbados, where petrol is pumped by the litre, prices are now $2.20 BDS per litre (1 USD = 2 BDS). This is the third drop in fuel prices in two weeks.
Low oil prices are obviously a 'bad thing' for OPEC (and oil companies as well). So, what does OPEC do? They cut back on oil production.
OPEC's position:
"The prices at this time, being affected by the financial crisis, (are) very low," OPEC Secretary-General Abdalla Salem El-Badri said. "We have to bring the prices up."
OPEC ministers decided to cut production by 1.5 million barrels a day because that is the amount of oversupply in the market, he said. The cartel's current production ceiling is 28.8 million barrels a day.
In announcing the cut, OPEC President Chakib Khelil said member countries had no choice but to slash production.
"What choice do they have -- see the oil price go down to the lower levels?"
OPEC cuts oil output to halt price collapse (CNN.com)
He may be right, but for the rest of the world, it's a bitter pill to swallow. Like it or not, they (i.e., OPEC and others), are operating 'for-profit' businesses.
Over the years, I learnt that businesses existed to make a profit (unless it's a non-profit organization where profit may not be the only/final goal). If the business (or any other activity), is not generating a positive return (not only in terms of money), for the person involved, then he should take his time, money and resources and invest them elsewhere.
This thought of mine was refined further during my finance classes and is essentially now: 'to create or maximise shareholder value.' Any activity in the business, no matter how small or large, be it directly or in-directly related to revenue generation, should adhere to this.
Back to OPEC. I am not defending OPEC, nor any other country, or commercial entity that produces/distributes oil. They have a product which is essential, in demand and, for the time being, doesn't face any major threat from substitutes (i.e., solar, bio-fuel, wind, etcerta).
Members of OPEC earn money from the sale of their oil and use it for, among other things, the development of their respective countries (i.e., infrastructure, education, health, security, etcetera).
On a related note, I wonder how much trade these OPEC members engage in with the rest of the world? In other words, they export/sell oil for money, this money can be (is) used to purchase goods and services that they themselves cannot produce (or don't want to).
So if you take away OPEC's oil revenues, or reduce them, it should, I think, reduce the amount and monetary value of trade that occurs between OPEC members and the rest of the world.
If this happens, could this not cause a problem for those countries that benefit (via trade), from OPEC's wealth? I mean a slow-down in business for the companies that produce and sell goods and services that end up (directly or in-directly), in OPEC member countries.
That's not good for the shareholders and employees of those companies. Nor is it good for the other businesses that provide services to those companies (the ones that depend on sales to OPEC members), nor is it good for the governments that depend on taxes revenues from those companies (and individuals) that then use those taxes to provide services (i.e., health, infrastructure, education, etcetra) to its citizens.
I'm grateful for the reduction in prices at the pump (it means I can spend my money on other things, which in turn generates business activity and benefits the local economy). Also, tourism is a major foreign exchange earner for Barbados, and here is where low oil prices help: there are only two ways to get to Barbados, either by sea, or by air. Both methods require fuel and high oil prices make it more costly for tourists to get here. High oil prices translate into high ticket prices and tourists may end up staying at home, or spending their money elsewhere.
In conclusion, I'm mindful that while high oil prices may not be good, there are usually two sides to any issue and in this case, I have to also wonder what 'high' is, and who is it not 'good' for? Everything, it seems, is relative. But what do I know? After all, IANAE (I Am Not An Economist). ;-)
Labels: Barbados, business, economics, economy, life, oil, OPEC, thoughts, World
Wednesday, September 10, 2008
Thoughts on OPEC, Oil and Economics
DISCLAIMER: IANAE (I Am Not An Economist)
(Image from Mr. Downling's Arabian Oil Page)
"So since the price of oil has finally dipped below $100, the OPEC group has decided to slow production of oil again. Thereby driving up the demand and making themselves more filthier rich than they already are..."
A snippet of an e-mail sent by a friend. His comments were in response to news of OPEC cutting output by 520,000 bpd (Yahoo! News)
And my response (anyone with an opinion or an economics background is strongly encouraged to leave a comment):
*DISCLAIMER: This is a lengthy e-mail.*
According to various business articles/publications, the fall in in the price of oil was largely attributed to the slowdown in the global economy (which I believe is still happening for a variety of reasons, including the subprime fiasco which was a result of bad/risky lending practices by financial institutions).
The same slowdown may have caused some (many?) businesses to cut back, or shelve plans for expansion, or to do without additional staff and so on, and so forth. Part of this expansion may be partly responsible for driving the demand for oil and its by-products. Less expansion may result in less hiring, which may result in less spending and consumption (by businesses and the public alike). This may end up coming full circle to less expansion all over again as businesses suffer due to an economic slowdown.
I believe, in general, that oil may/cannot keep on climbing in terms of price. It will be expensive, yes, in relation to previous prices, but there's a limit to how high it can go. If it gets very expensive, then demand will fall (taking price with it) and substitutes and/or alternatives may become more attractive (i.e., solar, bio, electric, or by simply reducing demand by reducing consumption through driving less and car pooling more).
To summarize (and bastardize) the Law of Demand: all things being equal, the higher the price of a good or service, the lower the demand for it. Of course one also has to figure in PED (Price Elasticity of Demand) and maybe YED(?) (Income Elasticity of Demand).
If demand doesn't change much for a product when the price increases, then the product can be said to be price inelastic (this product may be an essential item, like bread, oil, or even the newspaper, so even if the prices go up, people still buy the product because they consider it to be essential, like oil). If price changes (increase/decrease) and demand changes as a result (increaes/decrease), then the demand of this product is said to be price elastic, e.g. consumers may find another product, or do without it (e.g., if butter prices go up then, all things being equal, people may switch to margarine, if I remember an example I read somewhere correctly).
Getting back to OPEC, I *personally* think that if they wanted to get more for a barrel of oil, they should've increased production. An increase in production may, I believe, temporarily result in a price drop (as a result of the increased supply of product in the market). A cheaper price may cause an increase demand, which drives up prices and removes the excess supply until an equilibrium price is reached. Put in more practical terms (I think), The World (businesses, industries, people) upon seeing that oil prices have fallen (from an increase in product on the market) *MAY* rush back to their old levels of consumption (having forgotten the lessons of high oil prices to begin with).
In doing so, the World may end up shooting themselves in the foot. Increased demand for a product, especially one as scarce as oil, may drive up its price. A related example (maybe not the best) is the stock market in the U.S. and those tech/dot-com stocks. High demand drove the stock prices up to insane/unheard of levels (then the bubble burst and prices dropped). Real-estate (in Barbados for example), may also be similar. Prices are high because the market supports high prices (and obviously because land is finite, scarce resource). Take away the demand or whatever is causing the demand (say for example the culture that Barbadians must own a piece of the rock for financial security, or to pass on to their kids) and prices may very well drop (but not by an amazing amount because remember, land is a finite resource).
But what do I know? Remember, IANAE.
:-)
(Image from Mr. Downling's Arabian Oil Page)
"So since the price of oil has finally dipped below $100, the OPEC group has decided to slow production of oil again. Thereby driving up the demand and making themselves more filthier rich than they already are..."
A snippet of an e-mail sent by a friend. His comments were in response to news of OPEC cutting output by 520,000 bpd (Yahoo! News)
And my response (anyone with an opinion or an economics background is strongly encouraged to leave a comment):
*DISCLAIMER: This is a lengthy e-mail.*
According to various business articles/publications, the fall in in the price of oil was largely attributed to the slowdown in the global economy (which I believe is still happening for a variety of reasons, including the subprime fiasco which was a result of bad/risky lending practices by financial institutions).
The same slowdown may have caused some (many?) businesses to cut back, or shelve plans for expansion, or to do without additional staff and so on, and so forth. Part of this expansion may be partly responsible for driving the demand for oil and its by-products. Less expansion may result in less hiring, which may result in less spending and consumption (by businesses and the public alike). This may end up coming full circle to less expansion all over again as businesses suffer due to an economic slowdown.
I believe, in general, that oil may/cannot keep on climbing in terms of price. It will be expensive, yes, in relation to previous prices, but there's a limit to how high it can go. If it gets very expensive, then demand will fall (taking price with it) and substitutes and/or alternatives may become more attractive (i.e., solar, bio, electric, or by simply reducing demand by reducing consumption through driving less and car pooling more).
To summarize (and bastardize) the Law of Demand: all things being equal, the higher the price of a good or service, the lower the demand for it. Of course one also has to figure in PED (Price Elasticity of Demand) and maybe YED(?) (Income Elasticity of Demand).
If demand doesn't change much for a product when the price increases, then the product can be said to be price inelastic (this product may be an essential item, like bread, oil, or even the newspaper, so even if the prices go up, people still buy the product because they consider it to be essential, like oil). If price changes (increase/decrease) and demand changes as a result (increaes/decrease), then the demand of this product is said to be price elastic, e.g. consumers may find another product, or do without it (e.g., if butter prices go up then, all things being equal, people may switch to margarine, if I remember an example I read somewhere correctly).
Getting back to OPEC, I *personally* think that if they wanted to get more for a barrel of oil, they should've increased production. An increase in production may, I believe, temporarily result in a price drop (as a result of the increased supply of product in the market). A cheaper price may cause an increase demand, which drives up prices and removes the excess supply until an equilibrium price is reached. Put in more practical terms (I think), The World (businesses, industries, people) upon seeing that oil prices have fallen (from an increase in product on the market) *MAY* rush back to their old levels of consumption (having forgotten the lessons of high oil prices to begin with).
In doing so, the World may end up shooting themselves in the foot. Increased demand for a product, especially one as scarce as oil, may drive up its price. A related example (maybe not the best) is the stock market in the U.S. and those tech/dot-com stocks. High demand drove the stock prices up to insane/unheard of levels (then the bubble burst and prices dropped). Real-estate (in Barbados for example), may also be similar. Prices are high because the market supports high prices (and obviously because land is finite, scarce resource). Take away the demand or whatever is causing the demand (say for example the culture that Barbadians must own a piece of the rock for financial security, or to pass on to their kids) and prices may very well drop (but not by an amazing amount because remember, land is a finite resource).
But what do I know? Remember, IANAE.
:-)
Labels: business, economics, life, oil, OPEC, politics, thoughts, work, World
Tuesday, July 22, 2008
A very brief look at the other side of the coin: the American Petroleum Institute
Easy to read and follow, I picked up Linda McQuaig's 'It's the Crude, Dude: War, Big Oil and the Fight for the Planet,' while vacationing in Canada last year.
The title is what grabbed me, followed by the subject matter. The actual content has been nothing short of provocative, revealing and attention grabbing (especially the bit about Chavez 'saving' OPEC, and how Rockefeller and Standard Oil came about).
In one of her chapters, McQuaig mentions, in less-than-cozy terms, the American Petroleum Institute. The API, according to their website, is:
"...the only national trade association that represents all aspects of America’s oil and natural gas industry. Our 400 corporate members, from the largest major oil company to the smallest of independents, come from all segments of the industry. They are producers, refiners, suppliers, pipeline operators and marine transporters, as well as service and supply companies that support all segments of the industry."
I'm mentioning them because some of their documents which, for whatever reasons or interests they are trying to serve, are interesting and worth reading, especially:
Understanding Today's Crude Oil and Product Markets (Oil Primer)
The Facts About Oil Industry Mergers, Market Power and Fuel Prices: An API Primer
The Truth About Oil and Gasoline: An API Primer
The title is what grabbed me, followed by the subject matter. The actual content has been nothing short of provocative, revealing and attention grabbing (especially the bit about Chavez 'saving' OPEC, and how Rockefeller and Standard Oil came about).
In one of her chapters, McQuaig mentions, in less-than-cozy terms, the American Petroleum Institute. The API, according to their website, is:
"...the only national trade association that represents all aspects of America’s oil and natural gas industry. Our 400 corporate members, from the largest major oil company to the smallest of independents, come from all segments of the industry. They are producers, refiners, suppliers, pipeline operators and marine transporters, as well as service and supply companies that support all segments of the industry."
I'm mentioning them because some of their documents which, for whatever reasons or interests they are trying to serve, are interesting and worth reading, especially:
Understanding Today's Crude Oil and Product Markets (Oil Primer)
The Facts About Oil Industry Mergers, Market Power and Fuel Prices: An API Primer
The Truth About Oil and Gasoline: An API Primer
Labels: American Petroleum Institute, economics, news, oil, politics, U.S., World
Saturday, July 19, 2008
Relations between China and Africa
"FEARS of a "no fun Olympics" are growing as security restrictions increase and become more bizarre with less than 20 days to go until the opening ceremony.
Beijing police have been visiting bar owners in the popular Sanlitun area and asking them to sign pledges agreeing to not serve black people or Mongolians and ban activities including dancing."
Fears of a 'no-fun' Olympics in Beijing (theage.com.au)
"BEIJING — Chinese police officials have forced some Beijing bar owners to sign secret pledges promising to prohibit blacks from entering their bars during the Olympics next month, a Hong Kong newspaper says.
The police denied the report Friday, and most bars denied any knowledge of the pledges. But many African residents of Beijing say they are facing harassment from police and discrimination from bars as the Olympics approach."
Africans in Beijing harassed as Olympics approach (globeandmail.com)
"No one alive at the close of the 19th century could have missed the "scramble for Africa". A motley collection of robber barons, imperialist ideologues, explorers, rogues and adventurers - the likes of Cecil Rhodes and the appalling Leopold II, King of the Belgians - carved up the continent in the name of five European powers.
Today, few appear to have noticed that a second "scramble for Africa" is under way. This time, only one giant country is involved, but its ambitions are every bit as momentous as those of Rhodes and company. With every day that passes, China's economic tentacles extend deeper into Africa. While Europe sought direct political control, China is acquiring a vast and informal economic empire."
Why China is trying to colonise Africa (Telegraph)
(NOTE: Is it just me, or is there something fishy going on here? Are the Chinese trying to have their cake and eat it, too? Then again, what do I know? IANAE - I Am Not An Economist, IANAP - I Am Not A Politician, IANAOE - I Am Not An Oil Exec and so on and so forth...)
"The People's Republic of China and the Federal Republic of Nigeria established diplomatic relations on February 10, 1971. Bilateral relations have since enjoyed smooth and steady development."
China-Nigeria Relations (EMBASSY OF THE PEOPLE'S REPUBLIC OF CHINA IN THE FEDERAL REPUBLIC OF NIGERIA)
"The traditional friendship and relations of good cooperation between China and African countries have stood the test of time and gone through the trial of international turbulent events. This relationship, being a good example to the developing countries, has been further consolidated and developed under the present new situation."
China-Africa Relations (Ministry of Foreign Affairs of the People's Republic of China)
"China has secured four oil drilling licences from Nigeria as President Hu Jintao continues his week-long tour of Africa, his second in three years. In exchange China will invest $4bn (£2.25bn) in oil and infrastructure projects in Nigeria."
China and Nigeria agree oil deal (BBC NEWS)
"According to China's Ministry of Commerce, China and Nigeria signed an 8.3 billion US dollar railway construction contract. China will build 1315 kilometers of railroad in the west African state; this is the biggest infrastucture project abroad for a Chinese company to date."
Nigeria and China railway deal: $8.3 billion (DANWEI)
Beijing police have been visiting bar owners in the popular Sanlitun area and asking them to sign pledges agreeing to not serve black people or Mongolians and ban activities including dancing."
Fears of a 'no-fun' Olympics in Beijing (theage.com.au)
"BEIJING — Chinese police officials have forced some Beijing bar owners to sign secret pledges promising to prohibit blacks from entering their bars during the Olympics next month, a Hong Kong newspaper says.
The police denied the report Friday, and most bars denied any knowledge of the pledges. But many African residents of Beijing say they are facing harassment from police and discrimination from bars as the Olympics approach."
Africans in Beijing harassed as Olympics approach (globeandmail.com)
"No one alive at the close of the 19th century could have missed the "scramble for Africa". A motley collection of robber barons, imperialist ideologues, explorers, rogues and adventurers - the likes of Cecil Rhodes and the appalling Leopold II, King of the Belgians - carved up the continent in the name of five European powers.
Today, few appear to have noticed that a second "scramble for Africa" is under way. This time, only one giant country is involved, but its ambitions are every bit as momentous as those of Rhodes and company. With every day that passes, China's economic tentacles extend deeper into Africa. While Europe sought direct political control, China is acquiring a vast and informal economic empire."
Why China is trying to colonise Africa (Telegraph)
(NOTE: Is it just me, or is there something fishy going on here? Are the Chinese trying to have their cake and eat it, too? Then again, what do I know? IANAE - I Am Not An Economist, IANAP - I Am Not A Politician, IANAOE - I Am Not An Oil Exec and so on and so forth...)
"The People's Republic of China and the Federal Republic of Nigeria established diplomatic relations on February 10, 1971. Bilateral relations have since enjoyed smooth and steady development."
China-Nigeria Relations (EMBASSY OF THE PEOPLE'S REPUBLIC OF CHINA IN THE FEDERAL REPUBLIC OF NIGERIA)
"The traditional friendship and relations of good cooperation between China and African countries have stood the test of time and gone through the trial of international turbulent events. This relationship, being a good example to the developing countries, has been further consolidated and developed under the present new situation."
China-Africa Relations (Ministry of Foreign Affairs of the People's Republic of China)
"China has secured four oil drilling licences from Nigeria as President Hu Jintao continues his week-long tour of Africa, his second in three years. In exchange China will invest $4bn (£2.25bn) in oil and infrastructure projects in Nigeria."
China and Nigeria agree oil deal (BBC NEWS)
"According to China's Ministry of Commerce, China and Nigeria signed an 8.3 billion US dollar railway construction contract. China will build 1315 kilometers of railroad in the west African state; this is the biggest infrastucture project abroad for a Chinese company to date."
Nigeria and China railway deal: $8.3 billion (DANWEI)
Labels: Africa, China, economics, life, news, oil, Olympics, politics, World
Monday, June 2, 2008
Article: 'Will Soaring Transport Costs Reverse Globalization?'
A snippet from the article...
"Globalization is reversible. Higher energy prices are impacting transport costs at an unprecedented rate. So much so, that the cost of moving goods, not the cost of tariffs, is the largest barrier to global trade today. In fact, in tariff-equivalent terms, the explosion in global transport costs has effectively offset all the trade liberalization efforts of the last three decades. Not only does this suggest a major slowdown in the growth of world trade, but also a fundamental realignment in trade patterns."
Sources:
Will Soaring Transport Costs Reverse Globalization? (CIBC World Markets)
"Globalization is reversible. Higher energy prices are impacting transport costs at an unprecedented rate. So much so, that the cost of moving goods, not the cost of tariffs, is the largest barrier to global trade today. In fact, in tariff-equivalent terms, the explosion in global transport costs has effectively offset all the trade liberalization efforts of the last three decades. Not only does this suggest a major slowdown in the growth of world trade, but also a fundamental realignment in trade patterns."
Sources:
Will Soaring Transport Costs Reverse Globalization? (CIBC World Markets)
Labels: business, China, economics, life, news, oil, U.S., World
Sunday, June 1, 2008
Article: 'The Coming Energy Wars'
Snippets from the article...
""Indeed, there's concern that as higher oil prices force many Asian economies to reduce or even cut their generous fuel subsidies, growth will slow sharply, and there could be social unrest as the world's poorest become more desperate. The political ramifications of this (which already include moves away from free trade), combined with the ever-rising costs of doing business as usual, could force a retrenchment from globalization. "It's a harbinger of the reversal of globalization," says Jeff Rubin, chief economist for CIBC World Markets. "At $200 a barrel, you'll see transport costs rise so much that they will effectively reverse the trade liberalization of the last 30 years." He predicts that world trade will realign itself regionally, so that while Japan may continue to ship in goods from China, the United States will increasingly import from Latin America. "If you look at the period from 1973 to 1979 [when oil spiked] you'll find the same thing happened," he notes. "The share of imports to the U.S. from Latin America and the Caribbean rose by 6 percentage points. That was all about freight costs.""
"This spring, America hit a historic point. With average gas prices per gallon edging toward $4, America's notoriously profligate ways started to change fast. Americans are driving less, using mass transit more, buying fewer gas guzzlers, indeed shopping less wantonly in general, and lowering their previously unshakable confidence as consumers. Suddenly, Americans are acting differently; if not exactly like Swedes, then not quite like themselves, either. It's a shift that could change the world.
And there are more changes to come. So far the price shock has triggered the most obvious consumer shifts in the United States. Europeans, already greener, are also are buffered by a stronger currency, and Asians are protected from the spiking price of oil by subsidies that control the impact on gas prices at the pump. But if oil prices continue to rise, and the subsidy dam breaks, as seems likely, the energy revolution now transforming America will spread. "We sailed through $80 a barrel," notes energy authority Daniel Yergin, author of "The Prize: The Epic Quest for Oil, Money and Power" and chairman of Cambridge Energy Research Associates. "But that doesn't mean we'll sail through $200 a barrel. That sort of price would have enormous global consequences.""
Sources:
The Coming Energy Wars (Newsweek.com)
""Indeed, there's concern that as higher oil prices force many Asian economies to reduce or even cut their generous fuel subsidies, growth will slow sharply, and there could be social unrest as the world's poorest become more desperate. The political ramifications of this (which already include moves away from free trade), combined with the ever-rising costs of doing business as usual, could force a retrenchment from globalization. "It's a harbinger of the reversal of globalization," says Jeff Rubin, chief economist for CIBC World Markets. "At $200 a barrel, you'll see transport costs rise so much that they will effectively reverse the trade liberalization of the last 30 years." He predicts that world trade will realign itself regionally, so that while Japan may continue to ship in goods from China, the United States will increasingly import from Latin America. "If you look at the period from 1973 to 1979 [when oil spiked] you'll find the same thing happened," he notes. "The share of imports to the U.S. from Latin America and the Caribbean rose by 6 percentage points. That was all about freight costs.""
"This spring, America hit a historic point. With average gas prices per gallon edging toward $4, America's notoriously profligate ways started to change fast. Americans are driving less, using mass transit more, buying fewer gas guzzlers, indeed shopping less wantonly in general, and lowering their previously unshakable confidence as consumers. Suddenly, Americans are acting differently; if not exactly like Swedes, then not quite like themselves, either. It's a shift that could change the world.
And there are more changes to come. So far the price shock has triggered the most obvious consumer shifts in the United States. Europeans, already greener, are also are buffered by a stronger currency, and Asians are protected from the spiking price of oil by subsidies that control the impact on gas prices at the pump. But if oil prices continue to rise, and the subsidy dam breaks, as seems likely, the energy revolution now transforming America will spread. "We sailed through $80 a barrel," notes energy authority Daniel Yergin, author of "The Prize: The Epic Quest for Oil, Money and Power" and chairman of Cambridge Energy Research Associates. "But that doesn't mean we'll sail through $200 a barrel. That sort of price would have enormous global consequences.""
Sources:
The Coming Energy Wars (Newsweek.com)
Sunday, September 16, 2007
And In Other News...
Clue search after Thai air crash
"At least 88 people were killed when the aircraft, operated by a Thai budget airline, skidded off a runway in heavy rain on the southern island of Phuket." [via BBC NEWS]
Family tribute to (Colin) McRae and son
"Mr McRae, 39, his son Johnny, friend Ben Porcelli, 6, and Graeme Duncan, 37, died following a helicopter crash in Lanarkshire on Saturday." [via BBC NEWS]
Alan Greenspan claims Iraq war was really for oil
“I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil” [via Times Online]
Oil industry 'sleepwalking into crisis'
"Former Shell chairman says that diminishing resources could push price of crude to $150 a barrel" [via The Independent]
World's Worst Polluted Places [via The Blacksmith Institute]
Why old rockers are back on stage
"DINOSAURS might be revived in one of two ways. Fiction suggests applying the techniques of genetic engineering to DNA extracted from bloodsucking prehistoric insects trapped in amber. To resurrect the dinosaurs of rock, however, all you need is a fat cheque and a block booking at a vast stadium." [via Economist.com]
"At least 88 people were killed when the aircraft, operated by a Thai budget airline, skidded off a runway in heavy rain on the southern island of Phuket." [via BBC NEWS]
Family tribute to (Colin) McRae and son
"Mr McRae, 39, his son Johnny, friend Ben Porcelli, 6, and Graeme Duncan, 37, died following a helicopter crash in Lanarkshire on Saturday." [via BBC NEWS]
Alan Greenspan claims Iraq war was really for oil
“I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil” [via Times Online]
Oil industry 'sleepwalking into crisis'
"Former Shell chairman says that diminishing resources could push price of crude to $150 a barrel" [via The Independent]
World's Worst Polluted Places [via The Blacksmith Institute]
Why old rockers are back on stage
"DINOSAURS might be revived in one of two ways. Fiction suggests applying the techniques of genetic engineering to DNA extracted from bloodsucking prehistoric insects trapped in amber. To resurrect the dinosaurs of rock, however, all you need is a fat cheque and a block booking at a vast stadium." [via Economist.com]
Labels: accident, death, environment, Iraqi, music, news, oil
Wednesday, August 8, 2007
1 Billion Chinese Can't Be Wrong, Or Can They?
The total number of human beings alive on the Planet Earth is, as of July 2007, 6.6 billion. Of that 6.6 billion, it is estimated that China's population is around 1.3 billion. China also has the largest number of active troops, estimated at around 2,255,000.
So it was out of pure curiousity that I read The Economist's article on China's "long march to be a superpower." While it may sound a bit silly, the most interesting part of the article, for me, was reading that since the 1980s, China has bought four aircraft-carriers. One of them, the Kiev, was once in the possession of the Soviet Union and is now a tourist attraction!
China was also no. 2 in the world when it came to 2006 oil consumption figures, with first place going to the United States and third place, Japan. According to a 2004 article on the BBC's website, China's rapidly expanding economy has created a huge demand for the fossil fuel.
So it was out of pure curiousity that I read The Economist's article on China's "long march to be a superpower." While it may sound a bit silly, the most interesting part of the article, for me, was reading that since the 1980s, China has bought four aircraft-carriers. One of them, the Kiev, was once in the possession of the Soviet Union and is now a tourist attraction!
China was also no. 2 in the world when it came to 2006 oil consumption figures, with first place going to the United States and third place, Japan. According to a 2004 article on the BBC's website, China's rapidly expanding economy has created a huge demand for the fossil fuel.
Tuesday, August 7, 2007
Peak Oil, Did You Miss It?
In case you did, click here to see view my short post on Peak Oil. If you're concerned about the future of oil, this may be worth reading. You should also spend some time going through some of the links in the post.
Peak Oil. What It Is And Why You Should Be Worried
Peak Oil. Ever heard of it? No? Then you need to hear about it. Sooner or later, it will affect you and everything around you.
Is Peak Oil Real?
"As first expressed in Hubbert peak theory, Peak Oil is the point or timeframe at which the maximum global petroleum production rate is reached. After this timeframe, the rate of production will by definition enter terminal decline. According to the Hubbert model, production will follow a roughly symmetrical bell-shaped curve."
[via Wikipedia, Peak oil]
"Peak Oil is the simplest label for the problem of energy resource depletion, or more specifically, the peak in global oil production. Oil is a finite, non-renewable resource, one that has powered phenomenal economic and population growth over the last century and a half. The rate of oil 'production,' meaning extraction and refining (currently about 84 million barrels/day), has grown in most years over the last century, but once we go through the halfway point of all reserves, production becomes ever more likely to decline, hence 'peak'. Peak Oil means not 'running out of oil', but 'running out of cheap oil'. For societies leveraged on ever increasing amounts of cheap oil, the consequences may be dire. Without significant successful cultural reform, economic and social decline seems inevitable."
[via Energy Bulletin]
Top 3 World Oil Producers and Consumers (2006)
(Thousand barrels per day)
Top 3 World Oil Producers
1. Saudi Arabia 10,719
2. Russia 9,668
3. United States 8,367
Top 3 World Oil Consumers
1. United States 20,588
2. China 7,274
3. Japan 5,222
[via Energy Information Administration, Official Energy Statistics from the U.S. Government]
Is Peak Oil A Myth?
"Peak oil is a scam designed to create artificial scarcity and jack up prices while giving the state an excuse to invade our lives and order us to sacrifice our hard-earned living standards."
"Earlier this year Saudi Arabia reportedly increased its crude reserves by around 200 billion barrels. Saudi oil Is secure and plentiful, say officials.
Is this the normal course of behavior if we are currently at the peak for oil production? The answer is no, it's the normal course of action for increasing production.
There have also been reports that Russia has vastly increased its reserves even beyond those of Saudi Arabia. Why would they do this if they believed there would be no more oil to get hold of? It seems clear that Russia is ready for unlimited future production of oil.
There is a clear contradiction between the peak oil theory and the continual increase in oil reserves and production."
[via Prison Planet.com, The Myth Of Peak Oil]
Oil, Oil, Everywhere...
[via WSJ Article, Manhattan Institute]
Only time will tell if Peak Oil is real, or if it's a myth.
Is Peak Oil Real?
"As first expressed in Hubbert peak theory, Peak Oil is the point or timeframe at which the maximum global petroleum production rate is reached. After this timeframe, the rate of production will by definition enter terminal decline. According to the Hubbert model, production will follow a roughly symmetrical bell-shaped curve."
[via Wikipedia, Peak oil]
"Peak Oil is the simplest label for the problem of energy resource depletion, or more specifically, the peak in global oil production. Oil is a finite, non-renewable resource, one that has powered phenomenal economic and population growth over the last century and a half. The rate of oil 'production,' meaning extraction and refining (currently about 84 million barrels/day), has grown in most years over the last century, but once we go through the halfway point of all reserves, production becomes ever more likely to decline, hence 'peak'. Peak Oil means not 'running out of oil', but 'running out of cheap oil'. For societies leveraged on ever increasing amounts of cheap oil, the consequences may be dire. Without significant successful cultural reform, economic and social decline seems inevitable."
[via Energy Bulletin]
Top 3 World Oil Producers and Consumers (2006)
(Thousand barrels per day)
Top 3 World Oil Producers
1. Saudi Arabia 10,719
2. Russia 9,668
3. United States 8,367
Top 3 World Oil Consumers
1. United States 20,588
2. China 7,274
3. Japan 5,222
[via Energy Information Administration, Official Energy Statistics from the U.S. Government]
Is Peak Oil A Myth?
"Peak oil is a scam designed to create artificial scarcity and jack up prices while giving the state an excuse to invade our lives and order us to sacrifice our hard-earned living standards."
"Earlier this year Saudi Arabia reportedly increased its crude reserves by around 200 billion barrels. Saudi oil Is secure and plentiful, say officials.
Is this the normal course of behavior if we are currently at the peak for oil production? The answer is no, it's the normal course of action for increasing production.
There have also been reports that Russia has vastly increased its reserves even beyond those of Saudi Arabia. Why would they do this if they believed there would be no more oil to get hold of? It seems clear that Russia is ready for unlimited future production of oil.
There is a clear contradiction between the peak oil theory and the continual increase in oil reserves and production."
[via Prison Planet.com, The Myth Of Peak Oil]
Oil, Oil, Everywhere...
[via WSJ Article, Manhattan Institute]
Only time will tell if Peak Oil is real, or if it's a myth.
