The Hindu Business Line : Market storms that lash the energy engine

Chilling apprehensions about oil, which is on a relentless runaway rise, threaten to make this winter colder, even as oil jumps to $98 a barrel, on fears of a harsher winter.

Oil may reach $100 by the end of the week if the North Sea storm cuts production significantly, says Bloomberg, citing Brian Hicks, president of the Wealth Daily newsletter. “Any threat to supply is enough to send the price of oil up a dollar, two dollars every single day.”

A different storm lashing the energy engine is the rush of funds into the ‘energy financial markets’ such as the New York Mercantile Exchange ( www.nymex.com) and the Intercontinental Exchange ( www.theice.com): over $100 billion of additional speculative money has been added between 2000 and 2006, says Tom James in Energy Markets: Price Risk Management and Trading ( www.wiley.com).

“Even if geopolitical tensions do not create any further volatility in the years to come, the increased money flows created by investors into the energy markets may continue to do so,” he foresees.

Of immense educative value in the book are the chapters on key energy aspects such as derivatives markets, futures, hedging, technical analysis, accounting, and emissions trading.

On ‘pricing Middle East crude in the next century’ Taimur Hadi, director of strategy and business development at the Dubai Mercantile Exchange has contributed inputs.

“Unlike the liquid, well-regulated and transparently priced futures benchmark for sweet crude oil, Middle East sour crude oil sold to Asia is priced based on a thinly traded and unregulated over-the-counter market in Singapore,” says Hadi. “The backbone of this price-discovery mechanism is Dubai (Fateh), a crude-oil stream with less than 1 lakh barrels of production per day.” A futures market in Middle East sour crude oil is the only long-term, sustainable solution to the region’s need for price-risk management, he argues.

Important read.

‘Old’ money

Age is fast catching up with capital markets in emerging economies and making them buoyant. And it is happening through pension funds that are pushing their monies into institutional investors.

“Increasing amounts of household savings are being directed towards pension funds and other financial investment plans for retirement,” observes World Economic and Social Survey 2007: Development in an Ageing World from the United Nations ( www.academicfoundation.com ).

“Demographic changes together with increasing sophistication of financial instruments and changes in institutional arrangements in many countries have led to an increased presence of pension and mutual funds in the financial markets, with numerous potential implications.”

The UN study informs that between 1990 to 2003 assets under management (AUM) of institutional investments rose from $14 trillion to $47 trillion, in the developed economies; a jump that was from 78 to 160 per cent of their aggregate GDP. A similar surge is visible in developing economies too. “Chile leads with a total asset of pension funds that was equal to no less than 65 per cent of GDP in 2004.”

Closer home, the recent move by the market regulator to clamp down on participatory notes may perhaps have to be seen in this context.

Closing arguments

Justice is valuable but it should not be obtained through ‘irregular or improper means,’ as Lord Sankey cautions. A chapter in The Devil’s Advocates by Michael S. Lief and H. Mitchell Caldwell ( www.landmarkonthenet.com ) elaborates on the precept, by discussing a case in which the chief justice redefined the use of confessions and police interrogations.

“A suspect’s confession is powerful evidence… But what if the confession was physically coerced or psychologically induced? Is such a confession trustworthy? What if it was a lie?”

A collection of ‘greatest closing arguments in criminal law’ that professionals’ logic would greatly benefit from.

Costs of ageing

Funding for the ageing is hot. For instance, Christopher Pyne, the Australian Minister for Ageing talks about making the funding model sustainable, while Aged Care Association chief executive Paul Carberry argues that, on economic and moral grounds, those who can afford to should accept a greater share of the cost of aged care than is presently the case, considering “a future declining workforce and a rapidly expanding aged population,” as www.news.com.au reports in an October 17-dated story. The UK is better placed than most other countries in Europe “to keep down the costs of sustaining its future elderly, mainly because of the extreme modesty of the state old age pension. This represents a mere 16 to 18 per cent of the average national wage,” notes Jeremy Seabrook in A World Growing Old ( www.vivagroupindia.com ).

While the more generous pensions provided by the state in Germany, France and the Netherlands will absorb between 14 and 18 per cent of GDP of those countries within 30 years, the UK’s commitment is not likely to rise much above ‘the existing level of 5 per cent of GDP,’ he adds.

Since ageing is irreversible, it is risky to hope for the best, especially when it comes to taking care of the weak and the most vulnerable, cautions Seabrook. “It would be negligent to rely upon economic growth in perpetuity, upon the goodwill of future generations or even upon the capacity of private pension schemes to ensure the financial stability of the old.”

The author, therefore, exhorts that the precautionary principle ought to apply in this case, “no less than in that of global warming or any other sign of potential breakdown in social, ecological or economic order.”

Energetic presentation.

How to listen better?

When listening to informative speeches, you can enhance your concentration using the bracketing technique, advises Handbook of Public Communication by Andrew D. Wolvin, Roy M. Berko and Darlyn R. Wolvin ( www.jaicobooks.com ). “As you take notes on the speaker’s ideas, write down the ideas competing for your attention and put brackets around them. You have recorded them; you will remember that they are important, and you can come back and deal with them later.”

Another tip in the book is to listen to the speaker’s signposts — ‘the transitions, vocal emphases, and forecasts of main points.’ These signposts are structural cues that can assist your focus on the points, the authors explain.

Yet another method to help you when confronted with a vast amount of information is ‘chunking’ — that is, breaking down the information in subunits, grouping things according to their common description.

For the avid, a major memory strategy described in the book is rehearsal. “To ensure that the information gets stored in the long-term memory so that it can be recalled, you have to repeat it and rehearse it over and over until it can be brought back into consciousness,” the authors reason.

“To remember information, such as the lecture you just heard in class, it is best to review your notes, or recount your mental thoughts, as quickly after the listening experience as possible.”

Recommended addition to the enthusiasts’ shelf.

D. MURALI

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