new U.S. fuel economy standards

for further reading, check out my new blog:

Obama ends the dominance of gas guzzlers on U.S. streets (whatmattersweblog.com)

Crude Oil Price Chart 1998 – 2009: Facing the inevitable – oil prices are bound to rise

Splitting GM into a good and a bad company

Today, a few newspapers trying to interpret Obama’s remarks on the auto industry make me feel like the President’s auto task force is planning to do exactly what I wrote on November 30th, 2008. Searching Google News you’ll find numerous articles claiming that Obama wants to split General Motors into a “good company” and a “bad company”.

–>>>>> How to save the American auto industry? No time for baby steps!

 

2009: year of change, challenges and chances

2008 just ended and will be remembered as the year when the financial crisis rooted in risky mortgage lending turned into a global economic crisis. In today’s globalized world, the crisis spread from the U.S. housing market to almost all parts of the world. The global financial system went crazy, banks were collapsing, governments around the world injected hundreds of billions of dollars into financial markets and shabby banks. Things went from bad to worse on September 15th, when the U.S. investment bank Lehman Brothers filed for bankruptcy protection - it was the largest bankruptcy in U.S. history. The fall of Lehman sparked anxiety in the financial industry as the U.S. government didn’t intervene to prevent a collapse. Following the liquidation of Lehman Brothers, a global panic sellingof bank shares set in which also contributed to the failure of other financial institutions. Hypo Real Estate, a German property lender, suffered from the consequences of the Lehman failure as inter-bank lending dried up and the Munich-based company needed to be bailed out.  Just days after Lehman had declared bankruptcy, the insurance giant AIG was nationalized. Less than two weeks earlier, the U.S. government had bailed out the mortgage giants Fannie Mae and Freddie Mac. They were taken into public ownership.

Apart from the financial sector, the car industry is among those hit hardest by the international crisis. After record-high gasoline prices had hammered car sales in the first two thirds of 2008, sales plunged further due to the lack of confidence among consumers and tight credit in the last third. The Big Three car makers from Detroit – GM, Ford and Chrysler – are in the worst situation in  their history. Whether these companies survive depends pretty much on the decisions the next administration is going to take. The American auto industry is largely responsible for its demise as they missed the market trend and continued producing poor-quality gas-guzzlers at high labor costs. In the last decade, the management failed completely. Detroit’s car makers were outflanked and outsold by more innovative competitors from Japan, Korea and Germany that had better engineering and more long-term concepts for success. (more on this: How to save the American auto industry? No time for baby steps) However, even the new #1 car maker Toyota, which successfully build up a green image over the last few years, was hit hardly by the crisis in the auto market. Actually, this is not surprisingng. Though Toyota has sold more than one million units of its Prius hybrid car since it went on sale more than a decade ago, the majority of the slightly below ten million cars sold in 2008 has a less impressive fuel economy. (Check out Dec. 24th’s post)

All industrialized countries as well as many emerging nations will be in recession in 2009. Consumer spending is falling rapidly as economic uncertainty spreads, unemployment rises as companies slash their workforce to respond to lower demand, unavailability of credit and a bleak outlook for the next quarters.

The drop in oil prices since July 2008 represents best the worsening of the world economy. Since the United States is by far the world’s largest oil consumer (a quarter of total global consumption), demand has been falling which caused oil prices to lose ground. Global oil demand is contracting for the first time in more than 25 years! The day when Lehman Brothers collapsed, oil fell below the $100 a barrel mark, when the U.S. reported the loss of half a million jobs on December 5th, oil slid below $40.  On the one hand, lower energy prices benefit large parts of the population at the moment. Gasoline prices are at a four-year low in many parts of the world. (take a look at my overview of gasoline prices worldwide) On the other hand, currently low oil prices delay urgently needed investments into oil fields and the oil infrastructure which will cause an unprecedented price-hike once the economy does better. Even the $ 330 billion investment that OPEC countries want to make until 2011 which was announced earlier this year were not even enough to maintain the current production capacity in the medium term. In fact, more than one trillion dollars were needed to be spent every single year to maintain the current global oil output until 2030. (see my article on the World Energy Outlook 2008)

The turbulent times might still continue for several months. Though there is hope that towards the end of this year, the economy might begin to recover. 2009 should be seen as chance for a fresh start. On January 20th, Obama will take office as the 44th president of the United States. He’ll also be the first African-American president. This is undoubtedly a historic year. People in every corner of the globe and especially in the  U.S. are full of expectations. Obama stands for change and hope. Great leadership will be necessary to rebuild the nation and steer it out of the economic crisis. Pessimists predict a “lost decade” for the U.S. as Japan has experienced, others forecast the beginning of the recovery in fall. Barack Obama is likely to put all of his energy into solving the financial and economic problems the U.S. is facing right now. As soon as the economy allows him to focus on foreign policy, he is expected to work towards a new multilateralism.

Despite the calamity of the moment, the day will come when the economy thrives again. This is the time to push forward some necessary, fundamental and painful changes which will be the foundation for future growth. Given that Obama will be in power soon and that the U.S. has always been known for the flexibility of its economy, there’s plenty of reason to believe in a prosperous future. If the right action is taken, every crisis can be seen as a big chance. Especially at this point in history, where we are about to experience major changes in our daily lives due to the inevitable transition that is to take place in the energy sector over the next decade, there have seldom been more opportunities.

History being made – a once in a lifetime election

Today’s election has definitely captured the attention of the whole world. There is a lot of excitement within and without the United States. Looking at the latest polls, it is likely that Senator Barack Obama wins with a comfortable lead over Republican John McCain, though polls can never be relied on. Nevertheless, I am sure that there won’t be anything like a “Bradley effect” this time. At this moment in history, there are issues that weigh more than skin color or party affiliation. The majority of early voters polled voted for Obama. If Obama wins tonight, he will be the first African-American president of the United States. But above that, he symbolizes a new era of politics. His message of change in line with his charismatic personality inspired millions of voters. He raised more than $600 million and his passionate supporters worked hard in all states to make potential voters register. Undoubtedly, Barack Obama is a magnetic figure and this gonna be a remarkable election. Thus, it’s no surprise that voter turnout is expected to be considerably higher than usually. In next few hours, the first exit polls could give a glimpse of who’s ahead. Obama is sure to get a boost from first time voters. Right now, I’m watching CNN newsanchors playing with their high-tech equipment on which they appear to be very proud of, most interesting a huge touch screen – very entertaining. To no ones’ surprise, the economy is still issue #1. This afternoon, the McCain campaign launched a final robocall especially in southern Florida in Spanish, warning voters that former Cuban leader Fidel Castro, amongst other rather socialist South American leaders like Hugo Chavez from Venezuela,  allegedly endorsed Obama. Even if this were true, I despise this action and I am convinced that this is completely irrelevant.

The bottom line is, by the end of this day, voters will have chosen a new president , giving the world’s most powerful nation new political energy and hopefully new optimism.