With Eurozone PMI showing a sustained positive level of 53.6 there is every chance of continued growth. This is, of course, good for lubricants demand.
One question that emerges is: what could cheaper energy do for Europe if it adopted either more renewable energy sources and/or encouraged shale oil exploration by addressing the fracking issue? Could Europe see the sort of recovery that has helped re-invigorate the US?
Politically fracking is stalled in several countries, although Germany is considering legislation to regulate exploration. Yet, with the global oil price seemingly ‘regulated’ by increased supply from US shale oil (as well as a 16% uplift in US' year-on-year oil production last year and the Saudis maintaining output additional supply from Europe would sustain downward pressure on the prices.
Will this actually happen? Maybe not in the short term, but as drilling technology and efficiency improves in the US (productivity has increased sevenfold since 2007 making the encomics appear more sustainable, Europe's appetite for shale exploration could be renewed.
The switch to renewables in general, and solar power in particular, also seems to have accelerated helped by various national incentives and the dramatically falling price of panels and installation. In 2014, Germany had the largest installed base of solar power globally at 38.2GW.
The speed of change can be remarkable. The UK added close to 2GW in Q1 of 2015 at one tenth of the cost of a new nuclear power plant which is currently being built at an estimated price tag of £24bn and already six years behind schedule. Although they UK's solar success has been encouraged by subsidies, in Japan the solar industry is already cost-competitive against other sources, without the help of the government. Meanwhile, China's Quarterly solar power installation at the start of 2015 was just 1GW short of the US' record-level solar increase for the whole of 2014.
This all provides ammunition to those commentators who argue that “Big Oil” is coming under pressure. We have seen Chevron divesting of investments in New Zealand, following the sale of its remaining share in Caltex Australia. Low oil prices have provided the stimulus for re-alignment and changes in the past - witness Shell recently targeting BG. We should expect this level of change to continue, although as pointed out in last month's White Paper, big deals could mean big consequences.
Lower oil prices continue to be good news for the emerging economies, with their greater propensity to consume, and for world growth in general. As an influence on the lubricants industry it is good new too, even if it leads to customers requesting a reduction in finished product prices. However, as Fuch's Dr Lutz Lindemann points out in this month's White Paper, lubes producers face a raft of issues that will influence future development.
The world economic focus will continue to move South and East and the lubricant companies will re-focus too, particularly when it comes to synthetics. Having the ability to absorb data from multiple sources, re-shape that and combine it with the Parc data to ensure a high level of global equipment coverage is exactly what OATS earlFUSiON and its associated solutions will provide.
The latest development is Product Manager 1.1, which is now available to OATS clients and we look forward to talking to you about how it can effectively transform your customer engagement.
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Sebastian Crawshaw
Chairman - OATS