Monday, July 11, 2005

It's the Saudis Stupid!....and the Chinese too.

Conspiracy? What conspiracy?

Let me say this first, I find conspiracy theorists to be very..ermm...'ignorantly' amusing.

Why is that so? Basically because most of the conspiracy theories floating around out there were formed with no fundamental grounds whatsoever. I'm sure you've come across such people before in your lives. Think about it, when was the last time you heard someone say this about the plunging price of a particular share,

"Aiyah, sure syndicate play the price wan lah"

Sounds familiar eh. The funny thing is, when you prod further and ask what are the supporting facts, you'd most probably get shot back with a cocky, you-are-so-gullible look and a dismissive, "Sure like that wan lah, don't you know our stock market always let the big syndicates play kau kau wan?"

Well, sorry for sounding like a wet blanket, but I wouldn't want to base my investment strategies on some mamak-stall gossip, if you know what I mean.


Here's a second amusing point. Try asking these conspiracy-theory-spouting folks about the details of their stock portfolio. You know, the usual information on the companies industry, business segment, management characteristics, PE ratios, NTAs, gearing, gross margins etc.

Surprise surprise, most of them don't know squat about the companies they are investing in. I am not saying that syndicate play has nothing to do with the prices of shares, but to blame the fluctuations of the stock market entirely on syndicate play? C'mon, that's purely misguided.Pick up an issue of Time and Fortune, or heck just turn to Astro channel 90; I'm sure you'll find some morsel of information as to why your portfolio did a olympic beating, swan-breasted-nose-dive into the pool of shattered ROI.

Fine and Well, But What Has This Got To Do With The Saudis?

Ok, back to the Saudis....and Chinese.

I was chatting with an individual recently about the run up in the price of oil. To me, the reasons why oil prices have been so high lately (past USD$60 a barrel at the moment) are pretty clear cut. First of all, we can thank China for significantly contributing to the global growth in oil consumption. Of the total worldwide growth in oil consumption for 2004, China was responsible for 45% of it, amazing...or madness, depending on how you look at it. As stated in Economics 101, high demand + limited supply = bite-yer-arse prices.

Secondly, terrorism continues to wreck havoc in the countries of the middle east. Coincidently, these countries are also responsible for producing most of the oil you and I use to power our gas guzzling, enviroment polluting vehicles to get us to the gym, or the grocery store, or wherever. It goes without saying, where you have instability in the supply, there you will have high prices.

Thirdly, all the members of OPEC sans Saudi Arabia are already pumping oil at their maximum capacity. Only the Saudis have an additional 1.5 million barrels of unutilized production capacity per day. When this happens, it means that there is basically no 'slack' in the supply chain to cope with any disruptions or increase in demand whatsoever. This has certainly caused a lot of people to begin bolstering their oil reserves (thus driving up prices), just in case.

Last of all, we all know what happened to Yukos (The largest oil company, or at least it used to be, in Russia) in Russia right? It's CEO Mikhail Khodorkovsky was jailed on tax evasion charges, and the company will subsequently be broken up by the government and sold in itty-bitty little pieces. That certainly wont help keep the oil prices down.

All the above make sense right? These information are not well-guarded secrets right? You can spot them anytime you open up the newspaper, or an industry magazine right?. So it came as a surprise to me when the above mentioned individual summarised the entire global oil industry into one sentence,

"Oil price is high because let the Americans play up mah"

I could write another post on why America would not want high oil prices, but I think you get what I mean.

Anyone for more helpings of conspiracy theories?

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Blogger ::Lord Apprentice:: said...

u party pooper, here i was happily blaming the increasing oil prices on samy velu.

wats that u say? china? 45% of of total world consumption? What are they doing? Frying rice with oil? Geez....

11:28 AM  
Blogger Bernard Yong said...

Not 45% of the world's total consumption lah you dolt....hahah. The largest oil guzzling nation is still the US of A, those darn Yankees.

China is responsible for 45% of the increase in global oil consumption. meaning if the world's appetite for oil grew by 15% in 2004, China would have contributed around 7%. That's a lot.

11:38 AM  

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