Right now, you can find extremely changeable conditions wherever you look. Lots of volatility on global stock markets. Oil prices having fallen more than $35 this month. The U.S. GDP has fallen 0.3% in the third quarter after consumer spending declined. Net incomes are declining. No one doubts that there’ll be at least two consecutive quarters with negative growths, thus officially making this downturn a recession. Many European countries are in recession, too. Trillions of dollars have been promised by governments around the world in guarantees and bailouts. Central banks have trimmed their interest rates. Recently, the FED reduced interest rates in the U.S. to as low as 1.00%. Next to the economic crisis, sparked by the housing crunch, there are still numerous issues to be dealt with. The financial crisis and the resulting credit freeze curbs small and medium businesses. Consequently, business investment fell. People are layed off and unemployment is rising. Especially credit card debt is becoming a more and more serious problem as consumers fail to pay their credit card bills. Thus, it is no surprise that American Express, a major credit card company, appears to be in trouble. The company announced to cut 7,000 jobs which is 10% of its global workforce. The fact that credit card debt has gotten out of hand poses another threat to the stability of the financial system.
Yet, there are some positive developments amid the crisis. Oil prices nosedived despite OPEC’s 1.5 million barrels a day production cut. Oil prices have slipped below $65 per barrel last week and right now, no one can rule out that oil might approach the $60 mark in the short term. Nevertheless, we cannot be far from the floor. Some oil exporters might produce at a loss in the meantime. If oil dips below $60, this would mean that exploring Canada’s oil sands were uneconomical. Of course, the sharp price decline of the recent months was more about emotions than about fundamentals. In addition, the strengthening US-Dollar helped to drive commodity prices down. The price of oil is tied to the USD as most of the global oil trade is priced in dollar. In the first half of this year, oil prices skyrocketed partly because the dollar losing in value; and oil prices were rising to preserve the value of oil. Another undeniable inflater is the fact that oil is scarce. However, the current development proves that we have definitely not yet reached Peak Oil, otherwise, prices couldn’t have fallen that much despite a still growing global consumption, most notably from China. But the long-term outlook is rather bleak. First, it’s to be seen whether the dollar can maintain its newly gained strength. In fact, the dollar gained against the euro, although the Fed cut its interest rates. Actually, money is quite cheap at the moment. Second, oil consumption will recover inevitably. Third, oil production is close to its limits and the credit crunch has already an impact on the development of future oil supplies. According to Bloomberg, the financial crisis delays 20% of deepwater oil rigs: “As many as 20 of the 100 deepwater oil rigs on order worldwide may be delayed or canceled as loan availability erodes, possibly slowing developments including the biggest petroleum discovery in the Americas in three decades. ” (http://www.bloomberg.com/apps/news?pid=20601086&refer=news&sid=aookyGgmOAts) The Brazilian oil company Petrobras is facing credit-related difficulties in preparing the exploitation of the Tupi oil field, which is the biggest oil field discovered in the Americas for a long time, just off the coast of Brazil.
All the uncertainty around the world can be felt especially on stock markets. In Germany, for instance, the shares of Volkswagen, Europe’s largest car maker, gained more than 200% on a single day due to the step-by-step takeover by Porsche, the much smaller manufacturer of luxury cars. In Japan, the shares of Sony lost in value as the company (as well as many other Japanese exporters) face harder times with the Yen having gained against other currencies.
Gradually, excitement about the approaching U.S. presidential election is spreading globally. The whole world will be waiting on the eve of November 4th to hear who will be the next president of the United States of America. This election is definitely the most important in decades, as we are likely standing at a turning point in history. The next U.S. president can bring about a change for the better. And this is the moment, when such a fundamental change can be started. As you might already know if you have read some of my previous posts, I am convinced that the upcoming transition will be all about energy. And, under the condition that the right action is taken, it is likely that within a couple of years, the energy tech industry will have become a major generator of wealth and jobs. Besides, energy independence could be within reach let’s 5-8 years.
To sum things up, there’s plenty of reason to be optimistic! History shows that each technological revolution in the past has brought more wealth. Why should it be different this time?