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x
2016-01-21 13:40:00
Oil Prices - An Irreversible Trend Or A Speculative Movement?
On January 19th oil prices dropped to USD 28 per barrel.

A very low level not only compared to recent years but also on a 30 year trend.

2015_GDP"

Why this situation? Is this sustainable or a speculative movement?

We will try to answer the question looking at 1/ current situation 2/ trend on demand 3/ trend on offer and cost of production before 4/ drawing our conclusion.

1 / What is the surplus?

2.4 mbj as per eia at its in Q2 2015 and now gradually decreasing.

The reason is the increase in production from 2008 to 2014 in USA (+5.5 mbj) and Canada (+1.0 mbj) due to the exploitation of shale gas and oil (USA) and oil sands (Canada) which became profitable with the significant jump in oil prices (from about 30 dollar a barrel in 2003 to more than 120 in the second quarter of 2008). The increase in production was particularly strong in 2012 (+1.2 mbj), 2013 (+1.4 mbj) and 2014 (+2.0 mbj).

2/ What is the trend of demand?

About +1mbj per annum (+0.9 mbj per annum since 1980).

The trend is unlikely to change in near future.
With increasing global car sales (and electric vehicles still marginal) and increasing demand for energy we can expect the increase to continue.

As a matter of fact, the last 5 years do not show any sign of change in the trend albeit high prices. Demand increased by +1.0 mbj per year over the 5 year period 2011 - 2015 with an acceleration in 2014 (+1.2 mbj) and 2015 (+1.3 mbj).

2015_GDP"

3/ What is the trend on offer?

Producers in North America needs a barrel at about 70 USD to be economically viable.

During Q4 2014 when the price moved to about 70 USD (73) per barrel already about half of 20 major US / Canada oil producers focusing on domestic production went into losses.
During Q3 2015 when oil prices were just under 50 USD (46), out these 20 companies, all but 1 were making losses.

2015_GDP"

Production started decreasing in North America in 2015: after a peak in March 2015, oil production started decreasing in the US (-0.3 mbj in October 2015 vs. March 2015). Gas production reached its peak in September 2015 and slightly decreased in October.
As of January 8th, 2016 there was 650 rig operating in the US versus 1931 at its peak on September 26th, 2015 a decrease of two third.

Offshore production, in other part of the world, needs a barrel above 50.

More generally, oil producing companies around the globe, continue to cut drastically on investments, which will gradually result in a curb in production.

Only Iran is likely to increase significantly its production, even with a barrel below 50 USD, due the end of economic sanctions and very low cost of extraction.

4/ Conclusion

The surplus of offer versus demand will reduce much faster than expected as a significant part of production needs a price per barrel above 70 USD to be profitable.

As a result we can expect a sharp rebound of oil prices at a level of 70 USD in the near term.
x
2015-08-03 18:04:00
Corporate Turnover - Western Companies vs. Emerging Companies
What is the best way to get benefit of emerging market growth? Should it be done by investing in western global companies or directly in companies originated from emerging countries?

To answer the question we have run statistic on more than 5,000 companies from 18 leading developped (9) and emerging (9) markets over last 10 years.
The primary indicator we are looking at is the average real turnover growth (= average turnover growth - inflation) in order to make comparison relevant.
The result are presented in below table and graphs.

The very significant result is that the growth of companies is strongly linked with the GDP growth of their domestic market. As a result, companies orignated from emerging markets, are the one registrering the fastest growth level.
Chinese and Indian based groups lead the race with an average real turnover growth of 13.7% for Chinese groups and 12.3% for Indian groups.
Companies from Russia (7.9%), Morocco (7.5%), Philippines (7.4%), Taiwan (7.2%) and South Korea (7.1%) come after in the 7%-8% range.
On the other side companies from developped countries enjoyed a much lower real growth with the United-States at 3.1% real growth, Japan at 4%, France, United-Kingdom and Germany at about 2%.
Remarkably, Switzerland, a small European market home to a number of global companies, saw its major companies real turnover declining at a pace of -1.4% per year, compared to a global real GDP growth of 3.8% per annum.


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x
2015-07-09 18:04:00
2015 GDP, Population and GDP per Capita
2015_GDP"
x
2015-06-10 12:30:00
The Year 2015 Top 200 Listed Companies in the World By Turnover
The Year 2015 top 200 companies continues to shows a huge predominance of companies from developped countries while, for emerging countries, only China making it the top 10.
US lead the race with 70 companies followed by Japan with 20 companies. France and China complete to podium with 19 companies each.

As a whole European Union would come seond with 60 companies in the top 200.

Emerging countries like Russia, India and Brazil, each of them placing 3 companies in the top 200, may soon make it in the top 10 (11th in 2014).

Top 200 Dynamic List

USEvolutionSchoolingCosts"

x
2014-12-13 20:30:00
US Student Loan - A Quick Overview
Student loan in the United-States are rising at a dramatic pace reflecting constantly increasing cost to attend colleges. The total amount of student loan has increased by an annual rate of +12% from the end of 2004 (USD 346 billion) to the end of 2013 (USD 1,080 billion). It now stands at USD 1,126 billion (September 2014).

This increase is driven in equal proportions by the number of student going through student loan to fund their college fees and by the average amount of these loans.
The number of student going through student loan has increased by 6% per annum from 2004 (23 million of people) to 2013 (39 million). This reflects for a part a positive trend as more and more young people are attending shool and universities. However, this number in increasing just slightly above +2% per annum - accounting for less than half of the 6% increase
The average amount has increased over the same period of time by 5.9% per annum moving up from USD 15K to USD 25K.

The graph below shows the evolution of prices for tuition and school fees compared to overall inflation. Since 1980 the overall prices have been multiplied by 3, but schooling and child care costs have been multiplied by almost 10.

USEvolutionSchoolingCosts"

Out of 10 senior students who graduated from public and nonprofit colleges in 2013, 7 where having student loans with an average amount of USD 28,400.

Close to 90% of these student loans are done through federal student loans.

This increasing level of student debt, unlike other debt, is showing an increasing % of deliquency albeit it is virtually impossible to default on a federal student loan as the government has a lot of power to recover the money.

US_Student_Loans"

This situation is not only a risk in term of debt not being repaid but also for the economy has young people, facing the burden of student debt, has less money to spend on other things. In addition it also reduce their capacity to get a mortage credit which has a negative impact on home construction - one of the major sector in the US economy.

But the most critical point on a long term view is that this situation may result in unequal opportunities according to the wealth of the family student come from.

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