1) Helps middle east petro-dollars wipe our the US investment bank write-off’s!!
2) Helps propel US economy, considering rising freight costs (proportional to rising crude costs). Rising freight costs offsets the cheaper labor cost advantage that china offers.
E.g. Steel imports to US (from China) dropping significantly, also US domestic
steel production rising significantly. To delve a bit, CIF cost of Chinese per ton HRC (including freight cost of US$90/t) has well exceeded domestic production cost!! (Metals Analyst!!)
Believe the same would be for other goods and commodities, with freight eating
away the china advantage (i.e. wage arbitrage).
3) Depreciating USD – helping exports, also possibility of relocating manufacturing bases back to USA, read somewhere of BMW thinking of re-locating its plant somewhere in US (from Germany), if the trend in EUR/USD continues… too much!! Well if that’s the case then Mr. Ben won’t have to worry about rising unemployment levels!!!
4) Thinking…. …
Disadvantages
1) Obama supporting ethanol policy, his point of contention with rising crude prices stands even stronger. Thou, only at the cost of lower supplies on other crops (as acreage under maize increases), eventually leading to food inflation… India, has nothing to worry, as is self sufficient (on date, except for edible oils)
2) Further political tensions or rift among OPEC???? Vague thoughts….Pardon me..
Just as BHP got freight premium for iron ore supplies to Baosteel, China (price up 90%yoy, against CVRD-Brazil up65%yoy); why could the same not be applied to South American oil producers (say Venezuela, etc) supplying oil to US. Really am not sure on the dynamics of Oil pricing, would need to dig into it…invite thoughts/ideas on this…
3) GS has predicted double digit inflation for rest of year, and Sensex bear case of sub 10k levels…. Well, in that case… I might end up loosing a job and then shall only write blogs!, also triggering a subprime in India (read tipping point), with PLR’s expected to go up…and no cash inflow , GOD help India’s largest pvt. Bank and me!!!
Oil Conundrum – in triple digits till when!!!
Is really the demand for oil increasing (I don’t think so), and supply increasing (don’t know, recent Saudi announcement doesn’t really change the way things are). Then what is the root cause….
*****Sixth Sense says, Post US Elections…. Things would be fine… ******
Higher oil prices…. Funding democrats or republicans this elections,
OR
May be it’s the last chance for Bush cohort to make money!! (if I get it right, top republicans enjoy fair share of direct/indirect profitability in Exxon, Shell, who I believe are direct beneficiaries of rising crude prices)
Thought’s / IDEAS invited…..
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2 comments:
nice to see an article from a future economist!
here is my penny's worth! –
india big problem – double digit inflation, raising interest rates, increasing deficit, depreciating rupee, diving markets, raising spreads / yields, growth reassessed, RBI selling $$ to prevent INR free fall, reducing reserves…. As you mentioned, it’s a tipping point (named sub prime) – lead to fight to quality, increasing the yields further, increasing the spreads – its 1998/99 all over again! Just waiting some smug country to default on its debt ehh! NICE!
US and so called developed economies – well, we all know… getting out of an stagflation is tuff business even for a veteran… and we are looking at a rookie here! (http://adityakasera.blogspot.com/) Well, one point – USD is at historical lows… but if it does start to fall further, well the ever increasing deficit will increase further! And over leveraged economy will be leveraged further.
Oil – its based on too many variables to actually enable my feeble brains to even understand the damn thing! But here are some random thoughts – Saudi increase of 200,000 b/d is peanuts. The day it announced the increase, the oil prices infact increased (thanks to the Nigerians). Oil has crossed Hubbert peak, with the limited supply of oil. There are signs of speculative bubble too. Remember in case of commodities, futures are one of the variables that dictate the spot!
Well… there are infinitely many variables, and I am out of ideas and time
Nice article.. keep em comin!
good article... its really a mind-boggling affair - this OIL!! Its time we came up with alternative fuel solutions - and bio-fuel with all its cons does not seem a viable option!! India, it seems, has hit the wrong spot at the wrong time! It will be worthwhile to watch what Reddy and PC work out here - I fear both stand to lose their jobs over this, though I doubt what the next govt can do abt this!
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