Skip to main content

Oil Prices & Ramifications

Even though we saw US$93.80 for oil, in real terms, the price is not an all time high as its still below its all-time inflation-adjusted high of US$101.70 back in April 1980. However, Crude has climbed 47.3% over the past 52 weeks, and since 2001, it is up 511%, from US$18 to US$93. We have examined the reasons why & potential ramifications, here's a repeat:

a) Increasing Global Demand: Booming growth in China and most of Asia-Pacific. Add India, Korea, Russia, Brazil, and Australia to the equation as well. Even old E.U. is moving in the right direction.

b) Correcting U.S. Dollar: The dollar is at 15 year lows versus a basket of currencies. The Fed is engineering a cheaper US stocks scenario amidst credit problems in the US. The correction in USD is reflecting itself in oil prices.

c) Under Invested: We are reaping the consequences as many big oil companies and state controlled firms have under invested to replenish natural production declines.

d) Money Supply Growth: What we are seeing is not just oil prices but almost every single commodity. The growth machinery cited above coupled with aggressive money supply growth policies undertaken by most developed nations over the last 5 - 7 years have resulted in a load of liquidity swishing in the system.

e) Shift In Balance of Power: Due to the dependence on oil and their record prices, the producers have minted a lot of surplus cash. Russia has used its proceeds wisely, effectively bankrupt in 1998, now Russia has more than US$450bn in reserves. Russia is also using petro money to "control" the surrounding small countries via joint ventures and questionable deals. China, realising its vulnerability has deliberately courted African countries with proven oil and gas reserves.

f) USA May React: USA being USA will be facing untold problems if oil prices stay at US$100 for a prolonged period (say a few years). Politicians will work feverishly to control the consequences of living with US$100 oil. Push comes to shove, USA may fight certain wars for the oil - if you know what I mean.

g) Petrodollars Balance Sheet: Used to be 100% in US Treasuries - this way the US can continue to consume as the petrodollars were recycled back to lend to the US via Treasuries. Over the last 2 years,many countries with hefty trade surpluses have started huge sovereign funds to invests in foreign companies. These companies are a mask to move funds away from buying Treasuries. I don't see this trend reversing, hence I see further downside for USD.


Popular posts from this blog

My Master, A National Treasure

REPOST:  Its been more than two years since I posted on my sifu. This is probably the most significant posting I had done thus far that does not involve business or politics. My circle of close friends and business colleagues have benefited significantly from his treatment.

My Master, Dr. Law Chin Han (from my iPhone)

Where shall I start? OK, just based on real life experiences of those who are close to me. The entire Tong family (Bukit Kiara Properties) absolutely swear that he is the master of masters when it comes to acupuncture (and dentistry as well). To me, you can probably find many great dentists, but to find a real Master in acupuncture, thats a whole different ballgame.

I am not big aficionado of Chinese medicine or acupuncture initially. I guess you have to go through the whole shebang to appreciate the real life changing effects from a master.

My business partner and very close friend went to him after 15 years of persistent gout problem, he will get his heavy attacks at least…

PUC - An Assessment

PUC has tried to reinvent itself following the untimely passing of its founder last year. His younger brother, who was highly successful in his own right, was running Pictureworks in a number of countries in Asia.

The Shares Price Rise & Possible Catalysts

Share price has broken its all time high comfortably. The rise has been steady and not at all volatile, accompanied by steady volume, which would indicate longer term investors and some funds already accumulating nd not selling back to the market.

Potential Catalyst #1

The just launched Presto app. Tried it and went to the briefing. Its a game changer for PUC for sure. They have already indicated that the e-wallet will be launched only in 1Q2018. Now what is Presto, why Presto. Its very much like Lazada or eBay or Alibaba. Lazada is a platform for retailers to sell, full stop. eBay is more for the personal one man operations. Alibaba is more for wholesalers and distributors.

Presto links retailers/f&b/services originators with en…

How Long Will The Bull Lasts For Malaysia

Are we in a bull run? Of course we are. Not to labour the point but I highlighted the start of the bull run back in January this year... and got a lot of naysayers but never mind:

p/s: needless to say, this is Jing Tian ... beautiful face and a certain kind of freshness in her looks and acting career thus far

I would like to extend my prediction that the bull run for Bursa stocks should continue to run well till the end of the year. What we are seeing for the past 3 weeks was a general lull where volume suddenly shrunk but the general trend is still intact. My reasons for saying so:

a) the overall equity markets globally will be supported by a benign recovery complemented by a timid approach to raising rates by most central banks

b) thanks to a drastic bear run for most commodities, and to a lesser extent some oil & gas players, the undertone for "cost of materials" have been weak and has pr…