Monthly Archives: August 2008

I’ll take a summer break…

Since April 15th, I’ve tried to keep you up-to-date with information, news and insights on important issues and developments worldwide. As I’m constantly learning when I’m blogging, I’ll keep improving the quality of my posts. The first month was tough with only 10 to 20 visitors a day, so I’m happy that this number has meanwhile gone up to 70 to 150 visitors a day. Now I’ll take a summer break and spend a few weeks in Miami, Florida, to refresh my mind and gain new impressions. I’ll be back in mid-September and I’ll continue blogging.

For the upcoming weeks, there are two issues that could have a significant impact on the course the global economy takes.

First, the further development of energy prices. Will oil prices keep falling or will they just take a break on their march towards $200 a barrel? Could the violent tensions between  Georgia and Russia threaten oil supplies to Europe, fuel political tensions between the U.S., the EU and Russia, Europe’s major energy supplier and therefore drive up energy prices?

Second, it’s interesting to see which way China will take after the Olympic Games. Could the next global superpower be overwhelmed with interior problems ranging from inequality in wealth to devastating environmental pollution? Will Chinese competitiveness nosedive with rising labor costs?

As you can see, the next months will turn out to be crucial for the further development. After all, we are on the verge of a coming up fundamental transition. Energy is the topic of our times. Given that energy prices are soaring and will remain high in the medium-term, energy efficiency will become vital. We’ll experience an era of technical innovation. Completely new forms of housing and driving will evolve. Electric cars are the first large-scale step of this transition. At first, I was really astonished by the huge interest in this topic. The three most successful posts ever are all about electric cars. Increasingly, electric cars will become part of our everyday life. Of course, there are yet some obstacles to be resolved, but those pessimists who rule out the breakthrough of alternatives to the combustion engine within the next decade will finally be overwhelmed by the dynamism of this development.

I advise you to check out these posts which I think capture the essence of what’s going on and what’s ahead:

The Air Car could revolutionize transportation – an electric car without an electric motor
– most successful post ever, as far as I know, the only article on the web giving a comprehensive overview of cars driven by nothing but pure air, including the outstanding Di Pietro  motor.

Electric cars:

Electric vehicles are competitive with gasoline-diven vehicles
The electric car revolution is about to happen
All major auto-manufacturers are designing their own electric cars
Gasoline prices in the U.S. have recently hit record levels, but there are many countries where drivers are paying much more

 

 

 

Electric cars have to be expensive? – Not necessarily!
China, India and other countries subsidizing gasoline to keep domestic prices down are forced to embrace electric cars
Nissan wants to become the Japanese front-runner in electric car technology
Drivers are ready for electric cars
Tough luck for Ford – how a former subsidiary could revolutionize the auto industry
First German offshore wind farm shows the huge potential of electric cars in terms of efficiency and stability of the power grid
Electric micro-cars are perfect as neigbhorhood cars and major car makers should offer several EV models to provide cars for many purposes
India’s Tata Motors and the Malaysian national carmaker Proton to launch electric cars soon
The electric car – the last sign of hope for troubled U.S. car makers?
The electric car on the fast track 
The heart of the electric car – battery manufacturers are courted by car makers
Air batteries could lead to the breakthrough of electric cars
Preparing the introduction of the cars of the future
Finally, even Chrysler switches to electric cars
Portugal to join Israel and Denmark to be among the first countries shifting to electric cars on a grand scale
Several electric cars are to go on sale in 2009 – amongst some top-speed sports cars
G8 embracing electric and hybrid cars to halve CO2 emissions by 2050
Mediterranean Union will feature flagship initiatives such as solar energy development in sunny North Africa

Energy

Has the bubble popped?

Oil will become even more expensive, a coming up fundamental transition – scary news
Wrong-Way Driver Germany
To avoid a climate catastrophe, $45 trillion need to be spend
Getting money for consuming electricity? – That’s indeed possible!
China’s green skyscraper
The era of cheap air fares is over as oil spikes to record levels and several airlines won’t survive this unprecedented crisis
Air France turns to trains as regional operations are becoming less profitable
Today, for the first time in Europe CO2 gas was injected below the surface at Europe’s first CO2 stoaring test facility in Germany
Bio fuel out of orange peels
Saudi Arabia boosting its oil production might not even bring short-term relief
Vancouver is a leader in hydroelectric power and seeks to become one of the greenest cities of the world
Masdar City – carbon-free city in the UAE

Anything else that matters…

Is a global water crisis looming?

An amazing airline! – Air Asia, the Asian low cost pioneer
Internet capacity could strike in 2010 – big slowdown expected
Internet traffic relies on undersea cables – vulnerable to attacks?
Dongtan eco-city yet another showcase project promoting sustainability in China?
Irish voters throwing back Europe and shooting themselves in the foot by killing the EU reform treaty

I hope you all keep reading my posts and leave comments as soon as I continue to write in September. Best wishes to all of you!

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Global economic party is over

The outlook for the global economy is rather gloomy. Global growth rates are declining, the United States and many EU countries suffer from an economic downturn, primarily caused by the U.S. subprime mortgage crisis and soaring commodity prices, most notably oil. Even China, a guarantor of double digit growth rates, is likely to cool down while dealing with the numerous threats to the country’s social and economic stability. (Read more on: Amazing opening ceremony of the 29th Olympic Games in Beijing)

The high oil price impacts airlines and container shipping companies all around the world. (Shrinking Asia -> Europe cargo volumes indicating an economic downturn in Europe) High inflation rates are destabilizing the global monetary system. In fact, two thirds of the earth’s population are facing double digit inflation rates. (Doubts whether the ECB’s interest rate increase can counteract inflation)

Hans-Werner Sinn, president of the Munich-based Ifo Institute for economic research summarized all factors impacting global growth in this worth reading article:

The global economic party has ended; The Japan Times

http://search.japantimes.co.jp/cgi-bin/eo20080310a2.html

 

Check out: Wrong-Way Driver Germany

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“There is no oil shortage.” , Michael O’Leary, CEO of Ryanair

Ryanair is Europe’s largest low-cost carrier and the airline’s chief executive Michael O’Leary, who is always good for a surprise, is about to conclude the company’s biggest deal ever – an order of 400 new aircraft with deliveries starting in 2013. Ryanair is known for ordering new planes at times when the aviation industry is in a crisis because of the stronger position in negotiations with the planemakers. In the aftermath of the 9/11 terrorist attacks, Ryanair ordered most of the planes that are now in service. They got an extremely competitive price and now benefit from the high efficiency of the very young fleet.

Now, the aviation industry is in an even deeper crisis than in 2001 and this crisis cannot be compared with any other that preceded because the major threat to the survival of many airlines is the skyrocketed price of oil. Expenses for jet fuel make up the largest share of the total spending of a low-cost airline. They have already reduced all other services to a minimum in order to be able to offer extremely competitive fares, but with soaring jet fuel costs, especially low-cost carriers struggle.

The announcement that Ryanair were in talks with both, Airbus and Boeing, planning to order 400 planes, was kind of a sensation as first, the Irish airline has until now a fleet of 166 planes which are solely from Boeing, second,  Ryanair could face its first loss since 1989, after a profit of nearly half a billion euros in 2007. In part, Mr. O’Leary himself is responsible for the profit slump as he considered fuel hedging unnecessary until last year. Starting in January, Ryanair will use fuel hedging to protect itself from oil price fluctuations. Besides, Ryanair feels the pain of more reluctance on the side of the travelers. Ryanair’s fares are up considerably and unless the price of oil goes down, Ryanair will have to hike up prices by up to 40%. But Michael O’Leary seems to be pretty optimistic about the future development of the aviation market and the development of the oil price. He expects oil prices to fall below $100 a barrel as he thinks that demand is declining. Moreover, ordering planes today is cheap because of the weak U.S. dollar. Mr. O’Leary said that planes are “about half as expensive as a few years ago.” This time, however, Mr. O’Leary might err. He already mentioned that if oil prices remain high, only 3 to 5 European carriers will survive, amongst Ryanair, of course, which he expects to draw businessmen traveling on a budget from the big flag carriers. The 400 planes would be used to replace numerous older ones and to be part of O’Leary’s massive expansion plan. Nevertheless, Ryanair already had to give up some airports in Central and Eastern Europe and lay down some jets to increase profitability and avoid overcapacities in the winter season. In addition to the worsening conditions of the aviation sector due to soaring operating costs and the economic downturn, the EU’s stupid cap-and-trade emissions trading scheme which will unfortunately include the aviation industry, will be yet another challenge.

But the point is that oil prices will remain high, due to the OPEC cartel, fundamentals of supply and demand as well as the fact that oil resources are finite.

Has the bubble popped?

The EU decided to include airlines operating in Europe into emissions trading overburdening an industry already struggling

Dull ambience at IATA’s general annual meeting in Istanbul: the airline industry faces a severe crisis

http://www.irishtimes.com/newspaper/breaking/2008/0806/breaking25.htm

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Shrinking Asia -> Europe cargo volumes indicating an economic downturn in Europe

Container-shipping companies have been growing rapidly for years, ordering more and more container ships with higher capacities. This year, the capacity of container ships worldwide has grown 15%. With globalization widening the distance between production locations and consumer markets, demand for sea fright has been growing by double digits annually for seven years in a row. Shipyards still struggle to satisfy demand for new and bigger ships. However, this development has stalled. According to the Far Eastern Freight Conference (FEFC), a 17 member organization that makes up about 70% of trade between Asia and Europe, cargo volumes from Asia to Europe are down by 0.48%. This might not sound too dramatic, but this came totally unexpected. In December 2007, Rod Riseborough, the FEFC’s chairman, predicted a 19% growth. The turnaround can be attributed to many factors. The rising cost of fuel drove up the operating costs of the freight lines and prompted them to hike up prices and demand surcharges. The shipment cost of one single container have risen decisively since 2001 and with demand soaring, surcharges and price increases were no big deal. But now, with weaker economic growth worldwide, overcapacities and a drop in demand could lower prices decisively. Last but not least, sharply rising labor costs in China prompt some companies to relocate production to other countries in Asia or even to countries closer to the big consumer markets in Europe and North America.

Not only the outlook for the container shipping sector is alarming, but also the outlook for the economic development in some European economies. Major retail chains are now ordering merchandise for the Christmas sales. A lower volume of orders shows that retailers expect weaker Christmas sales. This is indicating that European economies are cooling down. As recent polls show, consumer confidence is down all across Europe. Denmark has already fallen into recession, Spain, Ireland, Spain, Italy and France are all on the verge of a recession. Growth rates in Germany are also declining and domestic demand is weak. With the eurozone’s economic performance deteriorating, the euro’s rise against the dollar could also have come to an end. Despite high inflation rates, the ECB let interest rates unchanged.

http://www.lloydslist.com/ll/news/asia-north-europe-box-volumes-shrink/20017556354.htm

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Amazing opening ceremony of the 29th Olympic Games in Beijing

Excited about Chinese culture and China’s unprecedented rise to the leading global economies, I spent the last 6 hours watching the opening ceremony of the 29th Olympics in Beijing.

A breathtaking show! Really impressive. The approximately 15,000 voluntary performers made a tremendous effort and impressed about 4 billion spectators around the world with their skill, discipline and above all, their culture. Dancers, material artists, acrobats  and children from each of the 56 Chineseethnic groups were entertaining the 91,000 spectators in the stadium with an overly perfect acrobatics and light show. The 5 and a half hour long event featured the highlights of Chinese history and culture. Several Chinese inventions such as paper and gunpowder as well as other achievements played an important role. Especially the fireworks all cross the city and the national stadium, called “the bird’s nest”, illuminated the dark sky of the Chinese capital for hours. The size of the fireworks was enormous.

It’s no coincidence that the Games started today on 08/08/2008 at 08.08 pm. To the Chinese, 8 symbolizes prosperity. Therefore, today was a popular day for weddings not only in China but around the world. Next to the promising meaning of the number 8 in China, it’s also a date that can easily be remembered.

Inevitably, the IOC’s president Jacques Rogge delivered a speech. He spoke of a dream coming true for the Chinese, but beside the text, Rogge’s speech was poor. This man has absolutely no talent for speaking in front of people. What a terrible bureaucrat! He looked as if he were announcing a 50% sales collapse at a shareholders’ meeting. Of course, the Chinese officials who spoke of “green Games” (to achieve sustainability, it takes more than just wishful thinking!) were not really better in expressing their message, but their speeches were at least a bit more colorful.

The Olympic Games in Beijing can be considered as the acme of the Chinese rise which started three decades ago with the reforms introduced by Deng Xiaoping which helped to lift more than 400 million people out of poverty in a short time – something no other country has ever accomplished. The Chinese government fears that the fast rise with growth rates beyond 10% annually could eventually slow down. Especially when the glitz of the Olympics will have disappeared in autumn and when dust storms from the desert cover Beijing, China will have to take one of its greatest challenges: the environment. The enormous environmental damage, the result of three decades of untamed, aggressive growth, are omnipresent not only when haze makes breathing harder all across the country. Acid rain occurs in one third of the nation, 90% of Chinese rivers are too polluted to be used for drinking water. The environmental issue, the great inequality in wages and high inflation with runaway labor costs threaten both, the social coherence and the competitiveness. Harmony – which is a basic principle of Chinese philosophy – is rare. People work hard, competition is fierce, chances are better than ever, but nobody wants to be left behind or rank behind. Air quality is a health problem in almost every city in China. Labor intensive businesses are increasingly shifting production to neighboring countries such as Vietnam or Bangladesh. China’s leaders are well aware of the numerous challenges. Therefore, it’s not surprising that Chinese officials are nervous when it comes to allowing more public participation and freedom.

Is a global water crisis looming?
China, India and other countries subsidizing gasoline to keep domestic prices down are forced to embrace electric cars

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Has the bubble popped?

The long standing oil price surge has caused pain at the gas pump for drivers around the world. As you can see on the U.S. gasoline price chart from the Energy Information Administration (Gasoline prices in the U.S….), gasoline prices in America have almost doubled since January ’07. In January 1999, crude oil was as cheap as $16 per barrel. Since then, prices have been increasing rapidly, topped $100 per barrel on January 2nd, and headed to a new record of $147.27 on July 11th 2008.  This extraordinary development prompted many analysts to talk about a bubble. Generally, speculators are blamed for driving up the price of petroleum unsupported by the fundamentals of supply and demand. Politicians would like to use this feeling to tighten their grip on the financial markets.

However, the price of crude oil is now down by more than 18%, trading at $119.85 today. Not even one month passed since the record high and oil prices have lost more than 27 dollars per barrel. Now, the question arises: Has the bubble popped? Should we expect a crash in oil prices? Is crude oil overvalued?

Many analysts predicted that the oil bubble was set to burst as early as 2005 when oil was traded below $60. Of course, there was a tremendous influx of money into oil futures in recent years. But those who were betting on rising prices are increasingly moving from oil futures and oilcontracts. Some experts expect even a kind of commodities sell-off. The significant decline we experienced in the matter of weeks is likely to be the result of emotional behavior rather than rational decisions. However, there are some facts that support the recent development: Demand for oil dropped in almost all industrialized countries, people are cutting back on their driving and shift away from gas-guzzlers to more efficient cars and cars using alternatives to gasoline for power (see Drivers are ready for electric cars and all other posts on that topic), Housespeaker Nancy Pelosi proposed to release some oil from the strategic oil reserves in order to lower prices at the pump, Hurricane Edoward is not threatening any major supply depots, offshore drilling is under consideration and many major economies are heading into recession or stagflation.

Nonetheless, we are at the beginning of an era of scarce and costly oil. Even if oil prices might dip below $100 a barrel for a while, this will be just a pause on the path to new records. First, there’s the OPEC cartel which will inevitably reduce oil production to maintain prices if they should fall too much. Second, oil is not abundant as many think, there’s no excess supply with growing demand from emerging economies in Asia and oil production will hardly manage to cope with demand.

(Experts from the Energy Watch Group say that oil production has already peaked in 2006 and will decline steadily: Oil will become even more expensive, a coming up fundamental transition – scary news) Third, lax monetary policy around the globe fueled inflation and the rise in global commodity prices. Excess money in circulation contributed decisively to the oil price spike. To maintain the value of their petroleum exports, oil-exporting nations were happy to see the price of oil going up every time when the dollar lost in value against other currencies such as the euro. And it is the fundamentals of supply and demand that justify the high price of oil. Unless the global economy heads into recession, we won’t see any lasting price decreases. There’s no speculative oil bubble, global oil reserves are at low levels, demand is close to exceeding supply and any international crisis or natural disaster will drive up the price of oil to new record levels. Iran’s OPEC governor Mohammad Ali Khatibi said: “In case the dollar continues to depreciate, and the political tensions continue to deepen, the oil price may even reach $500 per barrel.” In the event that e.g. the Strait of Hormuz, which is a strategically extremely important waterway between the Persian Gulf andthe Gulf of Oman with close to 40% of the global oil supply passing through it, were sealed off, 500 dollars a barrel could become a real scenario as global oil supplies would be affected decisively. Iran threatens to disrupt sea traffic in the case of an attack by Israel or the United States.

http://blogs.wsj.com/marketbeat/2008/07/23/has-the-commodity-bubble-popped/

http://www.presstv.ir/detail.aspx?id=64986&sectionid=3510213

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Nissan wants to become the Japanese front-runner in electric car technology

Japanese automakers were among the first to mass market fuel-efficient hybrids and are ahead of most competitors in electric car technology. Toyota, now the world’s largest automaker, has early realized that alternatives to conventional cars using (only) gasoline for power could become big business.  With a whole lineup of hybrid cars, Toyota is leading this market segment and its flagship hybrid, the Toyota Prius is quite successful with more than one million sales so far.

 According to the U.S. Environmental Protection Agency, the Toyota Prius is the most fuel-efficient car currently sold in the U.S. Part of Toyota’s philosophy is long-term thinking. The company plans to offer its entire product lineup with hybrid technology by 2030. This however, might turn out to a bet on the wrong horse in the long term. Hybrid technology will only be a transitional solution. Sure, conventional gasoline-driven cars and especially gas-guzzlers will slowly but surely disappear. Just take a look at the latest U.S. car sales and it becomes obvious that the age of the conventional car is over. But hybrids are not the perfect alternative. First, hybrid cars are expensive as the technology is sophisticated and one conventional engine, a battery and an electric motor are needed. Second, the extra motor and the battery as well as the extra drive shaft add a lot of weight to the vehicle which outweighs a lot of the efficiency benefits. To sum up, hybrid cars combine the disadvantages of both technologies and they’re only cost-effective when used in large cars and SUVs and not in compact cars. The lifetime of the nickel-metal hydride batteries is limited and their performance is not sufficient. It’d be much cheaper and easier to make smaller cars more efficient to reduce carbon dioxide emissions and save gasoline. The Chevy Volt, General Motor’s hope for the future, has the advantage that the electric motor will generate the power to move the vehicle forward and there’s only a small combustion engine to resupply the batteries to extend the driving range. Thus, a lot of weight is saved and the technology is less complex and less fragile.

Nissan which is lagging behind in hybrid technology is now focussing on electric cars. Together with its French partner Renault, Nissan will provide the electric vehicles for Project Better Place in Israel and Denmark. Renault-Nissan has also signed a contract with the Portuguese government to introduce the same concept as in Israel and  Denmark in Portugal. The start of the mass production and mass distribution is set for 2010 in Japan, the U.S., Israel and Denmark.

Nissan will equip the electric vehicles with lithium-ion batteries that are twice as powerful as conventional batteries currently used in hybrids. The electricity from the batteries will power an 80 kilowatt electric motor. The Nissan electric car is not based on any existing Nissan vehicles, but has a unique bodystyle. This is absolutely right as cars designed to be driven with electricity are much more efficient than electric versions of cars originally designed for combustion engines.

Today, Nissan showed a test model of an electric car that will use batteries developed by Nissan. However, the batteries contribute with 300 kilograms to the total weight of the car. Nissan says that the all-electric car accelerates more qucikly than comparable gasoline-driven cars and driving it is comfortable and extremely quiet.

Even if Nissan appears to be willing to take the lead in zero-emission vehicles, I doubt that Nissan has a chance to become the market leader in this segment. GM, Toyota, Ford, Mitsubishi and Honda are strong competitors and will all start selling electric cars on a grand scale in 2010. Though Renault-Nissan could initially benefit from government cooperation in Israel, Denmark and Portugal, where an infrastructure with battery swap stations is being built and establishes a kind of standard, this system might not be attractive to other parts of the world. The Chevy Volt and most other plug-ins won’t necessarily require such an infrastructure.

http://ap.google.com/article/ALeqM5ge3J1BUlhvXKu5M4fjGrphzy1YowD92COB080

More on electric cars:

The Air Car could revolutionize transportation – an electric car without an electric motor
China, India and other countries subsidizing gasoline to keep domestic prices down are forced to embrace electric cars
Electric vehicles are competitive with gasoline-diven vehicles
The electric car revolution is about to happen
Tough luck for Ford – how a former subsidiary could revolutionize the auto industry
Electric micro-cars are perfect as neigbhorhood cars and major car makers should offer several EV models to provide cars for many purposes
First German offshore wind farm shows the huge potential of electric cars in terms of efficiency and stability of the power grid
All major auto-manufacturers are designing their own electric cars
Electric cars have to be expensive? – Not necessarily!
Gasoline prices in the U.S. have recently hit record levels, but there are many countries where drivers are paying much more
Drivers are ready for electric cars

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