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This post was originally published in The Platform

I dislike the label ‘activist’, armchair or otherwise. To be defined as an activist is to be defined by the inactivity of others. Armchair activism, as I see it, is a constant struggle against (to paraphrase Milton Freidman) ‘the tyranny of the status quo’; that dread inertia that prevents people at large from forming the critical mass required to propel decisive solutions to social issues that affect them all.

Armchair activism is different in nature from ‘on-the-ground’ activists who have a gamut of other responsibilities, like standing in front of tanks and bulldozers should the need arise. (Raashid Riza has an excellent post on contemporary activism, armchair activism and cynics of all forms in the light of recent events here.) Armchair activists are more specifically involved in spreading the word in the domain of public opinion – they are in the fight against ignorance, cynicism and apathy.

The goal of the armchair activist, conscious or otherwise, is to convince OTHER people of the need for altruism and moral consideration. Theirs is a sustained effort at tipping the balance of this inertia, at creating that critical mass. Social media has contributed to a phenomenal rise in armchair activism. The ability to influence public opinion is now at our very fingertips.

But armchair activists are rendered outcasts in an environment still dominated by  the primary tyrannical force, materialism. Materialism breeds selfishness, and selfishness is protected by cynicism. Cynicism denies responsibility for the actions of others, even individuals the cynics themselves have elected into power. Cynics deny that one can make a difference, but know that many can. However they doubt that enough will overcome their own cynicism in order to join together convincingly, thus building a self fulfilling philosophy that makes selfishness always comfortably right.

This is played out in social networks, both real and virtual, everyday. People cannot understand why other people get all up in arms about things that happen thousands of miles away. These others can’t understand how some can idly sit by and look at pictures of kittens when not only kittens but children are being slaughtered indiscriminately ONLY a few thousand miles away. Vocal cynics resent being reminded of the latter. And say so. Scoffing at idealists is a popular pastime when idealists get active.

And then there is the silent majority, too caught up with its own affairs to even bother with vocalising its cynicism. To all of them, the ‘voice of the people’ is a myth. Or if it exists, it only exists in order to elect the next American Idol, or president.

This disillusionment with the power of the ‘voice of the people’ is the primary source of conscious or unconscious ire for the armchair activist. Forever trying to influence and educate, shock and engage the public at large, armchair activists capitalise on critical events they see as having the ability to finally tip the majority in their favor. These are the times when they get really active, because to them it is all about critical mass.

And they help. Public outrage in the wake of Israel’s illegal Operation Pillar of Cloud helped accelerate the ceasefire agreement; public outrage at the Deepwater Horizon oil spill sparked investigations debating BP’s drilling practices, the risks of oil spills and key environmental issues in general. But have they done enough? I’d say no. The underlying causes of these issues remain, ready to burst forth in some new form of violence in the future. Change more radical than this would need to happen for a permanent solution, the kind of solutions that all activists, everywhere, ardently hope for.

But, unfortunate as it may be, this kind of critical mass manifests only when a major crisis is imminent. Only when the disease spreads to the very foundations of the materialism that breeds the cynicism, that breeds the apathy of public opinion, will the majority awaken from its inertia. But when this does happen, to paraphrase Friedman again, their actions will depend on the ideas that are ‘lying around’, the discourses, social infrastructure, alternative policies and theories of change that have been kept alive by activists of all kinds, waiting until the ‘impossible’ becomes the ‘inevitable’.

This is probably why activism and armchair activism appear futile in the short term and only superficially effective in the medium term. For long lasting change to occur, whatever that may mean, the efforts of activists are not enough.  It takes the efforts of non-activists as well, in the process converting everyone into someone who acts, removing the need to define what an ‘activist’ is altogether.

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The Central Bank just released the first six months of trade data for Sri Lanka. Trade is an important component of the Balance of Payments  (BOP). Which computes the sum of a countries transactions with the rest of the world.

Sri Lanka’s BOP is perpetually in the red. In 2011, massive imports in consumer durables and investment goods made the negative balance worse.  High imports last year were facilitated by low interest rates and a propped up exchange rate. But this year the government has tried to discourage imports by floating the rupee, increasing interest rates and actively discouraging banks from lending with a lending cap. There’s also the new taxes on vehicle imports that, together with other restrictions have just begun to impact durable imports in a big way.

The revenue the government gets from vehicle imports is important for its budget deficit (which is total government revenue less its spending). An increase in taxes like we’ve just seen is likely to actually reduce government revenue even further because potential vehicle owners will be completely discouraged to buy.

But so far this year, imports have failed to ease up as much as they were hoped to. And floundering global economies have reduced the demand for our exports. Globally, fuel prices are looking to rise but this will impact fuel imports less than local demand which is likely to increase the more we use thermal power in response to our ongoing electricity problem.

Last week global markets rallied on stimulus hopes and better than expected corporate earnings, while geopolitical tensions drove up crude oil. On that note, speculation on what will happen to Sri Lanka should it discover commercially viable oil reserves has already begun.

(Frontier Research does this nifty summary as a part of its overall range of news products, usually for private clients. They scour through the myriad goings on in the global economy so you don’t have to, and bring out what’s relevant from a Sri Lankan non-expert’s perspective. Pretty useful if you’re generally into economics, or just want to get a feel of current hot topics. Here I’ve syndicated their Weekly News Summary with permission.) 

The Week in Global Markets

Asian stocks rose last week amidst speculation that China and the US would boost growth in their economies, European and US markets also rose with the S&P 500 index gaining 0.4% its first back to back gain since June on better than expected corporate earnings supplemented by expectations of stimulus in the US. Escalating geopolitical tensions contributed to the rise of crude oil, which reached its highest level since May with Brent Crude gaining 7.7% and WTI gaining 6.3% during the week.

The Week in Economic Views

India’s current account problems are largely similar to Sri Lanka’s, with the critical difference of India having slightly better options that SL to work towards solving them. Any real solution however is still rendered academic by India’s policy logjam and government inactivity. SL on the other hand, has the will but can do little more than use tariff-based methods to fight the deficit.

State intervention and ‘status-quo preservation’ in East Asian economies might have actually contributed to Tiger Economy growth. Relevant to Sri Lanka as it too faces accusations of sub-standard governance relative to international best practices, should it still be able to grow despite this?

What if Sri Lanka hits Big Oil next year? We at Frontier are starting to focus on a possible game changer if Sri Lankan oil proves commercially viable, and stories from other Frontier nations such as Mongolia that have hit resource riches and high GDP growth can be illuminating both in terms of the good news and the bad.

A related piece highlights the process of energy policy formulation in Nigeria, giving an indication of the level of influence big oil companies have in policy oriented decisions.

The Economist looks at structural gaps in the LIBOR market’s pricing mechanism. The LIBOR manipulation scandal made waves after Barclays Bank was caught rigging the benchmark interest rate.

An interesting proposal from India highlights the need for an alternate inflation index in India, this is relevant to Sri Lanka as the CCPI has consistently come under fire of being inadequate to measure the country’s real inflation.

The IMF has expressed skepticism with regard to the recovery of European markets, a negative factor for regional economies.

Looks like we’ll be soon confronting higher oil prices again. But the paradox is that the prices will remain low as long as the economy is in a slump. The moment it picks up the pace and starts wanting more fuel to power its machine the prices will start flying.

This Economist report quotes analysts as predicting the arising of more ‘super cycles’ where the usual boom bust commodity cyles are interrupted and longer periods of price increases are seen as developing economies start absorbing and draining resources and thereby initiating prolonged (and potentially destructive) demand cycles.

The main reasons behind the initial price hike have apparently remain unchanged. All the easy-to-access oil fields are in the hands of governments and the Big Oil firms are having to increasingly resort to drilling in nooks and crannies to find more oil. Also a slump in oil prices back in the 80s have limited investment in oil reserves amd therefore most of current sites not new ones.

The Big oil firms claim to be heavily investing in new oil fields and technology although the benefits will only be reaped in a decade or so. Government companies Like Saudi’s Aramco and Brazil’s Petrobas have invested heavily in more capacity but other governments like Iran and Venzuela are reluctant to do this due to the current low prices in the market.

Countries like Russia and Venezuela are facing serious cash flow problems and are pressurizing private investement and sub-contractors with more taxes and no wages. In Nigeria the fighting around the Niger Delta with forces such as the MEND are creating some serious barriers to development of production

So oil firms have no new oil to speak of and other pressures on goverment firms will prevent them from increasing output. All except for the Saudi’s who have about three times the current capacity of production up their sleeves.

McKinsey, the consultants, argue that governments can help overcome this problem with a few simple measures. The more practical of which are increasing lorry load limits to increase fuel efficiency, increasing emmission standards and efficiency standards even more in the long run will undoubtedly help to curb demand.

Other measures that have been carried out in the past include investment in alternate energy sources, but the disastrous impact of bio fuels should have taught us a thing or two about the importance of thinking out such steps in detail. Electric cars are also a good option and it is encouraging to see quite a few global car makers coming out with models.

But all this has taken a back seat to the financial crisis. When the oil prices dropped so drastically everyone stopped thinking of the ‘oil problem’ in the classic short termist fashion characteristic of world governance. Bigger problems were at hand and opportunities to perhaps lay a foundation for a whole new energy culture were probably too far fetched and unimportant to care about then.

So now as the economy picks up again we may be confronted with bigger problems because now we won’t have a sub-prime morgage crisis to pull us away from strangling each other in a scramble for natural resources. Already oil futures markets are indicating a potential rise in prices.

Which brings me to McKinsey’s other suggestion; convincing developing economies to remove oil subsidies. This is something that these economies will definitely not agree to. They will argue that subsidies are essential to their growth. Moreover, they will question the fairness of such a request as economies that are ‘developed’ today got to such a state by the unrestricted consumption of all the resources they could lay their hands on.

China’s Oil demand has risen to pre-crisis levels (and unrelated note: their military prowess has arisen to previously unheard of levels), but global demand is still on a downward trend as decline is still apparent from other big world economies. But as long as oil remians a critical resource, the problem faced a few months ago will materialize again, and specultion will drive the prices even higher, with a corresponding increase in other commodity prices worldwide.

Steps need to be taken starting immeditely to make sure that oil is not a  critical resource, but to this end there is also a lot of disincentive for powerful oil economies and lobby groups. There is always money to be made for the oligarchs, and high oil prices are something they will definitely welcome with open arms.

for one hundred bucks a few months ago may have seemed like a dream to many, well i know it was dream to me. now, thanks to lanka IOC at least, the dream seems to have materialized again.

Now here’s the deal though. petrol prices still haven’t ‘officially’ been reduced to one hundred bucks, and IOC controlling only one third of the petrol market, will soon begin to feel the demand pressure with the full market force focused on it. Since no one in their right minds would buy petrol from CPC at 122 when they could guzzle it down at 100 bucks at IOC.

This is going to put a definite strain on their operations. Also, if CPC as the only wholesale supplier of petrol to the local market, refuse to reduce their wholesale price in compliance with the SC order, then that’s going to put a tough constraints on margins.

So they’ve got reduced margins, but increased demand, by almost 200 percent as a matter of fact. Assuming constant supply of oil, will this still be a profitable formula for IOC? they’ll definitely bring in tons of new revenue but will their cost model be able to hold it up.

They’ve probably thought about all this. And maybe they know something about the political situation that I don’t. One thing’s for sure this was a pretty good marketing ploy. Remember back in the day when IOC had a bad reputation because of perceived exploitative motives in the SL petroleum market? They hadn’t quite untarnished their image as yet but hell, this hundred bucks thing will definitely put them in the public’s affectionate eye.

Going on like this while the official price remains at 122 will not last though. if they keep at it and absorb reserves from India to cover up losses made through giving oil at 100 bucks, they could completely destroy the image, market share and business of CPC’s retail division and hell man I’m all for that. Not too sure of they’ll be able to get away with such anti competitive practices, but the possibility definitely exists.

If they can’t then they’ll simply switch back to 122 bucks a liter in a little while. But there is still hope that our block headed cabinet will actually move and reduce the prices. What’s the point of law if the government doesn’t adhere to it?

Basically Its a form of security, or insurance if you may. The government took out security against the prices of oil increasing and opted for a zero collar hedging base (where there is a sort of a ceiling and a floor to the price of oil, with a gap in between). So if the prices of oil increases above the ceiling or the highest set limit the bank doing the hedging would pay the difference to the government. Meaning that the maximum we’d ever essentially have to pay for oil would be that set price ceiling, no matter how high the prices rose.

Now, at the time the government ventured into this deal prices were skyrocketing and there was talk of $200 oil. So no regrets there right? We were all on the fast track saving a lot of money while the banks bore the burden. But the moment the price of oil started falling and kept falling past the price ceiling, the gap in between and the price floor? It became pretty apparent that the government would have to pay a significant premium on a barrel of oil that was going dirt cheap and getting cheaper by the day.

So we shat in our nappies and started beating our feet on the ground kicking up a fuss crying ‘corruption!’ at the top of our lungs. It’s pathetic really. They got themselves a scapegoat, and no matter what I may have said about Fowzie sacking him was not exactly solving the problem. Its just another example of the bullshit the government resorts to, to try and cover its own ass. If the hedging thing was a bad idea in the first place, then the blame should be on everyone involved, Cabraal, the Chairman and the freaking cabinet. Oh yeah, they’ve all forgotten about who actually approved of the whole thing.

This Central Bank press statement sheds some light on how the whole thing started off, as well as some basic information on hedging itself.

Specific figures relating to the whole things are suspiciously unavailable so I don’t know as to the exact date when this was implemented and how much of our import volumes were actually hedged. Also no idea as to the price ceiling or the floor that was taken up (please let me know anywhere where some numbers can be found), and why exactly these buggers didn’t complain about corruption when they were getting cheaper oil when it was trading $150 per barrel.

And in the meanwhile, screw the credit ratings and investor confidence. We can probably win them back with our natural charm and a cup of white tea yeah? Long live the Banana Democratic Socialist Republic of Sri Lanka.

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