World Saved $3.5 Trillion from Emergency Oil Stocks: IEA

The world has saved USD 3.5 trillion over the last 30 years by maintaining emergency oil stocks to offset supply shocks and curb price surges, the West's energy watchdog said on 25th June, Wednesday. The International Energy Agency (IEA) said in a report that emergency oil stocks held by member and non-member states have acted as an " insurance" against oil supply disruptions. Spiralling violence in key oil producer Iraq in recent weeks has pushed global oil prices to nine-month highs, reviving speculation of a release of strategic stocks in case of severe supply disruptions. "Significant economic benefits are derived primarily from offsetting oil supply losses and thereby reducing potentially significant oil price increases. These consist of reduced GDPlosses and reduced import costs," the IEA said. 

 

Using a model to simulate tens of thousands of possible oil supply disruption scenarios and market outcomes, the report estimated global net benefits derived from existing emergency stocks amount to USD 41 per barrel per year after storage costs. This equates to some USD3.5 trillion over 30 years, it said. The 29 IEA member states must hold stocks equivalent to at least 90 days of net imports. At the end of March 2014, member countries' stores totalled 4.1 billion barrels, equivalent to about 44 days of total global demand, the report said. By the end of 2013, 60 percent of oil stocks in IEA member countries were crude oil and 40 percent refined products such as gasoline and diesel. Stockdraw has proven to be the most powerful mechanism available to IEA member countries during an oil supply disruption, the Paris-based IEA said. Limiting oil consumption, particularly within the transport sector which accounts for more than half of all oil use in IEA members, was another way to offset supply disruptions, it said. The IEA was created in 1974 by 16 Western countries in the wake of the 1973 oil supply shock in an effort to limit the impact of future crisis. (Agency)

 

Israel Joins Paris Club of Rich Creditor Nations

Israel on 24th June, Tuesday joined an influential group of rich nations that help poor indebted economies, giving the country an international boost of recognition for its economic accomplishments. The news that Israel had been accepted into the Paris Club of creditor nations was welcomed by Israeli policy makers, who are facing calls to reduce high levels of poverty and inequality even as the country's economy hums along. The Paris Club announced Israel's induction, bringing its membership to 20 countries. The club is an informal group of governments, including the United States, that collectively negotiate deals with poor countries struggling with huge debts. It was created in 1956 and has worked out loan deals for 90 countries. It can cancel or restructure debts when countries are at risk of default. 

 

Israel's finance minister, Yair Lapid, lauded the Paris Club announcement, saying it "shows Israel's economic might and presents additional proof that Israel's place is alongside the strongest countries." Once a tiny farming nation, Israel has evolved into a high-tech economy with numerous startups and companies in communications, software and military technology. Its economy continues to grow, and unemployment is roughly 6 percent, well below the double-digit levels seen in many parts of Europe. After a 16-year effort, Israel was accepted into the Organization for Economic Cooperation and Development, a policy forum for the world's most developed economies, in 2010. Still, more than 20 percent of Israelis live in poverty, nearly double the OECD average. This week, a government committee urged Israel to pump nearly USD 2 billion into social services and welfare programs. (AP)

 

Adidas Set to Reach Soccer Sales Goal

Adidas predicts it will sell a third more Germany jerseys this year than when the country hosted the World Cup eight years ago as fans worldwide get behind the team in Brazil. Adidas will sell more than 2 million of the shirts in 2014, beating its record 1.5 million of 2006 and helping it achieve soccer-related sales of at least 2 billion euros  as the World Cup boosts demand for its balls and sports gear, it said. The Herzogenaurach, Germany-based company sponsors sides including the national team. “For the last couple of years, the German team is playing really exciting football,” Adidas spokeswoman Katja Schreiber said by phone. That’s reflected in the sales figures, with Germany gaining more fans internationally, she said.

 

More than 500,000 of the team’s jerseys will be sold outside Europe this year, compared with about 300,000 in 2010, the year of the last World Cup in South Africa, Adidas said. In total, the company expects to sell more than 8 million soccer shirts globally this year, up from 6.5 million in 2010. Achieving the target for soccer-merchandise sales of 2 billion euros this year will confirm “our outstanding position as the clear number one in football globally,” Chief Executive Officer Herbert Hainer said at a press conference. The company will sell more than 14 million Brazuca World Cup match balls in 2014, an increase of 1 million on 2010, Hainer said. (Agency)

 

World Cup Land Investors Seek to Recover Losses

Hundreds of British investors are looking to take legal action to recover lost money after being convinced to buy land in Brazil, ahead of the World Cup. Between 2010 and 2013 thousands of investors were contacted by a London-based firm of property brokers, Pantheon Realty Consultants. They were persuaded to invest in plots of land which, they were told, would rise in value due to the World Cup. The City of London police have since shut down the company's UK website.

 

Investors have lost millions of pounds and in many cases their life savings. Frustrated by low returns on savings in the UK, hundreds were persuaded by Pantheon to invest in plots of land which, it was claimed, were ripe for development and would rise in value due to the World Cup, the Olympics in 2016, and Brazil's rapid economic growth. Hundreds bought plots of land near the World Cup destination of Fortaleza, for which they typically paid £10,000. But at the end of last year, they learned that Pantheon had been wound up by the Insolvency Service after failing to file accounts. Many have still not received their title deeds. Where they have, the plots turned out to be worth just 200 Brazilian reals - just over £50.Those who made an initial investment were called repeatedly by sales people keen to sell further plots. The victims range from a widow with cancer in her eighties, who lost more than £70,000, to a 26-year-old who lost £26,000. (Agency)

 

ECB Imposes Negative Interest Rate

The European Central Bank has introduced a raft of measures aimed at stimulating the eurozone economy, including negative interest rates and cheap long-term loans to banks. It cut its deposit rate for banks from zero to -0.1 per cent, to encourage banks to lend to businesses rather than hold on to money.The ECB also cut its benchmark interest rate to 0.15 per cent from 0.25 per cent. The ECB is the first major central bank to introduce negative interest rates.Howard Archer, chief UK and European economist at IHS Global Insight said: "Despite being widely anticipated and in some quarters criticised for occurring too late, it is still a bold and unusual move by the ECB to take its deposit rate into negative territory." "There has to be considerable uncertainty as to how effective negative deposit rates will turn out to be," he added.

 

It has been tried before in smaller economies. Sweden and Denmark, who are both outside the Single Currency, attempted to use negative rates in recent years with mixed results. Analysts said in Sweden it had little discernible impact; in Denmark it did have the effect of lowering the value of the currency, the Krone, but according to the Danish Banking Association it also hit the banks' bottom line profits. (Agency)

 

Japanese Automakers Recall 3 mn Vehicles Globally for Airbag

Japanese automakers on 23rd June, Monday recalled nearly three million vehicles worldwide over an airbag defect that could pose a fire risk. Honda said it recalled about 2,033,000 vehicles which were produced between August 2000 and December 2005, including more than one million in North America and 668,000 in Japan. Two other automakers — Mazda and Nissan — also recalled hundreds of thousands of vehicles over the same problem, which was also responsible for earlier recalls by Toyota. Japan’s Takata Corp, which made the airbag, noted its US subsidiary had manufactured the airbag, apologising for the problem and vowing to make its utmost efforts to prevent a recurrence.

 

“We apologise deeply for causing tremendous trouble and worries to client companies, users of our products and other people concerned,” the company said in a statement. Nissan recalled a combined 755,000 vehicles, including 128,000 in Japan and 627,000 overseas. “In North America, 228,000 are on the recall list, with 7,000 in China,” a Nissan spokesman said. A Mazda spokeswoman said: “The recall will cover 11,832 vehicles at home and 147,975 units overseas, mainly in Europe and China.” Subject to Honda’s recall are a total of 13 types of vehicles in Japan, including the popular Fit and Accord models. Front passenger airbag inflators could have been assembled with an improperly manufactured propellant component, Japan’s third largest automaker said. That could cause the container of the inflator to rupture in the event of a crash, posing a fire risk or injuring passengers, it added. (Agency)