ENERGY MATTERS money-printing was explained by then US Federal Reserve Chairman Ben Bernanke in the Washington Post on 3 November 2010.
“ Higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.”
Their economic models assured them, despite all evidence to the contrary from the real world, that stimulus could somehow return us to the demand levels seen during the Baby- Boomer-led Super Cycle. They believed they had become modern“ Masters of the Universe”, able to control an economy of 7.3bn people with just the touch of a money-printing machine.
Now, the hollowness of this claim is being exposed, as markets return to being based on the fundamentals of supply and demand, rather than tidal waves of central bank liquidity. The end result is that companies face chaos in both feedstock and product markets. And this chaos could take a long time to resolve itself. This is why we are publishing with ICIS, a major new study that addresses the five critical questions which will dominate every company’ s agenda in the next few months:
• Can businesses still plan ahead for demand by simply using a relevant multiple for each product in relation to an IMF GDP growth forecast?
• Can companies continue to assume that oil prices will inevitably return to recent highs, or are prices more likely to stabilise at the $ 25 / bbl level seen before 2004?
• Do China’ s New Normal policies mark a complete change of direction from its previous role as the manufacturing capital of the world?
• Will today’ s globally ageing population maintain the same levels of demand for autos, housing, or electronics as in the past?
• Should companies focus on new growth areas for demand, in potential megatrend areas such as water, food, shelter, health, mobility and the environment?
No middle ground My key concern is that this chaos will create winners and losers. There will be no middle ground. Winning companies will accept that the world is moving into a New Normal which will be quite different from previous experience. Losers will cling vainly to the hope that change is not inevitable, and that the world will return to the comfortable Old Normal, where constant demand and robust profits were the norm. The year 2015 has thus proved to be the tipping point that I foreshadowed in last year’ s outlook:
“ The first of these transformational changes is the supply glut that now exists in all the major energy markets – oil, gas, coal and renewables. The second is China’ s emergence as an exporter rather than importer of petrochemical and refinery
|
million 10,000
8,000
|
Under 25s New Old( 55 +) Wealth Creators( 24 – 54) |
22 % |
Global Population Segments, 1950 – 2030( millions & %) |
|
6,000
4,000
|
|
|
|
|
|
|
|
|
13 %
39 %
|
|
|
|
39 % |
11 % |
2,000 |
36 % |
0 |
53 % |
1950 |
1955 |
1960 |
1965 |
1970 |
1975 |
1955 |
|
|
|
|
|
|
1985 |
1990 |
1995 |
48 %
2000 2005
|
2010 |
2015 |
2020 |
39 %
2025 2030
|
SOURCE: pH report, UN Population Division |
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