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Which way are economic winds of change blowing?

Ford is well poised for continued growth based on their greatly improved line-up of fuel-efficient vehicles, but will the price of oil remain high or will a global decline in demand create a surplus of oil, thus causing prices to plummet over the next year?
Posted: August 15, 2011 - 7:09PM
Author: Don Bain


This is a good question to ask at a time when markets and economies worldwide seem to be dealing with a high degree of volatility and unpredictability.

In an article on today, Trefis Team wrote, “Even though we believe that Ford is favorably positioned to grow its market share through its refreshed fuel-efficient product line-up and its investment in new technologies, we remain cautious about the global economic scenario which is facing several macro headwinds.”

Ford’s 9 to 12 percent year-to-year increases in the first two quarters of 2011 can largely be attributed to the Focus and Fiesta. Similarly GM has made market progress with the Volt, Cruze and Sonic.

Forbes accurately points out that a falling price of gasoline is likely to push sales of trucks while continuing or worsening unemployment will definitely favor commuter cars.

They concluded, “In the long term, we expect continued economic growth in emerging economies which will drive the demand for oil, resulting in elevated level of oil prices, which will continue to reinforce the trend towards fuel-efficient, smaller vehicles and in turn drive Ford’s car market share.”

However, just last week, The Wall Street Journal reported the International Energy Association’s (IEA) alert that the as yet to be realized double-dip recession, “could reduce energy demand enough to push international oil markets into surplus next year.”

The price of oil dropped by 12 percent in the first nine days of August, 2011. As a seemingly endless play of both human and natural disasters continues across the global stage, where will it all lead?

The IEA, considers this only one of several possible scenarios, but have trimmed their estimates of demand in the U.S.this year by one percent or 200,000 barrels.

“For the first time since March 2009, China’s monthly apparent demand contracted on an annual basis, contracting by 1.5 percent in June,” the IEA stated.
They attributed the decline to the Chinese economy slowing while higher end-user prices had their effect upon demand.

So most investments are volatile, providing unpredictable performance . So where do you invest you money?

There are two simple things that store well and always seem to be in demand: beans and bullets – put your money there and hunker down. (We're told 9MM shells fit the most weapons worldwide and you should diversify your bean holdings) Advice we share with tongue firmly in cheek.

As far as double-dips go, we prefer chocolate chip cookie dough in ours.