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View from the Bridge - Bulletin 166

As the APEC Summit conference takes place in Beijing, attendees might be wondering if there is a conspiracy between the US and Saudi Arabia?  Driving down the oil price reinforces the pressure on Russia, where every $10 drop in the oil price is estimated to cost $28bn in receipts, equating to $70bn so far.  This is on top of an estimated $75bn of capital flight caused by Western sanctions - making the Ukraine crisis a highly costly $145bn and rising.

For lubricants companies and car manufacturers who saw Russia as a key growth opportunity, this is a real challenge in the short term - and maybe in the longer term too.

The IMF World Economic outlook forecasts global growth of 3.8% for 2015. Better than 3.3% for 2014 but down on the 4% foreseen in July.

Perhaps the global question is "which set of problems would you rather have?"  Russia's with its falling currency, rising deficits and increasing pariah status? Or the US, now with a “lame duck” President, a freshly empowered Republican Congress and Senate, but an economy still growing at over 3% pa and some of the lowest unemployment in recent years?

Meanwhile  Europe, remains stuck in a triple-dip recession, with a tug-of-war taking place between Bundesbank hardliners and the desire to avoid a Japanese-style lost decade of deflation.  Europe has seen paltry growth of just 0.8% so far in 2014, with just 1.3% forecast for next year. Contrast this with individual numbers of 3.2% and 2.7% for the UK, or US stats of 2.2% and 3.1%.

It has to be hoped that European Central Bank President, Mario Draghi, can win his battle to start some form of European Quantitative Easing (QE), given that Ben Bernanke - former Chairman of the US Federal Reserve - has doubts about the political reality of implementing it. Japan recently initiated QE, to the surprise of the markets, putting more pressure on the ECB to make a move.

While China continues to lead the growth charge, still above 7%, it is now floating on its own lagoon of dubious property loans and endemic corruption. India seems to be one of the few nations benefitting from a change in government, with most of its economic indicators looking positive.

Elsewhere the re-elected President of Brazil is facing economic headwinds; South African growth is creaking at 1.4% and the Ebola effect can only suppress wider African growth further. All-in-all the BRICS don’t look in great shape - but developing economies are always in for a bumpy ride.

The only light in the gloom is for oil consumers themselves, where the falling oil price represents a welcome cash bonus.   The balance of growth in the lubricants market continues to move further towards Asia and the APEC economies, with further growth in car production and usage in China driving the lubricants market forward, along with others in the region.

What will be vital across the whole of the lubricants industry is for organisations to improve their customer support and digital systems to offer lower costs of delivery, whilst incorporating their own data to provide unique features in a saturated market. That is the primary goal of OATS new earlFUSiON platform and there is further explanation of our thinking behind it in our latest White Paper from COO, Dick Carney.

We look forward to reviewing the potential of earlFUSiON with you in the coming months.  In the meantime, to find out more or comment on anything you have read in this month's Bulletin, simply contact us by e-mail or follow our updates on social media via Twitter @Oats_LtdFacebook, LinkedIn and Google+.

Sebastian Crawshaw

Chairman, OATS

Tags: Asia, Europe, N America, Russia, View from the Bridge

Published 11th November, 2014

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