The dramatic changes sweeping North Africa has put into sharp relief the West’s dependency on oil and its desire to encourage democracy. Is 2011 the Arab world’s 1989 and, if it is, what are the implications?
The spike in the Oil price, from around $84/barrel in Nov to Brent Crude currently at $116/barrel with a 12-month forecast of $122, is good news for the upstream divisions of the oil firms. However, it represents a significant transfer of wealth from the Consuming West - and the fast growing Eastern nations - to a relatively small group of oil producing countries. Effectively it is a tax on a global economic activity. At the same time, within the lubricants industry it is a shift from the refiners and marketers to their upstream colleagues.
So what are the effects likely to be?
Last year we saw a tremendous economic bounce. World GDP continued to grow. In particular Germany recovered, dragging along several other European nations, and this is perfectly reflected in the excellent Fuchs results, with profits up nearly 40% on a 23% revenue increase.
The future, however, is looking cautious. Since 1979, each of the world’s non-financially induced recessions, have been preceded with a significant spike in the Crude oil price. Since this acts as a non-stimulatory tax, sucking money out of other economies, this has led to recessions around the world.
It remains to be seen how this will play out, but the position is less sanguine than at the end of last year.
More immediately, the London ICIS conference provided plenty of food for thought. Attendance was over 500 people with a suitably wide range of topics, including a “real world” presentation from Penrite’s Tony Lawton. Sergio Viscardi of Ipiranga, Brazil, gave us a real insight into the practicalities of biodiesel fuels and their impact on lubricants oil change intervals. His conclusion: the jury is still out with more research needed.
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Sebastian Crawshaw, Chairman OATS