Helping you navigate the new normal since 2001
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
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
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.
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
Chemical company results are confirming the severity of the crisis. If Europe wants to maintain a viable chemical industry, it therefore needs to accelerate its proposed Industry Acceleration Act. Hopefully, it will be published this week, and action will follow very quickly
Chemical company results confirm scale of industry crisis 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.”
If Europe’s chemical industry disappears, the whole economy will be at risk. This week’s Antwerp Summit needs to focus on kick-starting its recovery.
Antwerp EU Summit holds key to Europe’s chemical industry future Read More
Chemicals contribute to 96% of manufactured goods. So if the Commission and governments don’t now provide major support at this time of crisis, the whole European economy will be at risk.
Europeans are the only ones still operating on the basis of a rules-based international order. As France’s President Macron warned last week, we have to be much more realistic. We need “to protect our chemical industry, our industries – because they are being literally killed.”
INEOS bond price slide confirms chemicals are in Crisis 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
It would seem prudent to plan for further escalation of the military and trade wars in H2. Countries will likely continue to join trading blocs to counter Trump’s tariff war. And defence spend will further increase as the Middle East/Ukraine wars escalate
Middle East and Ukraine wars add to trade war risks for the global economy 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
Major paradigm shifts are never easy. Tesla’s example shows how even well-funded start-ups can lose the plot. But the benefits of robotaxis are very real for most people, if they can be realised.
Robotaxis take to the road in China, USA and now Europe Read More
Roman Emperors used to distract people with “bread and circuses”. Today, it seems Bitcoin is playing this role. The Tariff War is at major risk of repeating 1930’s Smoot Hawley Tariff Act. It introduced tariffs to “protect” the economy. And it led directly to the Great Depression.
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.
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
We are back in a world where geopolitics, not economics, drives decision-making. It is a world of shifting alliances. And so defence spending is set to be a key growth area for the future as Cold War 2.0 begins.
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 collapse of Asia’s main currencies versus the US$ confirms that our world is increasingly dominated by known unknowns. We know what the key issues might be, but we can only guess at how they might turn out.
Europe has been built through crisis since the end of World War 2. Today’s economic and political crises require a similar focus on reinvention.
Europe’s economy loses its “engine”, as France follows Germany into political turmoil Read More
Ageing BabyBoomers have been the main source of US population growth since 2005. So the need for global supply chains in disappearing, as the Boomers already own most of what they need. Trump’s tariff war means rapid and uncomfortable change now seems to lie ahead
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.
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.
Europe faces major geopolitical threats. In the East, the EU faces an existential challenges from Russia’s Ukraine invasion and its “no limits” partnership with China. In the West, there is rising uncertainty over Donald Trump’s support for Europe if he became president
European voters rally to the centre as external threats increase Read More
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
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%
It’s too soon to talk of an actual energy crisis. But as the charts showing Brent oil and European natural gas prices confirm, it is certainly time to start planning for the possibility. Oil prices have recently risen 25%. And Europe risks gas shortages if there is a cold winter
Energy markets could be heading towards a new crisis 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
Companies and investors need to invest time now on having a genuine debate about the risks ahead. The regulatory failures of the past few days highlight what can quickly go wrong, if one hasn’t war-gamed out potential risks. As the saying goes, “Failing to plan, equals planning to fail”.
Today’s financial crisis confirms that “failing to plan, equals planning to fail” Read More
Portugal is showing the way. Despite 6 months of drought last year, 57% of its electricity came from renewables. And its clean energy focus means it is becoming “one of the cheapest markets in Europe”. CO2 emissions will also have reduced by 75% in 2030 versus 2021.
As the photos from New York in 1900 and 1913 remind us, transitions happen very quickly once they get underway. One day, we are saying “it will never happen”. The next, we are telling our friends “I can’t understand why it took so long”. So it seems safe to assume that the auto industry will see major change in the next few years.
The next car you buy will probably be Electric, and you may not need to buy another Read More
‘Business as usual’ has been a great strategy for the past 40 years. But nothing lasts forever. It has now – like the central banks’ stimulus policies – hit the inevitable brick wall.
US inflation was last at 8.3% in January 1982. And then, the 10-year yield was 14.6%. History may not be a perfect guide, but it is the best we have. So it might be worth planning for rates to go much higher than most “experts” expect, now that they have broken out of their downtrend.
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”.
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.
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.
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.
Automakers are ahead of the game in terms of strategic planning. They soon realised the move to EVs meant their traditional business model, based on proprietary engine technology, would inevitably become obsolete. And so they quickly realised they need to pivot to focus on AVs and become software-driven. The rest of us need to catch up.
Automakers, governments, start to prepare for the launch of Autonomous Vehicles Read More
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
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.
Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways.
The plastics industry as we know it today, may well start to move into an endgame as it is squeezed from both ends of the value chain.
Plastics industry feedstocks at risk from the rise of Electric Vehicles 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
Now we need companies to step up to the plate, in alliance with their value chain and financial partners. Time is limited, and the industry must be able to demonstrate real progress before COP26 in November.
PlasticsEurope calls for mandatory 30% recycling target for packaging by 2030 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
Governments have failed to properly protect their populations from the pandemic. Some have actively encouraged it, the rest have simply been incompetent. Today, their failure to vaccinate the world means poorer countries are now acting as a petri-dish – enabling
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