Archive for the ‘Global economy’ Category

Oil price drop fuelling a surge in Indian car sales

March 18, 2016

It has taken a while coming, but the drop in oil price since mid-2014 is finally making its way into the Indian economy. Fuel consumption is growing at 10%. India has now passed Japan and is now the third largest oil consumer. Soon India will pass even China for energy consumption growth. Refineries which were intended for the export of oil have shifted to production for domestic consumption. Car sales which grew by 6% in the last year are now expected to be 12% in the next fiscal year (April – March).

Hindustan Times:

Underpinned by annual economic growth of 7-8 per cent, India’s fuel demand is seen as a key oil price support over 2016-2017, eating into a supply overhang that has pulled down global crude as much as 70 percent since mid-2014.

India has already pipped Japan as the world’s third-largest oil consumer. By 2040, India will have more than doubled its current oil use to 10 million barrels per day (bpd), according to the International Energy Agency (IEA), about on par with China’s consumption last year.

This roar of motor – as well as power and household – fuel use means some refineries initially planned for exports, such as the 300,000 bpd Paradip refinery on India’s east coast, have been flipped to serve domestic oil demand. …… Reflecting India’s rising importance as a buyer, Igor Sechin, chief executive of the world’s biggest listed oil company Rosneft, was in New Delhi this week to sign several deals with Indian companies such as IOC, Oil India Ltd and Bharat PetroResources Ltd.

…. Over April-February – the first 11 months of India’s current fiscal year – fuel demand rose 10 per cent to about 170 million tonnes (4 million bpd), according to a report this week by the oil ministry’s Petroleum Planning and Analysis Cell (PPAC).

For the next fiscal year through March 2017, the PPAC has forecast fuel demand growth at 7.3 per cent. …. India plans to spend Rs 97,000 crore ($14 billion) in 2016-2017 on expanding and improving the country’s road network, which at 4.7 million km is already vying with China as the world’s second-longest after the United States, although highways make up less than 2 per cent of that figure.

A 23.55 per cent increase in the salaries, allowances and pensions of millions of government employees later this year is also expected to shore up consumer spending, boosting purchases of cars and motorcycles. Sales of passenger cars and utility vehicles in India are expected to grow by as much as 12 per cent in the next fiscal year, up from an estimated 6 percent this year. That translates to around 230,000 new passenger vehicles hitting the roads each month.

The main impact has been on gasoline demand, which the PPAC expects to grow to 24.2 million tonnes (560,000 bpd) by next year, up more than 12 per cent from 21.5 million tonnes estimated for this fiscal year. “Gasoline demand has been growing in double digits and we expect this to continue as it depends on sales of two-wheelers and cars,” said Indian Oil Corp’s Singh.

Other fuels are seeing growth as well, and for similar reasons. To meet rising demand, state refiners are planning a 1.2 million bpd plant on the country’s west coast, adding to current overall capacity of 4.6 million bpd, although a fixed timeline has not been set.

I expect India and China to be key contributors to the recovery of the global economy and

Historically – though it is a relatively crude generalisation – low oil price has usually given – or coincided with – consumer-led growth and stability.

crude oil price history 1970-2014

crude oil price history 1970-2014


 

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Russia losing the shale gas wars

October 1, 2012

The advent of shale gas is not only a game-changer regarding power generation but also a game-changer in the area of energy and geopolitics. The Russian dominance in the European gas markets is being threatened and they are now joining forces with various environmental groups in an unholy alliance to restrain the development of shale gas production in Europe.

But in the long-term I expect Russia will join the shale-gas movement. They have larger resources of oil and gas bearing shales  than most others.

Wall Street Journal (Associated Press):

The Kremlin is watching, European nations are rebelling, and some suspect Moscow is secretly bankrolling a campaign to derail the West’s strategic plans. It’s not some Cold War movie; it’s about the U.S. boom in natural gas drilling, and the political implications are enormous. Like falling dominoes, the drilling process called hydraulic fracturing, or fracking, is shaking up world energy markets from Washington to Moscow to Beijing. Some predict what was once unthinkable: that the U.S. won’t need to import natural gas in the near future, and that Russia could be the big loser.

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Sarkozy attacks Cameron – much to Cameron’s delight

October 24, 2011

While European leaders are struggling to put together a rescue package for Greece which will not have a domino effect for Italy and Spain or drown too many European banks, David Cameron is facing renewed opposition to membership in the EU from within his own party. But it is not only in the UK that opposition to the growing exercise of powers by Brussels is increasing. Almost every EU member which has not adopted the Euro (Sweden, Denmark, Norway and the UK along with some of the newer members) has rising voices calling for the limitation of European power and a return of powers to the country parliaments. Voices against the Euro can even be heard in Germany where there is a widespread feeling ( not entirely wrong) that German taxpayers are paying twice for the spendthrift ways of Southern Europe; first directly by subsiding these countries and secondly by the devaluation of their savings in Euro. The Swiss are just thankful that they were never a part of this experiment.

In hindsight, what has become obvious is that the Euro-zone has few built in sanctions to prevent the profligacy of some countries which has to be paid for by others. What is also becoming clear is that without a fiscal uniformity – which would seem like being taxed from Brussels – the possibility of  “bad” members being spendthrift will always remain.

France has always seen the Euro as part of a long-term move towards a European political and fiscal uniformity in which France would be the centre of political power. A return to the glory days of the Holy Roman Empire which lasted over 800 years, except of course that the centre would be in France rather than in what today is Germany. Sarkozy could certainly see himself as the first Emperor.

Yesterday, as the Telegraph reports:

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German exports at all time high – proof of two-speed Eurozone

May 9, 2011

No doubt the value of the Euro which is being held back by the economically weak countries helps but it does not explain the strength of the recovery in Germany led by exports. It is not surprising that there are many Germans who are troubled by the burden placed on the European currency by Greece, Portugal and Ireland and begin to yearn for the return of the Deutschmark. There is a real fear among German savers that the achievements will be diluted by the weaker countries which in turn will destroy the value of their savings. The growth rate in Germany is second only to Sweden in Europe but the sheer size of the German economy makes it the real motor in Europe.

There is also an attempt by the German media to create a narrative that it is not unthinkable for a country to leave (or be pushed out from) the Euro. Last Friday’s media rumours about Greece leaving the Euro generally started in Germany. Even though the rumours were hastily denied by everybody, just the fact of bringing it up makes it less unthinkable.

Returning to the Deutschmark?

BBC: 

German exports surged in March to their highest level since records began, as the growing global economy lifted demand for its products and services. The country’s exports for the month totalled 98.3bn euros ($142bn; £87bn), 7.3% higher than February.

Its imports also reached an all-time high, up 3.1% to 79.4bn euros. Both imports and exports are the most since data started to be collected in 1950.

Germany is the world’s second-largest exporter.

Only China exports more than the European nation, and the latest monthly figure for German exports was much higher than market expectations.

“Germany is on the verge of a ‘golden decade’,” said Christian Schulz of Berenberg Bank. Fellow analyst, Carsten Brzeski at ING, said the German economy was now “cruising along smoothly”.

The latest German export figures provide yet more evidence of a “two speed” eurozone, with the German and French economies continuing to grow strongly, while others, such as Greece and Portugal are struggling against a backdrop of high national debt levels. 

G 20 ends: “We know we must do something but we don’t know what …”!

November 12, 2010

Everybody agreed that a currency war was a “bad thing” but each country – of course – denied that it would ever indulge in such a thing. All agreed that the world was a dangerous place and that there were “grave imbalances”. The US blamed China and China blamed the US but they did try to engage and tone down the earlier rhetoric. It started a little acrimoniously but ended with fine words and a task passed on to the IMF to set “indicative” guidelines.

It is no doubt a “good thing” that the leaders do meet and at least try to think a little outside the box but few have the ability to look much beyond immediate domestic issues and domestic politics. The European leaders did at least have a “break out” meeting to address the problems in Ireland.

Reuters –

G20 leaders closed ranks Friday and agreed to a watered-down commitment to watch out for dangerous imbalances, yet offered investors little proof that the world was any safer from economic catastrophe.

The developing and emerging nations agreed at the summit in Seoul to set vague “indicative guidelines” for measuring imbalances between their multi-speed economies but, calling a timeout to let tempers cool, left the details to be discussed in the first half of next year.

Leaders vowed to move toward market-determined exchange rates, a reference to China’s tightly managed yuan that the United States has long complained is undervalued.

They pledged to shun competitive devaluations, a line addressing other countries’ concern that the U.S. Federal Reserve’s easy-money policy was aimed at weakening the dollar.

In a nod to emerging markets struggling to contain huge capital inflows, the G20 gave the okay to impose “carefully designed” control measures. They also agreed that there was a critical, but narrow, window of opportunity to conclude the long-elusive Doha round of trade liberalization talks launched in 2001.

After weeks of verbal jousting, the United States and China sought to bury the hatchet over rows about China’s “undervalued” currency and the global risks created by the U.S. printing money to reflate its struggling economy. “Exchange rates must reflect economic realities … Emerging economies need to allow for currencies that are market driven,” Obama said. “This is something that I raised with President Hu (Jintao) of China and we will closely watch the appreciation of China’s currency.”

Tim Condon, head of research at ING Financial Markets in Singapore said it was “hard to disagree” with the vows of the leaders but they had fallen short of the progress hoped for going into the summit.

“They decided just to put down a lot of laudable objectives as the conclusion of the meeting and hope that they can do better, that more can be accomplished in future meetings,” he said. The G20 has fragmented since a synchronized global recession gave way to a multi-speed recovery. Slow-growing advanced economies have kept interest rates at record lows to try to kickstart growth, while big emerging markets have come roaring back so fast that many are worried about overheating.

But at least the G20 spouses apparently had a good time  in what looks like sunny autumn weather!

Main Image

The spouses of G20 world leaders walk through a park in Seoul November 12, 2010. Credit: REUTERS/Yonhap/Pool SOUTH KOREA


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