Consensus is forming that 2014 will be the economic turning point for the United States and that is, traditionally, good news for Canada. But is it?
Most rosy is the forecast by UBS that U.S. GDP will grow by about 3 per cent in 2014 and in 2015 then beyond. The IMF has also just raised its U.S. forecast.
“There has been good action taken by Congress to eliminate the fear about the budget and to reduce the sequestration. We see the Fed having taken some very well-communicated action concerning the tapering of the program, and those are good signs — in addition to which we see some good numbers: Growth is picking up and unemployment is going down,” head of the IMF Christine Lagarde said this week. “So all of that gives us a much stronger outlook for 2014, which brings us to raising our forecast.”
Interestingly, if the United States grows by 3 percent that will virtually match China’s growth, in absolute dollars. (Lest we forget the math. A 3 percent rate in the U.S. is based on a nominal GDP of US$17-trillion and China’s equally rosy forecast of 7.5 percent is based on a nominal GDP of less than US$8-trillion.)
The turning point has come due to the energy boom in the U.S., the housing recovery, the health of its manufacturing sector and productivity rates, banking stability, job growth, low consumer debts and an improved fiscal situation due to the spending cuts imposed by sequestration.
Canada, unfortunately, has some headwinds that, until addressed, will likely decouple Canada’s growth from its neighbour’s in the short and medium term.
Here they are, not necessarily in order of importance:
— Canada lives beyond its means as an economy, with trade and export deficits, despite the benefits of high commodity prices in the past few years.
— Canada’s productivity lags U.S. rates considerably, representing a negative metric that makes export growth difficult. The reasons are varied and include the fact that the Canadian economy is balkanized into political spheres of influence, variant tax and labour laws, non-tariff barriers internally and disparate worker credentials because it lacks a national trade agency to insure the fair flow of workers, goods and services or an over-arching Inter-provincial Commerce Commission. There is no free trade within Canada.
— Canada’s dollar is headed to as low as 88 cents U.S. this year, according to some projections, which is a symptom of problems but also, ironically, somewhat helpful in exports if sustained but not helpful concerning the following issue.
— Canada’s federal and Western provinces are pitch-perfect when it comes to debt levels, spending and investment. Their Triple A or high AA credit ratings reflect that.
But Eastern Canada, on the other hand, is a problem, a clearly defined have-not part of the country with high unemployment rates, high underemployment rates and spendthrift provinces led by Ontario which has the biggest debt of any sub-national government globally. In 2003-4, debts were C$140-billion and in 2013-14 are expected to reach $260-billion and heading higher.
So this means that as the Canadian dollar falls, repayments to foreigners increase as does the need for the Bank of Canada to begin increasing interest rates. The only solution is to bite the bullet, something that vote-hungry politicians have failed to address in the past.
In light of that realization, Goldman Sachs and others are shorting the Canadian dollar.
— Consumer debt is Canada is worrisomely high. The housing bubble in Ontario, condo craziness, has forced prices for all real estate upwards, and increased borrowing, with the result that Canadians now have switched places with the Americans as holders of the highest consumer debt. (Americans were forced to shed their borrowing after the 2008 meltdown but Canadians continued the tradition.)
(This debt overhang will slow consumer spending in Canada, but the newly lower debt levels south of the border are expected to enhance U.S. growth in the next few years.)
— Canada’s cornerstone exports are facing declines. Natural gas is being replaced by U.S. shale gas production. Crude oil, Canada’s most valuable export, is expected to drop in price $20 a barrel due to increasing supplies: the U.S. shale oil boom, Canada’s increasing production, a relaxation of the embargo against Iran if it fulfills its pledges on the nuclear portfolio and Mexico’s invitation to foreign oil companies to help increase production for its moribund national oil giant.
The one bright spot would be approval, finally, of the Keystone Pipeline, with its 800,000 barrels a day of exports. Another would be the Northern Gateway proposal to the B.C. coast.
But both are political footballs for different reasons and may not happen for years, if ever.
The Iranian diplomatic deal, if successful, could enhance world peace but would unleash much oil onto the market. The embargo has limited exports from 2.5 million barrels per day to one million.
The other important export driver in Canada is Ontario’s auto industry but this year the province was overtaken, in terms of production, by the state of Michigan for the first time in a decade. And Ward’s Automotive forecasts a steady decline in Ontario production.
On a positive note, most of Canada’s problems are soluble if electorates, and their public servants, agree to old-fashioned belt-tightening.
Most importantly, Canada has to stop signing free trade agreements with countries that don’t offer reciprocity in terms of export or investment opportunities, such as China and/or the European Union, and forge a Canadian Free Trade Agreement among its provinces and territories. And the US-Canada bi-national issues should be fixed and talks about a development partnership in the North should become policy.
But those are long-term solutions that have eluded Ottawa for generations.
In the meantime, just curbing the excessive growth and overheads of the entire Canadian public sector, and creating a healthy, fair market at home for the Canadian private sector, are bottom-line essentials that any nation-state must enact in order to protect and grow.
» Volgograd Bombings Follow Saudi Threat to Attack Russia Alex Jones’ Infowars: There’s a war on for your mind!
Prince Bandar warned Putin, “The Chechen groups….are controlled by us”
Paul Joseph Watson
December 30, 2013
Twin blasts targeting a train station and a trolley bus in the city of Volgograd which killed at least 31 people follow a threat by Saudi Arabia to attack Russia using Chechen terrorists if Moscow did not withdraw its support for President Assad in Syria.
The first attack took place at Volgograd-1 station on Sunday morning, killing 17 people. CCTV footage shows an orange blast behind the main doors of the station, smashing windows and sending debris out into the street. The prime suspect is a female suicide bomber.
The second attack occurred near a busy market in Volgograd’s Dzerzhinsky district. A bus packed with people on their morning commute was ripped apart by a suicide bomber, killing 14.
Although no group has claimed responsibility for the blasts, suspicion immediately fell on Islamists from the North Caucasus region who routinely attack soft targets in Russia.
While the media has concentrated on the threat such groups pose to February’s Winter Olympics in Sochi, no scrutiny has been given to a warning issued by Saudi Prince Bandar bin Sultan back in August when he told Vladimir Putin that Saudi Arabia would activate the Chechen terrorist groups it controls to target Russia if Moscow refused to abandon its support for Syrian President Bashar Al-Assad.
As we reported at the time, the threat was made during a closed-door meeting between Prince Bandar and Putin at the beginning of August.
According to a transcript of the comments made during the meeting by Middle Eastern news agency Al Monitor, Bandar made a series of promises and threats to Putin in return for Moscow withdrawing its support for Assad in Syria.
“I can give you a guarantee to protect the Winter Olympics next year,” Bandar allegedly stated, adding, “The Chechen groups that threaten the security of the games are controlled by us.”
Bandar made it clear that his position was supported by the US government.
This “guarantee” to stop the Chechens from attacking the Sochi Olympics was also obviously a veiled threat that if Russia did not abandon Assad, terrorist attacks would be given the green light.
Given that Russia did not abandon Assad and indeed virtually single-handedly prevented a US military strike on Syria, much to the chagrin of Saudi Arabia which is the primary supplier of anti-Assad rebel jihadists, are we to believe that the Volgograd bombings are evidence of Bandar following through on his threat?
This article was posted: Monday, December 30, 2013 at 5:49 am
Radiation cleanup work in 11 areas in Fukushima Prefecture was scheduled to be completed by March 31 under a government plan announced in January last year, according to Kyodo. The environment ministry expects a delay in the project to the year beginning April 2016 amid opposition from locals to the setup of temporary storage facilities, Kyodo said.
A record earthquake and tsunami in March 2011 wrecked the nuclear plant run by Tokyo Electric Power Co. (9501), causing radioactive leaks that forced the evacuation of about 160,000 people. The government said last week it will assume decontamination costs from the Fukushima nuclear meltdowns in order to accelerate the rebuilding of the region.
Decontamination costs near the Fukushima site, 150 miles (240 kilometers) north of Tokyo, are estimated at about 2.5 trillion yen ($24 billion), the government’s Nuclear Emergency Response Headquarters said in a statement Dec. 20. The government plans to recover the costs through a sale of its shares in Tepco.
The environment ministry will release a revised schedule for the cleanup work soon, according to Kyodo.
To contact the editor responsible for this story: Gearoid Reidy at email@example.com
Mark Twain once said, “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” And, there are many, many things that the public and policymakers know for sure about energy that just ain’t so.
That list is very long indeed and getting longer as the fossil fuel industry (which has little interest in intellectual honesty) continues its skillful manipulation of a gullible and sometimes careless media.
Below I’ve listed seven whoppers that it would be charitable to call misleading. Longtime readers will recognize that I’ve addressed them before in various pieces. But I thought that it would be useful to review the worst of the worst of 2013 as the year ends.
Here are seven things everyone knows about energy that just ain’t so:
1. Worldwide oil production has been growing by leaps and bounds in the last several years. Oil companies (with governments following suit) have cleverly redefined oil to include something called natural gas plant liquids (NGPLs) that you might surmise actually come from natural gas wells. These include propane, butane, ethane, and pentanes. The new definition also includes biofuels such as ethanol and biodiesel.
This mishmash is sometimes referred to as “total liquids,” but more often “total oil supply.” This redefinition, however, depends on something that just ain’t so, namely, that NGPLs and biofuels are 100 percent interchangeable with oil. There is some interchangeability, but the volume is relatively small. NGPLs make up just 10 percent of total liquids. I’ve seen investment research that asserts that probably less than one-fifth of that (equivalent to about 2 percent of total liquids) can be directly substituted for oil, primarily in petrochemical refineries. That portion could grow, but only with extensive and costly retooling of the refinery industry, a move that seems risky with U.S. natural gas production stalled (see below).
Now, the central problem with including NGPLs as part of the oil supply remains that they have only a very limited ability to be used as transportation fuel which is the main driver for oil consumption.
Moreover, the energy content of NGPLs is around 65 percent of oil per unit of volume. Ethanol has about 66 percent of oil’s energy, and biodiesel has slightly more than crude oil, but somewhat less than the diesel it is meant to replace. We must also consider all the energy including oil that goes into growing, harvesting, transporting and processing the crops that are feedstocks for biofuel refineries. Some studies show that more energy goes into making ethanol than ethanol produces when burned in an engine.
Despite these well-known facts, the industry and government continue to count NGPLs and biofuels in barrels right alongside oil as if they were all equivalent.
Ethanol and biodiesel do directly substitute for some motor fuels. But there are upper limits on what we can produce and use. We are near those limits with ethanol unless engines change to tolerate higher concentrations of ethanol. Moreover, neither ethanol nor biodiesel can be used for the wide variety of purposes that crude oil can.
It turns out that 2005 was an inflection point after which supply growth for both total liquids and oil proper slowed considerably. With all this in mind, let’s look at the actual numbers which come from the U.S. Energy Information Administration (EIA).
Growth from 1998 to 2005: 11.7 percent
Growth from 2005 to 2012: 5.7 percent
Oil Proper (Crude Oil Plus Lease Condensate):
Growth from 1998 to 2005: 9.9 percent
Growth from 2005 to 2012: 2.7 percent
You can see that the real oil supply (crude oil plus lease condensate) has been growing at just over one-quarter the pace it did in the previous seven years–even with record prices, record investment and the wide deployment of new extraction technologies. Slowing growth coupled with skyrocketing demand in places such as China and India has put a lot of upward pressure on oil prices. It’s one reason oil prices remain near record highs based on the average daily price of Brent Crude, the world benchmark.
In 2011 the average daily Brent Crude price was a record $111.26—which was followed by another record in 2012 of $111.63. The price in 2013 through December 26 has averaged $108.52.
2. U.S. natural gas production continues to grow by leaps and bounds.This claim is even more misleading than the first one. It’s true that natural gas production has grown in the United States in recent years due to the exploitation of gas trapped in deep shale deposits, deposits that new technology called hydraulic fracturing is now making accessible.
But, it turns out that the rate of production of these wells declines rapidly, and the numbers suggest that raising the overall U.S. rate of production is going to be very difficult and expensive. In fact, since January 2012, monthly U.S. marketed natural gas volumes have been nearly flat despite a more than doubling of natural gas prices from their April 2012 lows. The average monthly volume in 2012 was 2.11 trillion cubic feet (tcf). For 2013 the data are only available through September, but the average through that month was 2.12 tcf. It’s doubtful that the average will change that much when the final three months of the year are included.
The easy shale gas has been extracted. Now comes the hard stuff. We may already be on the shale gas treadmill.
3. There is enough natural gas under the United States to last the country for 100 years. This claim requires that you first do bad math on the numbers even the perpetrators of this falsehood provide. The number turns out to be 90 years using their figures and 2010 U.S. natural gas consumption (while assuming, improbably so, no growth in U.S. natural gas use for the next 90 years).
But even that number vastly overstates what we are likely to get out of the ground for it includes estimates of probable, possible and speculative technically recoverable resources. Now, just because something is judged to be technically recoverable does not mean it will be economically recoverable. And, if it is further labelled possible or speculative, it seems foolish to base our public policy on such resources as if they were proven to exist and were ready to extract.
Shale gas expert Art Berman suggests we focus on the probable resources category and assume generously that 50 percent of those resources will actually get turned into reserves. (Keep in mind that no resource is ever exploited to 100 percent and usually only to a fraction of that. Also, resources are what are thought to be in the ground based on sketchy evidence, while reserves are what the drill bit proves are actually there and, more importantly, amenable to extraction.) Based on these assumptions, the United States has about 550 tcf feet of probable and proven reserves which means that the country has a likely supply of about 23 years (again, assuming, improbably so, no increase in the rate of consumption during the entire period).
Since Berman made those calculations, some of the probable resources have moved into the reserves category. But, the outlook has not really changed because this was expected.
4. The United States is about to become the world’s largest oil producer. This claim depends on the same sleight-of-hand being used to inflate worldwide oil production numbers as noted above: the inclusion of NGPLs and biofuels in the production numbers. The United States has been furiously drilling natural gas wells in the last few years and has increased its supply of NGPLs greatly. The production of crude oil proper has also been growing for essentially the same reason natural gas production grew: the deployment of hydraulic fracturing techniques and horizontal drilling to extract previously inaccessible deposits of so-called tight oil.
The results have been impressive, lifting U.S. production of crude oil proper (crude oil plus lease condensate) from 5.2 million barrels per day (mbpd) in 2005 to 6.5 mbpd in 2012. The latest available monthly production results are for September 2013 and put U.S. crude oil production at 7.8 mbpd.
But, it seems unlikely given the very steep production declines that existing tight oil wells experience–about 40 percent per year–that production will be able to scale that of the world’s number one and number two oil producers.
Russia currently produces 9.9 mbpd of crude oil proper. Saudi Arabia produces 9.8 mbpd. Both numbers come from the EIA.
Could the United States produce more crude oil proper than these countries in the near future? Since we cannot know the future, anything is possible. But, consider that the United States has gotten most of the easy tight oil. Now, it must begin to rely on extraction of the hard-to-get oil. That oil will come out at a slower rate.
Meanwhile, the tight oil wells already drilled will continue to decline at colossal rates and their output will have to be replaced before any increase in production is possible. Trying to increase oil production under these circumstances can be likened to running up a down escalator since the declining production of existing wells cancels out much of the production from newly drilled wells.
If the United States were to attain the number one spot some day, it would be hard to maintain given the high production decline rates cited above.
5. The United States is on the verge of energy independence. This canard takes advantage of the lack of public awareness about U.S. energy resources. The country has long been self-sufficient in coal. This has never been an issue. It has also been nearly self-sufficient in natural gas, importing a little over 15 percent of its needs (almost all of it from Canada) from 1991 through 2011 according to the EIA. That percentage has trended down recently as U.S. production has increased. But the U.S. supply of imported natural gas was never in danger due to political disruptions or wars in faraway unfriendly countries.
So, it turns out that energy independence really means oil independence. On this count the country is still very far away from independence despite recent gains in domestic oil production. For the most recent week ending December 20, the United States’ net crude oil imports were 7.5 mbpd. The country would have to nearly double its rate of domestic crude oil production to meet its current consumption needs. That seems very unlikely given the production dynamics discussed above for tight oil which is where nearly all the growth in production is currently taking place.
6. The United States has 250 years of coal left. This claim keeps getting recycled even though a 2007 National Academy of Sciences study concluded that there was no basis for making such a claim. It suggested that the United States might have 100 years of coal left (assuming, improbably so, there would be absolutely no increase in the rate of consumption over that period). But, the report concluded that no comprehensive study of U.S. coal resources was currently available. The truth is nobody knows how much coal is left in the United States, nor how much of that might actually be accessible.
7. Peak oil is a myth. Peak oil is the idea that oil production inevitably reaches a maximum rate and thereafter begins an irreversible decline. It does NOT mean running out, but rather that production declines over time. It turns out that peak oil is actually an empirically demonstrated reality for every oil well, every mature oil field, and now for the majority of oil producing countries in the world. Those who tell us that peak oil is a myth can only be engaged in propaganda rather than a search for the truth. Ironically, many of them cite the upturn in U.S. production as “proof” that peak oil is a myth, forgetting that U.S. production peaked more than 40 years ago.
Oil is a finite resource and so, the real debate is over the timing of peak oil production for the world as a whole. Some say the peak is nearby. Others say it is two or three decades away. But no credible expert says that there will never be a peak.
The cases for and against a near-term peak would be difficult to relate in detail here. But, it’s worth noting that the optimists have been consistently wrong about prices and supplies in the last decade, and those predicting a near-term peak have been much closer to the mark.
That doesn’t mean that the peak must be nearby. But it suggests that the models and assumptions of the optimists are badly flawed.
There are so many other misconceptions about energy which remain that it would take a dozen seven-item lists just to begin to address them. But, I offer these seven as a starting point for a clearer and more honest discussion of our energy future in the coming year.
A German magazine lifted the lid on the operations of the National Security Agency’s hacking unit Sunday, reporting that American spies intercept computer deliveries, exploit hardware vulnerabilities, and even hijack Microsoft’s internal reporting system to spy on their targets.
- Watch NSA leaker Edward Snowden’s surveillance warning
- Snowden document shows Canada set up spy posts for NSA
Der Spiegel’s revelations relate to a division of the NSA known as Tailored Access Operations, or TAO, which is painted as an elite team of hackers specializing in stealing data from the toughest of targets.
Citing internal NSA documents, the magazine said Sunday that TAO’s mission was “Getting the ungettable,” and quoted an unnamed intelligence official as saying that TAO had gathered “some of the most significant intelligence our country has ever seen.”
Der Spiegel said TAO had a catalogue of high-tech gadgets for particularly hard-to-crack cases, including computer monitor cables specially modified to record what is being typed across the screen, USB sticks secretly fitted with radio transmitters to broadcast stolen data over the airwaves, and fake base stations intended to intercept mobile phone signals on the go.
The NSA doesn’t just rely on James Bond-style spy gear, the magazine said. Some of the attacks described by Der Spiegel exploit weaknesses in the architecture of the Internet to deliver malicious software to specific computers. Others take advantage of weaknesses in hardware or software distributed by some of the world’s leading information technology companies, including Cisco Systems, Inc. and China’s Huawei Technologies Ltd., the magazine reported.
Der Spiegel cited a 2008 mail order catalogue-style list of vulnerabilities that NSA spies could exploit from companies such as Irvine, California-based Western Digital Corp. or Round Rock, Texas-based Dell Inc. The magazine said that suggested the agency was “compromising the technology and products of American companies.”
Old-fashioned methods get a mention too. Der Spiegel said that if the NSA tracked a target ordering a new computer or other electronic accessories, TAO could tap its allies in the FBI and the CIA, intercept the hardware in transit, and take it to a secret workshop where it could be discretely fitted with espionage software before being sent on its way.
Intercepting computer equipment in such a way is among the NSA’s “most productive operations,” and has helped harvest intelligence from around the world, one document cited by Der Spiegel stated.
Allegations taken seriously
One of the most striking reported revelations concerned the NSA’s alleged ability to spy on Microsoft Corp.’s crash reports, familiar to many users of the Windows operating system as the dialogue box which pops up when a game freezes or a Word document dies.
The reporting system is intended to help Microsoft engineers improve their products and fix bugs, but Der Spiegel said the NSA was also sifting through the reports to help spies break into machines running Windows.
One NSA document cited by the magazine appeared to poke fun at Microsoft’s expense, replacing the software giant’s standard error report message with the words: “This information may be intercepted by a foreign sigint [signals intelligence] system to gather detailed information and better exploit your machine.”
Microsoft said that information sent by customers about technical issues in such a manner is limited.
“Microsoft does not provide any government with direct or unfettered access to our customer’s data,” a company representative said in an email Sunday. “We would have significant concerns if the allegations about government actions are true.”
Microsoft is one of several U.S. firms that have demanded more transparency from the NSA — and worked to bolster their security — in the wake of the revelations of former intelligence worker Edward Snowden, whose disclosures have ignited an international debate over privacy and surveillance.
Der Spiegel did not explicitly say where its cache NSA documents had come from, although the magazine has previously published a series of stories based on documents leaked by Snowden, and one of Snowden’s key contacts — American documentary filmmaker Laura Poitras — was listed among the article’s six authors.
No one was immediately available at Der Spiegel to clarify whether Snowden was the source for the latest story.
Another company mentioned by Der Spiegel, though not directly linked with any NSA activity, was Juniper Networks Inc., a computer network equipment maker in Sunnyvale, Calif.
“Juniper Networks recently became aware of, and is currently investigating, alleged security compromises of technology products made by a number of companies, including Juniper,” the company said in an email. “We take allegations of this nature very seriously and are working actively to address any possible exploit paths.”
If necessary, Juniper said, it would, “work closely with customers to ensure they take any mitigation steps.”
About three weeks ago, I speculated that the bottom on interest rates had come and gone, and interest rates were rising.
This now seems more and more certain. Because of Abenomics, yields on Japanese government bonds have shot up and set off an ugly chain reaction. Bond prices are falling and yields are rising. Rather quickly, I might add.
Take a look at these charts of yields for selected Canadian government bonds. Pay extra attention to the longer-term bonds.
First, marketable bonds. The average yield on 1-3 year bonds:
Now 3-to-5 year bonds:
Here’s the average for 10+ year bonds:
Now the benchmark bonds.
First, the 2-year:
Long-term benchmark bonds:
Here’s the long-term real return bond yield:
You can draw your own conclusions from this data, I’m sure.
West Texas Intermediate traded near a two-month high above $100 a barrel after U.S. crude and distillate stockpiles fell more than forecast, while exports from Libya remained curbed by port closures.
Futures were little changed near the highest settlement since Oct. 18. Crude inventoriesdropped by 4.73 million barrels to the lowest level since September last week amid an increase in refinery operations, while distillate supplies, including diesel and heating fuel, fell by 1.85 million barrels to 114.1 million, the Energy Information Administration reported Dec. 27. A possible agreement with rebels to reopen the Libyan port of Hariga collapsed, the oil ministry said Dec. 28.
“The recovery of the U.S. economy is fueling expectations of higher oil demand in the U.S.,” saidOlivier Jakob, managing director at Petromatrix GmbH in Zug, Switzerland. “Distillate stocks will end 2013 at a multi-year low for the season and that should translate into very low stocks by spring.”
WTI for February dropped 7 cents to $100.25 a barrel in electronic trading on the New York Mercantile Exchange as of 11:43 a.m. London time. It closed at $100.32 on Dec. 27, settling above $100 a barrel for the first time since October. The volume of all contracts traded was about 56 percent below the 100-day average. Prices have climbed 9.2 percent in 2013, set for a fourth annual gain in five years.
Brent for February settlement was down 2 cents at $112.16 a barrel on the London-based ICE Futures Europe exchange. Prices have advanced 1 percent this year. The European benchmark crude was at a premium of $11.91 to WTI. The spread closed at $11.96 on Dec. 27, narrowing for a third day.
While there is currently no deal to reopen the port of Hariga, negotiations with rebels holding the terminal continue, Ibrahim Al Awami, head of measurement and inspection at Libya’s oil ministry, said by phone Dec. 28. The country is pumping 233,889 barrels of crude a day, compared with a daily capacity of about 1.6 million, the oil ministry said Dec. 21.
WTI has increased 8.2 percent in December amid reduced crude stockpiles in the U.S., the world’s biggest oil consumer. The country will account for about 21 percent of global demand this year, according to the International Energy Agency.
Crude inventories slid for a fourth week to 367.6 million barrels, according to the EIA, the Energy Department’s statistical arm. A median decline of 2.65 million barrels was forecast by analysts in a Bloomberg News survey. Refineries operated at an average 92.7 percent of capacity, the highest rate since July 12. Consumption of distillates climbed 2 percent to 4.17 million barrels a day.
“We saw some strength on West Texas based on the better-than-expected figures” from the EIA, Ric Spooner, a chief analyst at CMC Markets in Sydney, said by phone today. “There’s potential for the market to rally further if it gets more good news. The U.S. may see further improvement in economic statistics in the next few weeks.”
The EIA will next report weekly data on inventories and demand levels on Jan. 3, two days later than normal because of the New Year holiday.
Brent will drop for a second year in 2014 as U.S. oil production expands and supply threats ease in the Middle East and North Africa, a separate Bloomberg survey showed. Futures will decline to $105, down from $108.70 in 2013, according to the median estimate of the seven analysts who most accurately predicted this year’s level. Prices averaged $111.68 in 2012.
To contact the reporter on this story: Grant Smith in London at firstname.lastname@example.org
To contact the editor responsible for this story: Stephen Voss at email@example.com
China and Japan, Asia’s two most powerful nations, are increasingly jousting in the skies and in the seas near a set of disputed islands. Although their economies remain deeply intertwined, relations between the two governments seem locked in an irreversible, dangerous downward spiral.
Japanese Prime Minister Shinzo Abe further embittered feelings last week by visiting the controversial Yasukuni shrine, which honors the souls of Japan’s war dead, including 14 World War II leaders convicted as Class-A war criminals.
Needless to say, neither side seems terribly interested in a rapprochement. That’s a shame, because the deterioration in ties is fairly recent, stemming from a single incident involving the islands administered by Japan, which calls them the Senkakus, and claimed by China, which refers to them as the Diaoyu. A single, symbolic-but-generous gesture could well halt the slide.
Abe, though unquestionably a hawk on China, had nothing to do with the triggering event. In September 2012, then-Prime Minister Yoshihiko Noda ordered his government to buy several of the disputed islands from a private owner — an action which, in China’s view, effectively nationalized them.
Noda hadn’t intended to provoke the Chinese. On the contrary, he aimed to preempt a more aggressive gesture by hyper-nationalist politician Shintaro Ishihara — then Tokyo’s governor — who wanted to have the Tokyo metropolitan government purchase the islands and build on them to assert Japan’s sovereignty.
Still, barely two days before Noda’s decision, China’s then-President Hu Jintao had specifically warned him not to proceed. Hu’s concerns were legitimate. For years, China had quietly acceptedJapan’s “de facto” occupation of the islands even as it disputed sovereignty. By buying them, Japan appeared to be moving to “de jure” ownership. Given the nationalist mood in China, the Beijing government couldn’t risk appearing weak in its response.
If Abe really wanted to break the chain of escalation that has since played out between China and Japan, he could singlehandedly return to the status quo ante. He would only need to “sell” the islands to a private Japanese foundation or environmental group, ostensibly to preserve their undeveloped natural beauty.
Japanese hard-liners would no doubt regard such a move as a capitulation to China. It wouldn’t be. Even after a sale, Japan would continue its de facto occupation of the islands, as it has for decades. Since the islands’ purchase was made by a previous government, Abe’s Liberal Democrats need not feel bound by the decision. In fact, after pacifying his nationalist supporters by visiting Yasukuni, Abe may be in a stronger position to compromise on the islands.
In an interview with Bloomberg earlier this month, Abe called for a summit with President Xi Jinping of China and said, “Now is the time to go back to that starting point.” Abe was referring to a bilateral agreement he reached with Hu in 2006, during a previous term as Japan’s prime minister. Selling the islands would be a critical first step toward returning to that calmer time.
If Abe wanted to be bolder, he could make the same offer to China that Japan has made to South Korea over a different set of disputed islands: to have the issue resolved by the International Court of Justice. The chances of China agreeing to this are minuscule. But by taking the moral high ground, Japan would both reaffirm its reasonableness, and satisfy the major precondition China has imposed on any Xi-Abe summit — acknowledging that sovereignty of the Senkakus/Diaoyu is in dispute.
Of course, if it’s hard to imagine an Abe administration reaching out to Beijing now, it’s equally hard to see Chinese leaders responding constructively. Yet on a simple cost-benefit analysis, Xi has incentive enough to scale back aggressive naval and air patrols of the waters surrounding the islands. He has just embarked on a set of difficult, potentially far-reaching economic reforms. Although he can’t afford to look weak domestically, he also can’t afford a geopolitical crisis that would disrupt China’s economy and possibly global trade.
A major rebalancing is gradually taking place in Asia as China’s economy becomes larger than Japan’s. But it isn’t in China’s interest to push for this rebalancing too aggressively. When I was in Tokyo in early December, I was struck by the intensity of concern over China’s aggressive posturing. The harder the Beijing government pushes now, the more rapidly Japan will move to upgrade its military capabilities and strengthen its alliances with the U.S. and countries ringing China.
Both sides need to find a way to ratchet down their words and deeds. Japan can and should take a first, small step forward by “going back” and selling the islands. Any Japanese leaders who doubt the wisdom of doing so should ask themselves a question: Are they really better off today than they were two years ago?
(Kishore Mahbubani, dean of the Lee Kuan Yew School of Public Policy at the National University of Singapore, is author of “The Great Convergence: Asia, the West and the Logic of One World.”)
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Lebanese President Sleiman announced the grant on Sunday in a televised address [AP]
|Saudi Arabia has pledged $3bn for the Lebanese army, Lebanese President Michel Suleiman announced, calling it the largest grant ever given to the country’s armed forces.The pledge comes just as Lebanon held a funeral for Mohamad Chatah, the former finance minister, amid rising tensions over who might have killed him.
“The king of the brotherly Kingdom of Saudi Arabia is offering this generous and appreciated aid of $3bn to the Lebanese army to strengthen its capabilities,” Suleiman said in a televised address on Sunday.
He said the funds would allow Lebanon’s military to purchase French weapons.
French President Francois Hollande, currently on a visit to Saudi Arabia where he met King Abdullah, said France would supply weapons to the Lebanese army if it was asked to do so.
He told a news conference in Riyadh: “France has equipped the Lebanese army for a while up until recently and we will readily answer any solicitation … If demands are made to us we will satisfy them.”
Lebanon’s armed forces have been struggling to deal with violence spreading over the border from Syria’s civil war.
The country, which is still rebuilding after its own 15-year civil war, has seen clashes between gunmen loyal to opposing sides of the Syrian conflict, as well as attacks on the army itself.
Lebanon’s army is seen as one of the few institutions not overtaken by sectarian divisions that plague the country, but it is ill-equipped to deal with internal threats.
The Sunni Muslim kingdom of Saudi Arabia may be seeking to bolster the army as a counterbalance to Lebanon’s powerful Hezbollah, a Shia armed group and political party backed by regional Shia power Iran.
Rising regional Sunni-Shia tensions have been stoked by the war in neighbouring Syria, where rebel forces, made up mainly by the country’s Sunni Muslim majority, are fighting against the regime of President Bashar al-Assad, who hails from the Alawite sect, an offshoot of Shia Islam.