During the past week, the world has witnessed a series of events that influenced the various sectors of the growing global economy. On one hand, some events promised more developments and expansion not only in the international trade but also in specific countries. On the other hand, some occurrences may negatively impact or alter certain aspects of world trade including the economy of the country specifically involved.
Oil Price Rolls Back in the World market
The entire week is full of good news for oil importers worldwide. Since Monday, the oil price decreased by $2 per barrel in the world market. Prior to that, the value of oil kept on increasing due to the disruption of supply in Iraq as well as in Nigeria. According to the report by Mohamed El Baradei, director of International Atomic Energy Agency, Iraq has been planning to empower its production of nuclear fuel. The news has caused tension and raised concerns regarding nuclear weapons. Discussion about the issue is currently ongoing. The IAEA will talk about the subject of its scheduled meeting on March 6. After which, the report will be handed to the U.N security for final assessment.
The almost $2 decrease in oil price in the world market was caused by a failed terrorist attack that took place at the largest oil plant in Saudi. The situation though was immediately controlled by the Saudi forces that were roused to full alert because of the tension. The oil supply though was not disrupted within the country despite the attack. The value of light crude oil decreased by $1.91 while the price of brent crude oil lowered to $1.61.
The opposite situation, however, is taking place in Nigeria. Just recently, the oil price rose up to more than $2 per barrel. The sudden increase was influenced by the news of the Saudi terrorist attack. Moreover, another reason was oil supply within the Nigerian region was cut by 13,000 barrels per day due to the discovery of a leak. The series of militant threats and attacks within the region also prompted the increase in the oil price.
According to energy analysts, the improvement of the oil price in the world market would have been even better. However, there are several factors (like the focus of the oil market on short-term inventory data) that prevent more positive results. Currently, the oil price still remains close to $61 per barrel as a result of Algeria’s plea to OPEC for market stability.
Meanwhile, Shell, which is the third leading oil company, has gained a total of $23 B profit last year. This should be an enough reason to celebrate, but the huge oil company is currently facing the need to improve and expand its oil resources. Otherwise, it will run out off supply in the future. According to reports, Shell was only able to replace between 60% – 70% of the gas it used for production last year. In 2004, the percentage was even lower with only 19% or replacement.
Shell, however, is making use of its large assets in order to meet the stiff market competition. Its oil reserve projects located in Nigeria, Sakhalin Island and the Gulf of Mexico are currently underway. The success of these projects would definitely empower the company’s future possibilities.
Regions in the U.S particularly East Coast and Nigeria are also facing issues with regard to their oil supply. This problem may eventually result in changes in the price of fuel. This situation is primarily caused by the shift in the chemical used in the fuel refining process. Formerly, MTBE (methyl tertiary butyl ether) was used during the process. The use of MTBE, nevertheless, led to problems and protests regarding water pollution and the contamination of water supply. As an alternative, fuel companies in the U.S, particularly in the East Coast and Texas, are utilizing ethanol. The problem though is that ethanol is not abundantly produced within the country. Moreover, the fuel refining needs are greater than the amount of reserve available. As a solution, the U.S government is currently importing ethanol from Brazil while it continues to construct more ethanol plants within the country.
The campaign for energy independence in the U.S is also receiving negative feedbacks. Critics such as Tom Friedman of The New York Times commented that the government should focus on other more relevant issues aside from it. The claim that while energy independence may be motivated by noble purposes, it might not be the wisest move now. The government should look for other more practical alternatives. Besides, the big budget energy independence demands could be allotted to the other sectors of the economy and government.
The Various Auto Companies Continue to Grow and Expand in the World market.
The discussion regarding oils issues leads us to another important area, which is the car industry. Generally, auto companies reported notable developments and expansions during this week. Last Wednesday, Nanjing Automobile acquired the MG Rover plant at Longbridge, England for a 33-year lease from St. Modwen Properties Plc. The leading Chinese automaker is said to have paid 1.8 M pounds for the 105-acre factory. Nanjing surprised the global car industry last July 2005 when it bought MG rover for around 53 M pounds thus outbidding its fellow Chinese competitor, Shanghai Automotive Corp. The big move is part of the company’s vision to become one of the leading car brands in the world.
Honda Motors Co. is also getting more attention from the international auto market after it disclosed its plans to produce a hybrid yet the low-priced version of its Fit subcompact. The car maker intends to release the hybrid design next year. Honda representatives, nevertheless, clarified that the hybrid technology will be distributed only at a lower scale. This is due to the design’s very expensive production cost. However, Honda is also developing smaller battery and motors that would help reduce the hybrid cost in the future. This venture is part of Honda’s goal to beat the problem of high gasoline consumption through specially designed automobiles. Aside from Honda, other companies that have joined the market for hybrid cars are Ford and Toyota.
Based on its recent report, Ford Motor Co. has dropped down in its sales by 4% last month. Another company that has followed the same trend is General Motors. According to GM, its sales also decreased by 2.5%. Meanwhile, the total sales of both Toyota and DaimlerChrysler continued to improve this year. Particularly, the Chrysler Group jumped in its sales by 3% of around 190,367 cars. Some of the most popular automobiles sold by the company are Dodge automobiles, Chrysler, and Jeep. Chrysler’s Mercedes-Benz also improved by 28%. Toyota reported that its sales within the U.S alone rose by 2.4% to around 166,940 cars last February.
Although Ford’s sales on Jaguar have decreased last year, the automaker declared that it has no plans of selling Jaguar. Ford bought the famous car brand back in 1989 for around 1.6B pounds. This year, the car company is positive that Jaguar sales are going to recover and improve. Ford is also set to release a new car model that would be hitting Europe soon. This is part of its strategy to keep up with the strong competition against other auto giants especially those that come from Asia.
As part of its move to recover from its losses, General Motors officially tasked Jerry York as its newest member of the board. York is noted for its remarkable achievements at Chrysler and IBM. Although GM has been receiving negative feedbacks lately, York is positive that the company is going to recover. During his January speech, he proposed five things to the GM management: first, to make the expectation of revenue and cost more realistic; second, reduction of product offerings; third, review the whole company with an unbiased perspective; fourth, focus on core businesses; fifth, set a clear vision for the company.
Several Computer Companies Seek for Expansion
In terms of technology, Intel Corp. recently got the official permission from Vietnam in order to construct a microchip plant within its territory. Earlier, the leading microchip company proposed the $605M project, which will be built in Ho Chi Minh city. Vietnam would surely benefit from the budget since the project is expected to attract more foreign investors in the country.
Meanwhile, Lenovo computer company has announced its plans to release computers that bear the company’s name. Lenovo computers formerly carried the logo of IBM. The company stated that the move is part of its plans to establish itself in the worldwide market of computer technology.
Just recently, Apple computers invited several analysts and new reporters to its Cupertino base in order to check out its so-called “new and fun products.” So what’s up with the big bang? Rumor has it that Apple is intending to expand its technological products into Hollywood. Apparently, its iTunes has been contributing to the promotion of many TV programs. Again, there’s a possibility that the latest rumors could again turn out to be wrong. Yet then invitation given by Apple is surely a good sign that the company is up of a big bang of a surprise for everyone.
As part of China’s vision to improve its local technological industries, Vice Premier Wu Yi vowed last Thursday to strengthen the fight against illegal copying of software, music, and videos. Piracy has been a growing problem in the country for years. Despite several attempts to combat it, the problem continues to spread. In fact, piracy in China has roused international complaints including the report made by Washington. Now, the Vice Premier pledged to strengthen the battle against piracy not only as a response to these foreign complaints but also as part of China’s goal to improve its local technology.
More Developments in Various Sectors to Boost Global Trade
Just recently, Morgan Stanley decided to invest around $68 M to Mantri Developers Private Ltd. which is a property development company based in Bangalore, India. The decision is part of Morgan Stanley’s plan of venturing into the global stream of real estate. At the same time the investment would also help Mantri in its plans for national expansion. Real estate is currently booming in India due to the increasing demands for housing projects and office buildings. This economic rise is also attracting many foreign investors now.
In terms of health, Roche finally got the approval from the U.S drug regulatory board to release Rituxan as the newest drug to treat rheumatoid arthritis. The approval of the new medicine does not only promise more profit on the part of Roche, but it gives likewise hope for the patients who have not responded to other standard treatments for rheumatoid arthritis.
U.S faces Several Economic Concerns
Based on the latest report, the trade gap between exports and imports in the U.S has increased during the past year from 18% – 75% of a trillion dollar. This is due to the fact that American consumers have continued to demand more imported products such as oil, vehicles, and other goods. According to analysts, only a 57% increase in exports can bridge the gap. It must be noted the U.S. is a leading exporter of certain goods such as aircraft. Although the sales of durable goods decreased during the past year, producing companies such as Boeing hope to improve their sales in the succeeding years.
Meanwhile, the huge damage left by hurricane Katrina has also caused the insurance companies in the U.S to adjust their premiums. The adjustment is deemed necessary in order to cover the potential loss that would be caused by future catastrophes.