November 4 – November 10, 2016

Oil peaking in five years? Gig economy creating or cannibalizing jobs?

Headlines

FT – China moves to stop Hong Kong lawmakers from taking seats 11/6. “Beijing has banned legislators who advocate Hong Kong independence from serving on the territory’s council, in an unprecedented move that exacerbates fears over the rule of law in the financial center.”
FT – Erdogan moves in on executive presidency after crackdown on Kurds 11/7. Turkish President Erdogan is making his move for full control.
FT – India struggles to digest withdrawal of high-value banknotes 11/9. In an effort to clear the system of counterfeit bank notes, India has made Rs500 and Rs1,000 notes (which account for more than 80% of the cash value circulating in the country) invalid as of 11/9 – the notes can be exchanged at banks for new Rs500 and Rs2,000 notes with stronger security features.
FT – Social media alone understood the Donald Trump story – John Lloyd 11/9. “That the mainstream and largely liberal-inclined news media newspapers and national television channels should have missed the story to which social media were bearing witness is symbolic as well as real.”

Special Reports / Opinion Pieces

FT – The age of vitriol: Edward Luce on US politics and social media – Edward Luce 11/3
The Ringer – The Curious Have Won – Rany Jazayerli 11/3
- “Theo Epstein overcame 108 years of history to build a championship team in Chicago. In the process, he ended baseball’s long-running analytics war by proving that an objective, data-driven approach can change the game.”

Briefs

Ananya Bhattacharya of Quartz highlighted that Apple is basically the only company making any money selling smartphones.

“Yes, the company experienced three straight quarters of declining iPhone sales before registering an uptick in its most recently completed quarter. And its overall quarterly profit slid for the first time in 15 years. Even so, Apple accounted for a staggering 103.6% of the smartphone industry’s operating profits during the third quarter, according to a BMO Capital Markets analyst, Investor Business Daily reported.”
“Making it even more remarkable is the fact that Apple has actually been losing market share. In the third quarter of 2016, Android captured a record 88% of the global market, according to Strategy Analytics. Meanwhile, Apple’s iOS share slipped to 12.1% in the same period, from 13.6% the year prior.”

Kiran Stacey of the Financial Times covered how smog levels in Delhi are driving out some of its middle-class residents.
- Pollution is bad in India’s political hub. Really bad with particulate levels last week reaching more than 30 times the World Health Organization limit recommended for safe habitation.
- “The economic consequences of Delhi’s pollution are already being seen in the property market – often a leading indicator of what will happen to the rest of the economy.”
- “In the past three years, property prices in Delhi have fallen 21.7% according to the MagicBricks property index. And estate agents say the decline is accelerating.”
- “‘Rents have really fallen in the last year – on average by more than 30%,’ said Kajal Makhijani of Mak Realtors, a broker who works in particular with the expatriate community. ‘Expats are getting really worried about the pollution and deciding not to come, or to work outside the city. Recently we have seen those concerns start to be shared by Indians as well.'”
Illustrated in the Daily Shot in the Wall Street Journal on November 8…
- “Consumer debt (excluding mortgages) rose more than expected – shown as a percentage of GDP below.”
- “A good portion of this increase was from student loans. The chart below shows student debt directly owned by the federal government, which has now exceeded $1 trillion. Note that the total student debt outstanding (including debt that is guaranteed by the government) is about $1.4 trillion.”

Graphics

FT – In charts: America’s growing state of disunion – Shawn Donnan, Sam Fleming, and Lauren Leatherby 11/7

WSJ – Daily Shot: November 8, 2016

Featured

*Note: bold emphasis is mine, italic sections are from the articles.

Will oil peak within 5 years? Nick Butler. Financial Times. 3 Nov. 2016.

“On November 2 Simon Henry, the chief financial officer of Royal Dutch Shell and one of the most respected figures in the industry, told analysts on a conference call for the Shell results presentation that he believed ‘oil demand will peak before supply and that peak may be between five and 15 years hence.'”

Why…

“Oil demand in the developed OECD world has already peaked and is 9% below the level reached in 2005. In Europe, oil demand is down 17% over the same period.”

“All the indications are that in the developed world demand has further to fall. Oil use is now heavily concentrated in the transport sector. Electric vehicles have only a fractional share of the market but the numbers are growing month by month. Technology is improving, reducing costs and expanding sales. Tesla gets most of the publicity but those wanting to understand the impact of EVs on the oil market should look at China where 188,000 new electric and hybrid vehicles were sold in 2015. This year that number is expected to more than double to around 450,000.”

“As EVs proliferate, their costs will fall until they are the natural purchase everywhere.”

The implications for the oil companies are plateaued-to-falling demand and corresponding pressure on oil pricing.

With the biggest challenge facing the “producing countries, especially those that have failed to diversify their economies, such as Russia, Nigeria, Algeria, Venezuela and, of course, Saudi Arabia. Some have such a low production cost base that they should be able to keep their market share. But with the prospect of a decline in oil use in mind many will want to maximize production quickly to extract as much revenue as possible as soon as they can. In a declining market the expectation will be that prices will stay low or fall further, removing any remaining incentive to keep oil in the ground.”

“The 20th century was the age of oil. The 21st will not be and the adjustment process for those involved could be very disruptive – destroying rentier economies built on oil revenues, changing the pattern of trade and adding another challenge to unstable and dangerous parts of the world.”

Is the Gig Economy Cannibalizing or Creating Jobs? Here’s Some Early Evidence. Mark Muro. Wall Street Journal. 3 Nov. 2016.

“Does the so-called gig economy of app-based freelancing for platforms like Uber or TaskRabbit complement or ‘cannibalize’ more conventional payroll work? Given the sketchiness of the data available, it’s been hard to tell.”

“All in all… the online freelance marketplaces may well gain workers at the expense of competing payroll businesses in some industries, particularly where incumbents are struggling in weaker markets or fail to respond with better service.”

“All of this is important because of the rise of online temping, freelancing and independent contracting has huge implications for the circumstances of workers and families in cities.”

“To begin with, the scale of the trend is enormous. In this regard, the spread of new, gig-based business models for linking workers to work isn’t just a limited scale, vanguard development. Instead, the changes affecting a few hundred thousand workers in the rides and rooms industries are a tiny part of a pervasive, economywide move toward nontraditional freelance, contract or temporary work arrangements in dozens of industries. And the number of workers involved is huge. Overall, there may be as many as 68 million ‘independent’ workers in the U.S., according to a new estimate by the McKinsey Global Institute. Within a decade, nearly half of all employed Americans may be employed this way. So the size of the trend alone underscores the need to pay attention.”

“Beyond that, the shift to alternative work arrangements matters for policy makers because it represents a fundamental reorientation of the social contract within which millions of Americans work. Most notably, the rise of online temping, freelancing and independent contracting means that millions of workers increasingly lack access to the once-ubiquitous labor standards that defined the ‘good jobs’ economy that came out of the New Deal era. Gig workers, for example, retain limited access to income security protections, such as unemployment insurance, workers’ compensation and disability payments. Minimum-wage and antidiscrimination laws may not apply to such contractors, nor do they often receive retirement benefits such as Social Security. And for that matter access to credit, training and credentialing becomes even more tenuous than elsewhere in the economy.”

“In short, the expansion of the gig economy-left to itself-is likely going to contribute to larger trends that are reducing the share of American workers that can achieve basic economic security through their work.”

Other Interesting Articles

Bloomberg Businessweek