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Strategies & Market Trends : The Financial Collapse of 2001 Unwinding -- Ignore unavailable to you. Want to Upgrade?

To: Joseph Silent who wrote (4851)	3/18/2020 2:35:37 AM
From: elmatador	Read Replies (1) \| Respond to of 13803

Hi JS, Hope you are well. It is exactly what I am doing for my sector. Could the Oil Price Collapse Drive More Investment Into Renewables? Oil companies have long argued that renewables projects offer lower returns. “That argument no longer holds at $35 per barrel.” JOHN PARNELL MARCH 13, 2020 Black swan risk: With oil prices in the tank, renewables may offer better returns. Low oil prices will test the resolve of the majors’ energy transition plans, but analysts expect the companies' long-term commitments to decarbonization and renewable energy to remain intact. A dispute between Russia and Saudi Arabia has sent a flood of cheap oil and gas into global markets just as the COVID-19 pandemic is stifling demand. This market dislocation comes at a time when European oil majors including Shell, Total, Repsol and BP are embarking seriously down a path toward emission reductions and the diversification of their businesses into renewables, e-mobility and other energy services. Oil companies have been notoriously slow in pivoting their businesses toward cleaner energy sources. Will the current market storm change that? Might it even accelerate the transition? “The argument that has often been put forward is that they can't invest in renewables because renewable projects offer much lower returns than oil and gas projects. That argument no longer holds at $35 per barrel,” Valentina Kretzschmar, director of corporate research at Wood Mackenzie, told GTM. “Average returns from oil and gas projects are now the same as renewables projects and, in fact, renewables projects are much lower risk. Already, we have seen companies like Occidental cutting dividends by 90 percent. It's a discretionary spend,” she added. By that same token, the current headwinds for oil companies could mean a negative impact on carbon-reduction measures that would also be considered by the industry as discretionary spending. The upside for renewables The oil and gas sector currently accounts for just 2 percent of investment in renewables, according to Wood Mackenzie. So a slowdown in the near term would not derail the flow of finance to solar and wind projects. This isn’t the first time that oil prices have suffered a shock. During such “black swan” events, many types of diversification strategies are used to protect against commodity prices, said Luke Fletcher, senior analyst for investor research at the environmental reporting nonprofit Carbon Disclosure Project. “Traditionally, the integrated companies had their ‘downstream’ to mitigate against low oil prices,” said Fletcher. Essentially, low oil prices mean the profit margin for converting that into motor oil or other products is higher. “In the future, having exposure to other diversified energy assets, such as renewables, could provide a bit of a hedge against oil price volatility as well. They have fundamentally very different cash flow profiles and are obviously less reliant on oil and gas and other commodity prices,” Fletcher said. While some oil companies may choose to trim capex in the energy transition in the immediate term, others may choose to signal their longer-term strategy and double-down on diversification across the broader energy sector. As oil companies are hit hard by the price collapse, cost-cutting will dominate, and companies with weaker balance sheets will be more concerned with survival, Kretzschmar said. Yet longer-term strategies to expand revenue streams in the power sector are not likely to be shelved. “One thing is clear: The energy transition is not going to go away,” said Kretzschmar, pointing out that this week’s U.K. budget announcement had climate change woven throughout. “It's still a key priority for the government.” With that in mind, Kretzschmar warned against business as usual for oil companies. “The sector is already very much unloved by investors, and it's only going to get worse. I would like to see the oil and gas sectors starting to seize opportunities in the megatrend that is the energy transition. Because there are opportunities. It is a growing trend, and the pressures to transition and to tackle climate change are only going to increase."

To: Joseph Silent who wrote (4851)	3/18/2020 2:36:10 AM
From: elmatador	Respond to of 13803

The decline in oil prices will lead to significant real income shifts from oil exporters to oil importers, likely resulting in a net positive effect for global activity over the medium term. A supply-driven decline of 45% n oil prices could be associated with a 0.7-0.8% increase in global GDP over the medium term and a temporary decline in global inflation of around 1% point in the short term. Activity in oil importers should benefit from lower oil prices since a drop in oil prices raises household and corporate real incomes in a manner similar to a tax cut. While the positive impact for oil importers could be more diffuse and take some time to materialize, the negative impact on exporters is immediate and in some cases accentuated by financial market pressures. Since food production tends to be energy intensive, falling oil prices would likely be accompanied by declining agricultural prices. A 45% decline in oil prices could be expected to reduce agricultural commodity prices by about 10% . Passed through into domestic food prices, the decline in commodity prices would benefit the majority of the poor. lnkd.in The Great Plunge in Oil Prices: Causes, Consequences, and Policy Responses

To: Joseph Silent who wrote (4851)	3/18/2020 2:56:24 AM
From: elmatador	Respond to of 13803

Defense stocks will tank. These OPEC countries will curtail the purchase of weapons. See it as the opposite of the oil shock of 1973 when oil prices skyrocketed 70% to $5.12 a barrel. One effects beyond making OPEC countries rich quickly was that they bought shiploads of expensive military hardware. Big Customers for expensive weaponry post oil shock of 1973: Libya’s Moammar Gadhafi and Iraq’s Saddam Hussein and Iran's Reza Pahelavi and of course the Saudis In today's case this will reverse and the purchase of expensive military hardware will stop.

To: Joseph Silent who wrote (4851)	3/18/2020 3:41:57 AM
From: elmatador	Respond to of 13803

The way I do is: Look to a general direction the a sector or industry was already going and the evaluate if that trend becomes irreversible as a result of Covid-19 impact. For example in the case of oil major already investing in renewable energy because they had low reserves: Total, ENI, BP Their push might now come to shove as a result of Covid-19 and these il companies that have low reserves will allocate more capital for renewable energy. 1) Another case could be 5G You saw that 5G was not taking off as hyped. It can be the case that 5G will tank. That will have a big impact in telecoms. The US wants 5G American owned and may prompt buying Ericsson or Nokia or a merge of Nokia and Ericsson creating somehting like Airbus - Boeing Ericsson-Nokia in the west and Huawei in the East. 2) Movie Theaters Going to the movie had already an uncertain future Streaming was already gaining a big share of hours watching movies. Quanratnies may make that trend irreversible. The movie business is always changing, but these days it can be difficult to tell the difference between struggle and outright decline. The 2019 box office is down 9% from last year, and soon the theaters’ Netflix battle will be joined by Disney+, Apple+, WarnerMedia, and more. Even Hollywood is worried: Last week, (around June 20th 2019) when The New York Times assembled a sprawling collection of influential figures from the film industry to assess the state of moviegoing. The result was a multifaceted collage of alarming messages.~ indiewire.com The Unwinding post Financial Collapse which is, by the way, the them of this thread 3) Collapse of the European Union After Mediterranean problems post Financial Collapse of 2008 didn't lead to a GREXIT but to a BREXIT The spread of Covid-19 out of that sanctuary of illegal Chinese workers (estimated between 70.000 and 100.000) concentrated in Italy's Po River Valley, Italy's industrial heartland. They work in the leather and textile industries Austria is the route that connects Northern to Southern Europe and they are not happy that its government did not close the Southern border soon enough due to economic reasons which led to Covid-19 coming to the north, through Austria Perhaps Northern Europe would get fed up with their Mediterranean Club countries and split for good.