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European and Asian buyers need to worry about whether US exports of transport fuels will continue in the autumn as the US midterm elections loom. The risk is that the White House won’t want the domestic market to go short to support exports.
Oil product shortages and price hikes seem inevitable as Gulf War moves into 6th month Read More
Two major wars are underway in Europe and the Arabian Gulf. The IEA continues to warn that they have already created “the largest energy supply disruption in history”. And now, it seems financial markets are waking up to the major risks created by the $2.6tn AI bubble
If Trump now walks away, he will leave Iran with control of Hormuz. But he will need a lot of ‘boots on the ground’ to invade a country of 93 million people.. As history confirms, air power alone is unlikely to win the war
Brent returns to $100/bbl, with 25% of global output now impacted by war Read More
We are nearing crunch time for vital energy supplies of transport fuels and natural gas. Europe’s gas storage for the winter was just 28% full when refilling for the winter began in April. And around the world, energy supplies are getting tighter by the day.
Hormuz fighting, Russia’s fuel crisis, highlight risks to global fuel and gas supplies Read More
There are major upside risks on crude oil and product pricing as we head into H2. Inventories are very low, with no margin for error. And nobody knows whether the current US-Iran talks will actually end in a long-term agreement.
Major upside risks remain for oil and product pricing in H2 Read More
Financial markets think the oil crisis created by the Hormuz closure is over. But in reality, the risk of major shortages by Q4 is actually increasing. Oil inventories are near tank bottoms. And Hormuz transits are still only a fraction of the pre-invasion level.
Ras Laffan explosion, Iranian/US attacks, confirm restart risks for Hormuz plants Read More
The question is whether normal volumes of oil and gas will now start to flow again though the Strait? If they don’t, then an increasing number of major storage points will join Cushing in being at ‘tank bottoms’. And rationing will start to become inevitable, as the IEA warned in April.
Trump confirms oil reserves are down to just 4 weeks Read More
Oil companies are warning that “the US Strategic Petroleum Reserve is going to be precariously low. What comes next is higher prices. We are getting closer to the bottom. July is likely the pain point when the market turns.”
Hormuz closure pressures global oil reserves and food supplies Read More
The World Bank, IMF, IEA and WTO have all warned that the crisis risks spiralling out of control:
“If shipping flows do not return to normal, continued rapid depletion of global oil inventories ahead of peak summer oil demand in the Northern Hemisphere would present increasing risks for fuel security, market conditions, and broader economic resilience.”
Global risks rise as Hormuz remains shut and supply chains start to buckle Read More
US inflation risks are rising as the Hormuz closure enters its 4th month. Inflation rose to 3.8% in April. It was just 2.4% in February before the US/Israel war began. And the upward trend is set to continue
US inflation risks rise as Hormuz closure enters 4th month Read More
Financial markets are assuming the Strait will reopen this month, and free passage resume in June. If this is delayed, the risks of a global downturn to rival 2008 are rising.
Hopes rise for an early return to free passage in the Strait of Hormuz Read More
Petrochemical prices are warning of major inflation risks ahead due to the crisis in the Strait. They confirm we need to move back to a world of ‘local-for-local’ supply chains. The question is how quickly these can be put in place?
Petchem price rises confirm inflation risk as Strait of Hormuz remains closed Read More
As with Covid in March 2020, a ‘wake-up call’ is now about to hit most Western governments. Critical oil and gas-based products are at increasing risk of becoming unaffordable, or unobtainable.
Oil and product prices set to be ‘higher for longer’ as Hormuz remains closed Read More
The IMF is warning that “Heightened macro risks and the prospect of tighter monetary policy could trigger a sudden repricing by financial markets—with much lower asset valuations, higher risk premia, more capital flight, and dollar appreciation”.
IMF warns on inflation and recession risks, as Iran war continues Read More
Europe is facing its first major supply crisis, on jet fuel. Prices have already doubled. And now the IEA is warning, “Several European countries may start to face shortages of jet fuel in the next 6 weeks”.
Iran war starts to threaten key parts of the global economy Read More
The history of energy crises suggests that today’s supply chain surge will likely be followed by recession. Buyers will suddenly start destocking again, as they realise consumer demand was actually slowing, whilst they were busy increasing inventory.
We are likely entering a very difficult few months. As the IEA warns, major changes in our lifestyles will be needed unless the war ends soon and the Strait of Hormuz reopens.
The biggest energy supply shock in history has reached the one-month mark Read More
Smartphone markets are essentially acting as the ‘canary in the coalmine’, warning us that the global economy is still only at the start of suffering a major shock.
Hormuz crisis, memory-chip costs, will reshape the smartphone market Read More
Today’s oil/natural gas price rises will likely repeat previous ‘boom and bust’ cycles. Companies therefore need to (a) prepare for the short-term ‘boom’ and (b) plan in detail for the potential recessionary ‘bust’ which will follow it.
Strait of Hormuz closure risks major economic impact Read More
The Middle East crisis highlights the need for Europe to rebuild its competitive edge. This will need new business models, to address today’s market needs. This will create major new opportunities for forward looking companies
EU’s new ‘One Europe, One Market’ strategy set to challenge China, USA Read More
The Strait of Hormuz has never been closed before. So we are in uncharted waters. And President Trump’s plan to provide naval escorts to reopen it, creates a new element of risk. What would happen if an Iranian drone hit a US warship?
Middle East turmoil highlights risks to energy and food supply – and Saudi’s water Read More
As the BBC warns: “The greatest danger now is that President Trump, having amassed this powerful force close to Iran’s borders, decides he must act or lose face, and a war begins with no clear end-state and with unpredictable and potentially damaging repercussions.”
Yesterday’s world is fast disappearing. Future Winners will be those who develop the new business models needed today.
One door opens as another closes for the chemical industry Read More
Please join us for the next ACS Chemicals & Economy webinar next Thursday – Responding to Uncertainty
ACS Chemistry & the Economy webinar next Thursday – Responding to Uncertainty Read More
Tariffs, like interest rate changes, will take 12-18 months to work through the global economy. As always, the chemicals industry is providing early warning of what is around the corner in 2026.
President Trump’s tariffs change chemical industry business models Read More
The good news is that change is finally starting to happen. Last week, the European Parliament voted to simplify reporting for most companies. It also accepted the need to balance its Green Deal ambitions with the need for Europe’s economy to remain competitive.
INEOS files anti-dumping suits as European chemicals crisis worsens Read More
It is hard to accept the IEA’s belief that petchems can drive future oil market growth. Demographics mean that global petchem demand is probably already close to peaking. And ethane is an increasingly competitive alternative to high-priced oil and naphtha
Wishful thinking prompts IEA’s belief that petchems can drive oil demand growth Read More
Oil prices seem likely to continue under pressure. Inventories are at near-record levels. President Trump’s Trade War is slowing the global/US economy. And his Gaza peace deal creates the potential of a new Iran nuclear deal. Houthi attacks in the Red Sea may also reduce
Today’s oil market appears calm – but risks are rising under the surface Read More
As the EU Commission President warned earlier this month, “Battlelines for a new world order based on power are being drawn right now. Yes, Europe must fight.”
The chemicals industry is key to winning this fight. It is now time for governments to step up and support it.
Petrochemicals has become a major battlefield for producers in China, the USA and the Middle East. They are the ‘elephants in the market’. And so it makes sense for Europe to focus instead on ‘local-for-local’ opportunities.
The end of globalisation creates new opportunities for European companies Read More
We are living through a 3rd paradigm shift since the end of World War 2. Today’s risks have been building for some time. But like the story of the frog in the saucepan, the world has been slow to notice that the water is starting to boil.
Oil market volatility is likely to continue. But OPEC’s need to regain market share also makes it likely that prices will continue to decline. This is good news for the global economy – and geopolitically as it means Russia will have less money to spend on its Ukraine war.
Oil price volatility highlights underlying market weakness Read More
Transport is responsible for millions of jobs and 60% of oil demand. China’s auto market matters more than anywhere else. Unfortunately, it’s outlook seems very uncertain. It has the best Electric Vehicle technology in the world. But now, companies are in a major fight for survival
China’s auto industry seems set to be the next bubble Read More
Geopolitics have now replaced economics as the key driver for decisions. We are going back to the world of the Cold War before the fall of the Berlin Wall in 1989. It seems likely to be a very bumpy ride.
Chemicals hit as Trump’s Tariff War becomes a Trade War Read More
President Trump’s Tariff War will soon lead to empty shelves at Wal-Mart, Target, Home Depot and many other stores this month. The famous saying “Well in May and go away” might be a prudent policy for investors.
President Trump’s ‘drill, baby, drill’ policy is hoping to turn back the clock on the Energy Transition. Oil market volatility is therefore inevitable, and will add to the volatility he has created in the economy and financial markets.
Oil prices fall out of their ‘triangle’ as Trump’s trade war risks global recession Read More
The US economy is most at risk from the new policy. But President Reagan’s warning applies to every country trading with the US: “Then the worst happens: Markets shrink and collapse; businesses and industries shut down; and millions of people lose their jobs.”
President Trump’s trade war risks crashing the global economy Read More
Oil markets are warning of rising economic and political risk. Prudent companies and investors will be preparing for difficult times ahead, whilst still hoping for the best.
Brent falls out of its triangle – for the third time Read More
The Rules for doing business have to change. As NATO’s leader, Mark Rutte, has warned, Europe needs to “Raise defense spending or start learning Russian”
6 ‘Rules for Success’ as tariff wars and Europe’s Clean Industrial Deal begin Read More
“The Dumbest Trade War in History. Trump will impose 25% tariffs on Canada and Mexico for no good reason.” Wall Street Journal editorial
Time is not on Europe’s side. Hopefully, this crisis will lead policymakers to take the urgent actions that are now essential.
Europe’s chemical industry, and its economy, faces existential challenge Read More
The key is to rethink the business and become demand-led. And the good news is that companies are now starting to explore this option.
Chemicals industry starts to focus on Reinvention options at Berlin conference Read More
Oil market developments need very careful attention. If prices do now fall below $50/bbl, then central banks will likely rush to make major cuts in interest rates. And that will make deflation even more likely.
Deflation risks rise as OPEC aims to regain market share and cut oil prices Read More
Oil traders have built a record bearish position in oil futures, as they expect consumption growth to stay weak. So it would be no surprise at all to see prices fall towards the $50/bbl level.
The global auto market is going through major change. Gasoline/diesel cars seem set for major decline as the market transitions to EVs. In turn, business models are also set to change as the focus moves from “precision engineering” to “software”.
OPEC+ countries have been playing the geopolitical card for the past 2 years. But their output cuts have allowed US producers to gain market share, with production up 1.2mbd. The hurricane season may support prices for a while. But the risks are all to the downside. And, of course, today’s higher prices are also helping to accelerate the energy transition.
The critical test is now ahead – making it happen. Companies, investors and policymakers need to borrow Winston Churchill’s famous motto, “Action this Day”.
As Sir Jim Ratcliffe has highlighted, the penalty for doing nothing will be closure.
The Houthi attacks and increased hurricane risks highlight how geopolitics are replacing economics as the key driver for decisions. Global supply chains are increasingly being replaced by local-for-local operations as producers aim to improve reliability and control costs.
Hurricanes, Houthis, pressure global supply chains and add to inflation risk Read More
The two super-critical ‘dividends’ of the past 30 years are now reversing. The ‘demographic dividend’ of constant growth and low inflation created by the BabyBoom generation has ended, along with the ‘peace dividend’ created by the end of the Cold War in 1989
It’s our 17th birthday – and the world is looking very different from when we started Read More
Europe and the USA are unlikely to handover the EV market to China.
The next few years will likely be a bumpy ride for anyone involved in the auto industry and its supply chains.
Car Wars begin as US, EU and Turkey impose duties on Chinese electric vehicles Read More
OPEC would have been better advised to keep prices low to reduce non-OPEC supply and support demand. Instead, they are likely to face some difficult pricing decisions later in the year, if global growth continues to slow.
OPEC starts to refocus on market share as demand growth weakens Read More
Geopolitics are starting to fragment the global economy again. Economics are no longer the key driver for decisions. And so we need to refocus on the geopolitical risks ahead.
Chemical prices start to slide in Asia and Europe, as summer slowdown starts early Read More
The oil price has rallied 22% over the past 4 months, since it bottomed at $74/bbl. And slowly but surely, traders are being forced to realise that geopolitics are replacing economics as the key driver for world markets.
Oil and financial markets start to wake up to geopolitical reality Read More
Future Winners in today’s New Normal world will be those companies that realise that the key question is no longer, “Do we have low-cost supply?” It is instead “Do we have a customer who is willing and able to buy from us”.
Risks rise for petrochemical producers as trade tensions mount Read More
These paradigm shifts are coming at the same time as the loss of the peace and demographic dividends. They are taking our world in a new direction.
The likely Winners will be those companies and investors who focus on becoming demand-led.
Gasoline/diesel cars are now less than 50% of European sales as EVs and hybrids surge Read More
Unfortunately, the problems look set to get worse rather than better. And the oil price rise caused by the Israel/Gaza crisis adds to the problems caused by the Ukraine invasion. A difficult winter, and 2024, lie ahead.
300+ years of Bank of England data shows that interest rates are typically inflation plus 2.5%. At today’s level, this would imply – US rates would be 3.7% + 2.5% = 6.2%: Japan would be 3.2% + 2.5% = 5.7%: Eurozone rates would be 5.3% + 2.5% = 7.8%; UK rates would be 6.7% + 2.5% = 9.2%
The chemical industry is now starting to warn us of a new risk. Europe is already suffering from a cost of living crisis. And people simply can’t afford to pay even higher prices for energy. At a certain point, therefore, demand may simply collapse, and usher in deflation
Europe’s chemicals market highlights move into recession, and risk of future deflation Read More
Taylor Swift’s concerts are creating massive short-term demand as people reconnect after lockdowns. But the chemical industry is warning that deflation could be round the corner, due to the over-capacity created by 20 years of stimulus
Chemicals confirm deflationary pressures are building around the world Read More
The Ukraine war highlights how the real world can often be a very messy place. Issues such as geopolitics and demographics aren’t easy to understand. It can be hard to understand the detail of how key industries and markets are operating.
So it’s no surprise that most policymakers have preferred to stay in the world of theory.
The good news for consumers is that the move to renewables is already set to save European consumers €100bn in 2021-23. The technologies needed in terms of wind, water, solar and storage can successfully deliver the cheaper and more reliable energy supply needed to support the global economy.
OPEC struggles with lower demand as the war accelerates the move to renewables Read More
Food prices have stayed high due to the disruption caused by the war. They are unlikely to fall back quickly as the war continues and economic volatility intensifies.
Food prices set to remain volatile as the war continues and fertilizer costs remain high Read More
The ‘digitalization of everything’ has transformed the global economy over the past 30 years. The rise of the internet is just one example. Now electrification is set to have a similar impact, starting with the world’s largest manufacturing industry. Fasten your seatbelts for the ride!
Global auto fleet goes electric as “the electrification of everything” begins Read More
It’s going to be a very difficult winter. Most of the world will be impacted as Europe bids up energy/food prices to keep its people warm and fed. And it would never have happened if policymakers had recognised the importance of geopolitics, energy markets and demographics.
As the head of Germany’s Employers’ Associations warned last month: “We are facing the biggest crisis the post-war Federal Republic has ever had. We have to be honest and say: First of all, we will lose the prosperity that we have had for years”.
Millions of people around the world are already having to cutback on buying food for their families due to today’s high prices. By wintertime, the risk is that they will have to choose between buying food or heating their homes.
IMF warns the risks “for the economy are overwhelmingly tilted to the downside” Read More
The US is moving into recession as the Atlanta Fed chart confirms. Chemicals have been warning of this for some time. But policymakers and commentators remain in Denial about the economy. They prefer to focus on their computer models, and ignore the real world outside their window.
We are facing a perfect storm of global food, energy and financial crises set off by the war in Ukraine. Analysts need to stop focusing on monetary policy and the inversion of the yield curve. They need to look out of the window and start dealing with the geopolitical reality of Putinflation.
Consumer sentiment is already at all-time lows. Rising energy, transport and food prices will likely soon push inflation above 10%, and interest/mortgage rates to 5%+, adding to the risk of a major and long-lasting downturn.
Central banks and investors believed stimulus programs had created a “New Paradigm” where asset prices would always increase. Now they are starting to realise that stimulus is irrelevant against the 3 Horsemen of the Apocalypse – China’s continuing battle with the pandemic, Russia’s invasion of Ukraine, and potential famine as rising gas/fertilizer prices mean farmers can’t afford to grow their crops or feed their animals.
The chemicals industry continues to be the best leading indicator for the global economy Read More
Energy and financial markets are exacerbating the risks ahead. Oil prices at current levels – as the chart confirms, they now account for more than 3% of global GDP – have historically led to recession as the chart shows. The reason is that consumers have to cut back on their discretionary spending, which drives economic growth, in order to heat their homes and travel to work and school. Today’s high levels of natural gas prices add to this risk.
We are facing a K-shaped recession. Companies and investors have a difficult time ahead. They not only have to navigate a potentially major downturn. But they also have to completely reposition their portfolios for the New Normal world that will follow.
Prepare for a K-shaped recession with Winners & Losers Read More
These are difficult times, and there is no guarantee that they may not get worse. But they also remind us of the critical need to move beyond the Age of Oil, and develop more sustainable energy resources for the future.
The issue is simply that investors are in a state of Denial. And so there is a growing risk of a financial crisis as reality finally dawns on them.
Putin’s war in Ukraine set to impact the real economy and financial markets Read More
The central banks are now abandoning the ‘Bernanke Doctrine’ set out in November 2010 – that what was good for markets, was good for the economy.
The Fed’s NASDAQ bubble starts to burst as Netflix, Facebook plunge 30% Read More
Our pH Report Sentiment Index has been a very reliable guide to the S&P 500 in recent years. Now it is suggesting a major downturn may be underway as the US and Chinese stimulus programmes come to an end.
Evergrande’s default will only be the first of many. Companies and countries that have “bet the ranch” on China’s “perpetual motion machine” need to urgently decide how to minimise their potential losses, whilst there is still time
China’s ‘perpetual motion’ housing machine is starting to slow Read More
The implications of the rise in EV sales go well beyond the auto and oil markets, with petrochemicals likely to be next in line for disruption. This is why the surge in EV sales up the S-curve of adoption has to be my Chart of the Year.
We can expect to see electricity prices fall along with CO2 emissions. And consumers will no longer be held to ransom by geopolitical events
COP26 confirmed that the world is moving away from fossil fuels. OPEC’s high prices have made this move easier to afford by causing artificial shortages.
The new business models, based on using locally-produced recycled plastic feedstocks, are a ‘once=-in-a-lifetime’ opportunity to create growth for decades to come.
Recession may also burst today’s asset price bubbles in stock markets and housing prices – and even in more obscure assets such as art markets.
‘Watch out below!’ as supply chain chaos comes to an end Read More
The Federal Reserve can’t control the fallout from the bursting of China’s ‘subprime on steroids’ real estate bubble
The Fed’s stock market bubble is at risk as China bursts its real estate bubble Read More
Autos are going through a genuine transformation, just as a caterpillar transforms via the chrysalis stage into a butterfly
Businesses set for transformation as supply chain chaos combines with Net Zero targets Read More
Flooding in China and Europe, record temperatures in the USA, wild fires – all these are signs that climate change is accelerating. After all, the world has gone from 2.5bn people in 1950 to 7.9bn today. That must have an
Auto industry provides a model for the transition to Net Zero Read More
The blog has now been running for 14 years since the first post was written from Thailand at the end of June 2007. And quite a lot has happened since then: There was the 2008 financial crisis, one of the
The blog’s 14th birthday – and the New Normal world it predicted has arrived Read More
My Dutch colleague, Daniël de Blocq van Scheltinga, is a graduate of Leiden University in the Netherlands, with a Master of Law degree and a specialty in International law. Here he gives his expert view on the Dutch court’s decision to order Shell to reduce its CO2 emissions by at least 45% , relative to
The post Friends of the Earth v Royal Dutch Shell – what did the Dutch Court rule, and what does it mean for Shell’s business? appeared first on Chemicals and the Economy.
OPEC under pressure, China worries about off-balance sheet debt Read More
US inflation “surprise” puts Federal Reserve under pressure Read More
US jobs report punctures dream of quick return to “normal” Read More
Biden calls time on Reagan’s “trickle-down economics” Read More
Prepare to say goodbye to the great central bank-led rally Read More
A last hurrah for Dr Pangloss as investors ignore growing market risks Read More
Oil markets, NASDAQ, highlight underlying weakness in financial markets Read More
The rising dollar means all bets are off for Emerging Markets Read More
Interest rates jump as Fed focuses on need for higher inflation Read More
“Investing illusions can continue for a surprisingly long time”, Warren Buffett Read More
Investor mania is a classic sign of a late-stage bubble Read More
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Rising uncertainty hits market sentiment and prices Read More
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Biden’s plain-speaking will return markets to reality Read More
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2021 unlikely to see a quick return to ‘business as usual’ Read More
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OPEC and the Federal Reserve hold off reality for a (little) longer Read More
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“Everything is for the best, in this best of all possible worlds” Read More
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Yellen’s nomination for Treasury Secretary takes markets into peak “greed trade” mode Read More
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What would 4 years of President Biden mean for financial markets? Read More
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What would another 4 years of President Trump’s policies mean? Read More
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Central banks try to ‘print babies’ to boost consumption Read More
Volatility has begun to rise in oil and bond markets, as we expected. China’s upcoming ‘Vision 2035’ seems likely to prove a major game-changer for its economic model over time.
Wall Street is focused on central banks’ response to the pandemic, whilst Main Street focuses on its actual impact.
Wall Street hopes for the best, whilst Main Street fears the worst Read More
The Hertz rental car bankruptcy in the US highlights the risks to the economy
Financial markets are treading water as they wait to see what happens next
Financial markets have sharply diverged from events in the real world
A month ago, we forecast that oil prices would go negative in Q2
Markets are being driven by speculators funded by the central banks, rather than long-term investors.
Wishful thinking remains the dominant feature in oil markets, as in our other key areas of the global economy
Policymakers continue to prefer wishful thinking to reality Read More
April will be the cruellest month, as the Covid-19 virus starts to have its full impact on health and the economy.
“Saving lives and protecting livelihoods ought to go hand in hand”, IMF Read More