There seems to be a conspiracy of complacency about India. Read The Economist's dire warnings. To be fair, the naysayers have been warning of an India collapse for years, But the longer that these imbalances are allowed to build, the greater might the collapse be when it happens
Produce too little energy over the next 35 years, says the International Energy Agency in this article from the Guardian Weekly, and there will be price hikes and a financial crash; produce too much and the increased rate of global warming will also result in economic disaster. The rest of the article leaves you with the feeling that we have just gone too far, that nothing will or can be done to reverse the environmental catastrophe we seem to be heading towards. To what extent will the chemical industry be blamed for this disaster?
Please read this excellent piece from my colleague Nigel Davis, who is editor of the Insight section of ICIS news.Some further thoughts: if 46% of existing and 45% of future ethylene production is taken offline by flooding, just think of the impact on food pricing and distribution and the resulting social and economic chaos due to the shortage of food--packaging material. These estimates maybe wrong, but if Lehman Brothers are only halfway right God help us, and I don't just mean the chemicals industry. On a more immediate bottomline level, how many banks, consultants and project proponents are factoring in the increased risks of flooding into feasibility studies? Or does anyone really care enough to look beyond their next promotion or their imminent retirement? If you won't be around in 10 years' time, why bother asking awkward and potentially career-threatening questions?
Global leaders from the Group of Eight rich nations plus Brazil, China, India, Mexico and South Africa have agreed that developing countries will have to face targets for cutting emissions as well as developed countries.If these noble words are followed by action, prepare to be legislated against.
I wrote yesterday about Rex Tillerson and his belied that cutting hydrocarbons consumption could harm economies. Dr John Holdren, president of the American Association for the Advancement of Science, says "nonsense".
The optimism seems infectious: Reliance's market capitalisation breached the RS3 trillion level today, placing the giant in an elite group of only three Indian companies.And the petrochemicals major is predicting 12.59m tonnes of polymer demand in India in 2011-12 with local supply at slightly below 8m tonnes/year.
The forecast big deficit is based on a very rosy view of the economy and therefore polymer demand growth. Its estimate for polymer consumption in 2006-07 is a mere 5.49m tonnes.
Reliance might be using these bullish demand-growth numbers ahead of firming up a cracker project in India, which was first announced several years ago. The project is due on stream after 2010. Next year, the Indian major will commission 900,000 tonnes/year of polypropylene at Jamnagar.
Are Reliance and its investors guilty of irrational exuberance?
I had a feeling in my bones that Reliance was laying the groundwork for a major project announcement with its endlessly bullish forecasts about the Indian market (see my earlier blog 'Is India about to crash?').
And low and behold, last week we saw the Indian major firm up its long-rumoured plans for a new cracker and derivatives complex at Jamnagar. The cracker is due on stream in 2010-11, using off-gas and other refinery by-products from its new refinery as feedstock.
Commentators say feedstock costs will be low. The petrochemical giant is already said to be producing some of the most competitive propylene in Asia. If its growth projections prove too bullish, Reliance will need to focus very hard on costs.
This article from Reuters highlights the danger of overpaying for assets in the current India M&A frenzy.Perhaps its point about the overall of over-confidence is valid, especially given that previous deals were small scale. Other Indian companies, following Tata Steel's lead, are starting to bid the big league. Integrating small acquisitions to add value is one thing, but multi-billion purchases are another. Just ask Dow Chemical that ended up destroying value after buying Union Carbide.
And on the subject of Dow, will they won't they? The deluge of stories about Reliance and Dow continues with the latest suggestion that the pair are heading for an alliance rather than Reliace buying DowPlus, as you can see from the first Reuters link, Reliance are being linked with a stake in Carrefour.
Is this an unsustainable M&A bubble that could all go horribly wrong if purchase prices are too high? We are still in a global economic upcycle despite recent stock market collapses. What happens when the real slump does arrive and companies are left with assets purchased during oone of the strongest economic upcycles in history, coinciding with a period of exceptionally cheap credit?
We heard about this rumour last year, but it's emerged again - Reliance is now said to be in advanced discussions for acquiring Nova Chemicals. Nova's Alberta-based cracker and PE production might be attractive because of pretty competitive, locked-in gas prices, but would Reliance really want its styrenics business - the asset that's officially on the block?
And surely, a tie-up with Dow would be a much better proposition.
At the rate that things are going, India, the Middle, and possibly China, could own nearly all the western petrochemical majors in 10 years time.
No point obviously. As this report from Deutsche Bank Download file notes, the global skills shortage is not just in the west.
In the engineering sector, and perhaps this applies to petrochemicals, Deutsche Bank claims that the huge outpouring of Indian and Chinese graduates is grossly exaggerated; and it adds that the quality of graduates from both India and China can be pretty poor, meaning a great opportunity for western Europe - particularly Germany.
It's other conclusion, that the service industry boom cannot be sustained in India because of the skills shortage, is interesting. The route that India must therefore take, it says, is lots more manufacturing.
This is potentially tremendous news for petrochemical demand, again provided there are enough workers to run the plants.
But if India does embark on a huge build-up in manufacturing capacity, God help the environment.
I am already advising my 11-week-old son to buy a house on high ground. Soon I might need to suggest the Himalayas.
A boring topic to harp on about again I know, but this article from my colleague Nigel Davis from the Insight section of ICIS news supports what I have been saying for the past two years.
The industry has overbuilt, and despite all the optimism engendered by project delays and probably cancellations in Iran of No 11 Olefins and beyond, this is still, as Nigel says, an unprecedented wave of new capacity.
The reasons for this overbuilding are the easy liquidity that Paul Hodges of international eChem talks about in our commentary section, the optimism over sustained strong global growth and a continuing demand boom in China and India.
Nigel's report came out on the same day that Ben Bernanke's remarks sent stockmarkets into decline.
Imagine this: a combination of an unprecented wave of Middle East capacity, greater self sufficiency in China due to the large amount of capacity being built there and a US housing sector-driven recession that Bernanke's comments were interpreted as pointing towards.
This could be a great opportunity to pick up some cheap petrochemical shares and bankrupt companies in 2009 and beyond.
Reliance is building the world's first cracker that will be entirely fed by off-gas from its huge refinery expansion at Jamnagar. This technology has been used before, but never on this scale because nobody has had enough refinery capacity to run a cracker 100% on very cheap off-gas.
The Dow strategy includes looking for cheaper sources of ethylene and for "asset light" investments, ie, where it doesn't have to spend a bundle of cash to get its hands on cheap raw material. This has proved a highly effective strategy in Kuwait through the Equate joint venture.
In addition, Dow would get access to the Indian market where the growth potential is huge.
As for Reliance, it wants technologies - Dow's great strength - and also access to the US chemicals market. The US, despite low growth, is still the world's biggest market.
And so, I think, a Dow-Reliance tie-up makes a lot of sense.
As for a leveraged buyout of Dow, the complexities of which are made so simple even I can understand them in this excellent article from my colleague Joe Chang, what about the politics?
Middle East companies would very probably have to be part of such an historically massive to deal; they have the cash and don't have pressure from nervous shareholders. I am not sure whether Sinopec or PetroChina would be interested as their focus is on securing overseas oil and gas assets.
After the Dubai Ports controversy last year, an LBO involving the Middle East would surely be blocked by Congress.
Quite possibly, yes, despite my instinctiive pessimism. Perhaps emerging markets such as China and India have reached such a critical mass that no matter how much capacity is brought on stream, it will be easily absorbed.
Or maybe some disaster lies just around the corner.
Who cares if you've made your money in the most extraordinary bull run in history and have already cashed in your chips.
The collective sigh of relief was almost audible late last week when the Fed cut its discount rate - the rate banks charge each other for lending.
Action from other central banks, including the European Central Bank, could follow this week. Analysts also rate the likelihood of the Fed cutting its formal interest rate at its meeting next month at 50 per cent or more. This is the rate charged to companies and other non-bank borrowers.
But still, this credit crisis is not going to away that easily. See more detailed analysis below, but in short here, the implications could be:
*A weaker Chinese economy. Roughly one-third of China's GDP is dependent on exports and if the US goes into recession, this is serious. Many overseas chemical projects have been justified by estimates of persistently strong demand from China for imported chemicals that will be re-exported as finished goods. Sales of locally made chemicals would, of course, also suffer
*Unfunded projects backed by smaller private companies being shelved.
But a lot of capacity in the Middle East and China is too far advanced to be cancelled. In the Middle East, many of the projects already under construction might come on stream bang on time because the producers there can make money in any market conditions. Projects under construction in China start up on schedule because the government wants to gain greater independence from imports.
Let's hope this crisis goes away, but if it doesn't why on earth didn't the supposedly smart people who run the global financial system realise the dangers? Joseph Stiglitz, a genuinely smart guy, has been warning for years about the risks, which he outlines in this excellent article
Continue reading "The global credit crisis is going to last" »
Alan Greenspan refused to categorise conditions in the US housing market as a bubble when he was chairman of the Fed.
But now he's retired and while plugging his memoirs, he admitted in a TV interview the other day that lots of froth in different parts of the US made up what was, in reality, one giant bubble - similar to the one that went pop in 2001 with the collapse of the dot com shares.
Take a look at this article from The Economist which suggests that there are six countries - Belgium, Britain, Denmark, Greece and Spain - where a housing market crash is even more likely than in the US. In these countries, the article suggests, average house price inflation is 47% above what is justified by fundamentals.
And then look at Asia. In Singapore, property prices have doubled - even tripled in some cases - over the last two years. Speculation reached fever pitch until an increase in government taxes and the global credit crunch brought sanity to the market a few weeks ago. Now there is talk is of another property price collapse similar to the 1997 meltdown.
Then there are the property booms in India and China.
You can argue, as the Asian Development Bank does, that Asian fundamentals are so strong that the continent can ride out a US credit-crunch driven recession.
But what goes up has to eventually, surely, come down and bubbles have historically always gone pop.
And so from this calculate how many polymers and chemicals go into the construction industry - from PVC to formaldehyde - and think of a worst-case scenario for your business. This could be the froth being taken out of the market - meaning property prices falling back to where they should be based on the fundamentals. But as is often the case when sentiment turns bearish, prices could collapse below their real value. Fantastic news for bargain hunters with nerves of steel, but not much use if you're operating a PVC plant.
The global property bubble could pop as early as next year, if the Fed 50 basis point cut and any future measures fail to bring the credit crisis under control.
......how long will it last is the inevitable question. Demand growth has been so strong so far this year with very little new production coming onstream that while crude oil and the price of monomers have set a floor for pricing, they no longer appear to be the main drivers behind fluctuations and increases; in other words, supply is so tight that it is the demand pull rather than the cost push that's the dominant factor behind pricing this year. The attached slides from Chow Bee Lin, Senior Editor at ICIS pricing, illustrate this point - Download file
But Chinese inflation is rising. This has led to negative real interest rates on savings, leading to money being poured into ever-more frothy (remember, lots of froth makes one giant bubble) local equity and real estate markets.
Inflation everywhere could be back with avengeance - made worse by the US interest rate cut that has led to more hot money flowing out of the US into China, India and other developing countries.
Plus there are the long term implications of the global credit crisis beyond. A lot of the polymers being shipped to China and elsewhere are for re-export to the US and Europe as finished goods.
And, of course, the second half of next year marks the beginning up the big new capacity upsurge.
But the doommongers, including myself, have been calling time on the industry upcycle for three years now.
Maybe the super-cycle, as it is now lovingly called, will continue if demand growth in Asia continues to accelerate.
I was in India this week as the Times of India carried a front page cartoon of a bull dressed in a Superman outfit with an 'S' on his shirt to mark the Sensex surging past 20,000. All the talk was of the index taking 20 years to reach its first 10,000 with the second 10,000 added in only 20 months.
The belief among just about everybody you talked to at the first Asian Chemical and Petrochemical Conference* in Mumbai was that Asia had decoupled from the US - meaning, even a US recession would not have a major impact on growth in India, China and elsewhere.
Indeed, investors have been pouring cash out of western and into Asian markets in response to the sub-prime mortgage crisis, lower US interest rates, and the prospect of continued strong economic growth in Asia. *The conference was organised by ICIS and the Indian Chemical Council.
As far as petrochemical demand was concerned, delegates and speakers were forecasting double digit growth for the foreseeable future.
Is this just too good to be true?
After all the optimism, all the hype and a lot of investors' money, the industry has shot itself in the foot by failing to build demand ahead of supply.
Plus the negativity caused by food versus fuel and environmental counter-arguments to supporting this current generation of technologies is making some Asian governments hesitate on providing the support needed to bolster demand......
Asian industry leaders are playing lip service to the environmental crisis the world confronts .
George Monbiot, the excellent author and journalist, argues that what the West needs is a recession to give the planet a breather.Asia also needs a substantial economic slowdown to give policymakers and technology developers more time.
India is already being held back in mass manufacturing by restrictive labour practices and poor infrastructure - meaning the answer to the above question is already a resounding no in some sectors.
The rise of the rupee is also a concern, as this article from The Economist highlights .
The problem for India is because it has spent the last 15 years gradually opening its capital account and liberalising its financial market, it cannot do what the Chinese do so effectively - intervene to keep its currency competitive.
Export markets are going to get a great deal tougher next year as the US, and probably Europe, enter recession.
And so how will Indian manufacturers cope in these tougher markets versus their Chinese competitors, given the handicaps of the rupee that could remain high and weak infrastructure etc? The answer is likely to be not particularly well.
Reduced export sales will weaken the stellar petrochemical consumption growth we've seen over the past few years.
It will be interesting to see the effect that this will also have on polypropylene. Reliance Industries is due to commission its 900,000 tonne/year plant in Gujarat in mid-2008.
The two big gaps in the US major's Asian presence (and gaping gaps they indeed are) are cracker complexes in India and China.
China could be fixed through the alliance with PIC - meaning, Dow has leverage to get a license to build a naphtha cracker complex by offering crude supply through its new jv.
Atlernatively, it could achieve te same objective by completing its methanol-to-olefins project.
But India remains blocked by Bhopal. One wonders why a company with the wisdom of Down cannot work its way through the ever-in-flux Indian system, but maybe no foreigner can without the support of a strong local partner.
This is not meant to make light of the lingering misery of one of the world's worst chemical disasters, but the motives of some of those petitioning for more money are perhaps a shade dubious.
What's certain is that the issues cannot be as simple as portrayed in this Voice of America article.
First of all, apologies to readers for my complete neglect of this blog over the last six weeks. I can only plead overwork and being too stunned by the collapse of the global economy to think about the blogosphere.
I promise regular posts from now on, provided I am not once again dazzled by the headlights of the advancing global-calamity juggernaut.
Now to the actual first post since early June: The recent fall in crude prices provides some hope for hard-pressed liquids cracker operators confronting the squeeze of higher feedstock costs and weaker demand.
But the pricing decline is partly a reflection of just how bad demand has become - surpassing all estimates of reductions in fuel consumption in both Asia and the West. It's not just energy efficiency triggered by high prices that has driven crude down, but also the credit crisis.
Another reason why crude has fallen was the decision by the US to meet with Iran.
Fundamentally, crude supply remains constrained and it would only take an Israeli attack Iran (a strong possiblity over the next six months) for oil to reach $200 a barrel.
Commodity chemical companies need a different approach to customer management, new methods to deal with with highly volatile raw material costs and fresh ways of keeping costs down. Otherwise those without feedstock advantages are in danger of going bust.
ICIS training plans to run hands-on courses, complete with exercises on customer management, negotiation skills and price assessment with our partner - International eChem.
The failure, and quite possibly the death, of the Doha round of trade negotiations earlier this week could create a very confusing and erratic regulatory landscape for the chemicals industry.
As Fred points out, John McCain, if elected, has made it clear that he won't accepted emissions caps if China and India do not follow suit.
Obama. however, is prepared to let the US take the lead ahead of the Asian giants. He warns, though, that if they don't agree to fall in line at some point, import tariffs could be imposed equivalent to the energy content of finished goods.
The European Union is also understood to be considering the same safeguards as it looks to extend its cap-and-trade system. Industry, including at least one of the oil-to-chemicals majors, is lobbying hard for safeguard provisions of taxes on imports if no global agreement is reached.
Chemicals and other producers would obviously shut up shop in the EU and move to countries where there was no price set on emissions or if there was no effective import-tax system or some other kind of economic disincentive.
Despite the few remaining climate-change scepticis - quite rightly derided in the same New Scientist blog - climate change as a result of human acitvity is accepted by most scientists and governments as a reality.
A global agreement on a price mechanism for carbon - whether its a cap-and-trade system and/or a tax - would be the best outcome for the chemicals industry. It would enable producers everywhere to accurately assess the cost of investment in better processes and new technologies.
They could also make reliable and predictable income through trading credits globally and from operating and licensing new technologies.
Piecemeal legislation wouldn't provide the same degree of clarity, leading to equally piecemeal strategies from company to company and region to region.
The lawyers might also make a lot of money out of disputes over carbon import taxes.
And, of course, companies might still look to move their investments elsewhere by searching for loopholes in US and EU carbon import-tariff rules.
As the effects of climate change accelerate, you could also see knee-jerk nonsensical regulations introduced by governments out of sheer panic. This could make life very difficult, if not impossible, for chemical producers in certain countries.
So let's hope the Doha round can be rescued - and that it serves as a confidence builder towards the much bigger job of a new global agreement on emissions.
A report by the Hay Group on world pay, surprise surprise, concludes that the Middle East tops the world in terms of disposable income because of the region's economic boom and the absence of income tax.
This has serious implications for the chemicals industry in it's desperate battle for talent in a very tight recruitment market.
For every dollar of guaranteed cash that a senior manager earns in the United Arab Emirates, his counterparts in Singapore and Malaysia earn only 74 and 34 cents respectively In Indonesia, the manager will earn only 17 cents for the same job!
Chemical industry employees have obviously followed the feedstock advantage. But what's going to happen if gas supply for petrochemicals remains constrained in the UAE? Could we see a reversal of the brain drain?
And if the likes of BASF and Dow Chemical are successful in their search for alternative methods of making basic petrochemicals, could we see a realignment of pay rates?
High energy costs and global or regional prices on carbon emissions could also change the renumeration landscape.
Retailers in the West have already started to source more goods from local suppliers because of high transportation costs.
If you can make olefins from the Fischer Tropsch process (and there's a price on carbon) the obvious extension of this is that you could build new chemicals plants in, say, Germany to supply downstream industries benefiting from reverse-gear globalisation.
But you would also have to take into account Europe's ridiculously high tax rates (one of the reasons I quit Britain!)
The long-contemplated attempt to build integrated petchem hubs in India, complete with shared utilities and strong investment incentives - aka China and Singapore - now seems even more of a hopeless pipe dream.
At stake are Reliance's retail ambitions - and here goes, the government's plans for petroleum, chemicals and petrochemicals investment regions (PCPIRs). How Asians love their acronyms.
I remember back in 2000 I had a meeting at the first APIC conference in Yokohama, Japan, with representatives from the Indian government who were very keen on establishing these hubs.
There has been almost no progress since and the land dispute at West Bengal is further evidence of just how difficult life can be in a thriving and open democracy where there are more vested interests than servings of yellow dahl.
China occasionally lifts the lid off the proverbial pot to release a little pressure - for example, the government's decision earlier this year to give into protests over plans for a paraxylene plant at Xiamen in Fujian province.
But if protests seriously threatened China's economic growth model, individual business interests with sufficiently good connections or China's international image, the perpetrators would be marched straight off to re-education camps. You only have to look at the Olympics as an example.
So it looks likely to remain a do-it-yourself game in India when it comes to maximising integration and site-efficiency with Reliance the dominant practitioners.
From a national perspective also, maybe no PCPIRs in India would be a good thing.
"I spoke to the Indian government about these suggested sites at length," said an industry source a few months ago.
"They at first talked about supplying the local market but when I produced numbers to point out that the scale of what was being planned was far too big for India, they conceded that a lot of the volume would be for export. Where's the competitive advantage given India's comparatively high logistics and feedstock costs?"
....You might have to be to be able to afford this lot in a few years time (at least in some inflation-battered and collapsed local currency)
Thanks to Mark Berggren of MMSA for pointing out this wonderful quote: "Foreign aid might be defined as a transfer of money from poor people in rich countries to rich people in poor countries"
Douglas Casey, Classmate of Bill Clinton at Georgetown University
The tremendous economic boom of 2000-2007 in emerging markets might have also left millions more behind than had been previously thought as increased wealth from local prosperity - rather than from stealing foreign aid - has ended up in the hands of the middle classes.
For example, the ADB believes that there are 20.1% more people in poverty in Indonesia and 15.9% more poor people in the Phillipines than it had previously thought.
The great petrochemical hope in the sky has been India, but how can a country with terrible infrastructure, poor irrigation and very low literacy rates ever give the majority of its people the joyous pleasure of buying plastic bags? The World Bank estimates that 455 million people have to get by in India on $1.35 or less a day.
The point here is that inflation will eat into all the rosy forecasts for petrochemical demand growth that were around as recently as the first quarter of this year.
How long-lasting will the damage be to growth? The answer could be how long oil prices remain elevated which comes back to your view on supply and demand.
Surging oil prices on the well-documented supply problems are big factor behind rising food costs. This is either directly through higher transportation and fertiliser bills or indirectly through the nonsense of first-generation biofuels industry in the West taking away land from food production. Plus you have the problem of all those newly middle class people in countries such as India eating more meat.
I don't think the recent fall in crude prices changes anything. This is just a temporary correction based on weaker demand growth. When there's an economic recovery, the supply shortage could quickly result in another downturn - hence, constant volatility above a high price floor.
I wish had bought shares in agrochemical companies a few years ago.
A drowning man will grab hold of any floating debris - even a plastic bag made from standard-grade Chinese polyethylene (PE).
The president of Sinopec Corp, the Hong Kong-listed arm of the Chinese refining and petrochemical giant, was quoted in press reports as saying that projects that had already been postponed would be suspended indefinitely (taken as a face-saving euphemism for cancellations). He also reportedly said that the pace of other projects would be adjusted.
"Fantastic. At last we are seeing some commonsense," said a Singapore-based executive with a Western polylefins producer.
Sadly, though, only a few days later, Tianpu amplified his statement by saying that 2008 petrochemical expenditure would be cut by only $675m - amounting to much less than the cost of one cracker.
The excitement that greeted his first statement was the result of concerns over just how bad conditions could become over the next few years.
The hope was that a much bigger budget cut might take place - affecting the timing, or even the continued existence, of projects slated for commissioning in 2009 and beyond.
ICIS Plants & Projects estimates that 21 per cent of global ethylene capacity additions in 2008-12 will be accounted for by China.
The Middle East will be responsible for a further 36%, resulting in worldwide C2 capacity increasing to 156.3m tonne/year from 135.5m tonne/year.
China has every strategic reason to push ahead with more petrochemical capacity, even if growth looks precarious on the back of the likely frequent boom-and-bust cycles created by tight crude markets.
And we all know about the Middle East advantage, even if it might be eroding a little on tighter feedstock supply and higher capital costs.
"The knowledge society will strike back - eventually. Energy efficiency and renewable energy will be rewarding projects," says Norbert Walker, Chief Economist at Deutsche Bank in his Asia Trip Report 2008.
So if you are not in the Middle East and not in China, are not moving up the innovation curve or don't have good refinery-petrochemical integration (ideally, you will have a combination of all the above) you are in big trouble.
You're only option is to sell your business to some gullible fool during the next up cycle -but you'll have to be quick as the recovery is unlikely to last for long!
Back in the heady days of 2006, I asked a group of five like-minded nerds what their favourite business book was.
They unanimously voted for The World Is Flat: A Brief History of the 21st Century by Thomas Friedman.
I rushed out and bought a copy. It has sold by the truck load and was quoted by Mohamed Al-Mady of SABIC during his speech at the Asia Petrochemical Industry Conference in Thailand in 2006.
Back then everybody was talking about a new paradigm of growth, driven by the relentless rise of emerging market consumption. Nobody mentioned that other book, The Limits To Growth, published in 1972 by the Club of Rome, during those heady days of the economic boom.
I ploughed my way through most of The World Is Flat (it is overwritten - all the points worth making could have been made in considerably less than 488 pages) and was profoundly irritated by Friedman's relentless enthusiasm for globalisation.
At that time I must confess I hadn't heard of the Club of Rome book, nor did I give any consideration to the idea that Friedman might be dead wrong for any reason other than a gut reaction to his seemingly boundless optimism.
Now he has woken up to the fact, 36 years after The Limits To Growth was published, that indeed this might be the case with his new book Hot, Flat And Crowded.
In a review in the Financial Times, Rahul Jacob makes the point that we should have all seen the weaknesses behind Friedman's flat earth theory.
Friedman was entranced in his earlier tome by the rise of India, particularly the booming IT hub of Bangalore.
"I have lost count of the times friends or relatives in India have forwarded by email Mr Friedman's comment that, while his parents told him to finish his dinner because there were people starving in India and China, he told his daughters to finish their homework because there were people there eager and willing to take their jobs," writes Jacob in his review.
As Jacob points out, the very roads that Friedman travelled along to get to the headquarters of the IT giants point to the limits to India's particular form of middle class, elitist growth; they are pockmarked and hugely congested with ancient patched-up vehicles pumping all sorts of foul fumes into the air.
India suffers from a self-inflicted limit to how far it can grow without creating unsustainable social and environment pressures - because of a political system that has created virtual development paralysis.
How can a country with terrible infrastructure, poor irrigation and very low literacy rates ever hope to create sustainable economic growth?
According to the CIA Factbook, India's female literacy rate was only 47.8% in 2001. This compares with 86.5% in China, based on the country's 2000 census, adds the Factbook.
The speed limit on Indian and, of course, also global growth is resources - so presciently highlighted by the Club of Rome back in the 1970s.
I've only just woken up to this reality. Back in the dim and distant 2006, all I cared about was riding the global property and share boom while consuming immense amounts of carbon in pursuit of my career. This involved writing my own much-shorter tomes that encouraged others to do likewise.
Many of us became so enamoured by globalisation that we ignored the fact that there are simply not enough resources available to allow all of us to consume as much as the typical Texan, or more latterly a middle class Indian in Mumbai.
Friedman gets excited in his new book, according to Jacob, about China's potential to lead the way in solving the environment crisis.
I agree that China has potential, but some huge challenges lie ahead.
Idealistic enthusiasm (the ungenerous might use the phrase "gormless enthusiasm", which has applied to many of us over the last few years) might have its place in generating the individual energy to make a difference: Each of us need to find new ways of individual and corporate behaviour if we are to prosper in a world threatened by Peak Oil and catastrophic climate change.
This type of enthusiasm needs to result in more than just further consumption of trees through higher book sales (and when do we have the time to read books like The World is Flat? When we're flying, that well-known environmentally friendly form of travel).
We need to radically change the way we lead our lives.
The old saying "there's no such thing as a free lunch" has at last been proved true with the virtual collapse of the global financial system - and with it, quite possibly, the world's economy.
But for the last decade or more, the chemicals industry, like every other industry, gorged itself on an easy credit-fuelled property boom that's swept the globe.
In Singapore until very recently, real estate was red hot. Surprise, surprise, oversupply beckons, the market is flat and a pricing collapse cannot be ruled out.
Property bubbles come and go and so cyclical downturns were inevitable in Singapore, Thailand, India, China and Australia.
But perhaps the long-term fallout of the crisis - a much more prudently managed banking sector - might have negative implications for chemical demand-growth multiples over GDP.
As the problem rests mainly with US lenders, though, it's hard to say whether credit will also become much harder to obtain for good in Asia and other emerging markets.
But the appetite to lend money to average and below-average earners at high multiples of annual incomes - and with incredibly low "teaser" interest rates - will at the very least take a few years to recover.
Mohamed El-Erian, co-CEO and co-chief investment officer for Pimco, analyses the implications of this tighter credit climate in today's Financial Times.
It is worth asking your friendly neighbourhood consultant or in-house researcher whether any of their growth scenarios take into account the possibility of much tighter lending conditions for many years to come.
As the American Chemistry Council points out, $16,000 of chemicals are consumed when an average home is built in the states.
On a global basis, this alone means an awful lot of demand without counting consumption by real estate in other countries.
I was working with a chemicals consultant last month in India who gave me this priceless description of the true nature of a company:
"A company is a collection self-interested individuals who just occasionally -- and purely randomly - carry out actions that are for the benefit of the company as a whole".
Sounds like a comment, or a moan for those who actually care about who they work for, worth submitting to Lucy Kellaway, the corporate agony aunt, at the Financial Times.
In these straitened and grim times, the potential for office politics and such pontificating on the nature of the corporate world - as people sit around twiddling their thumbs and waiting for the bankruptcy administrator - must be huge.
Everyone will be looking for someone to blame. I blame Eric Cantona for leaving Leeds.
Herein begins an occasional series where I offer advice on how to make a little cash.
By the way, is it me or do I get the sense that a lot companies haven't woken up to the severity of the crisis we are in? A recovery this, and I think quite probably next year, is out of the question. We need to find new sources of growth to replace the US consumer who isn't going to start spending money again in the same volumes as before for a good many years.
Anyway, here is my handy tip: purely by coincidence discover one day that quite fortuitously you have priced your local product so high - way above international levels - that this has attracted competitively priced imports. Take advantage of this wonderful, joyouous happenstance, this glorious instance of serendipity and lodge an antidumping petition.
India has launched a petition for PP anti-dumping action against Saudi Arabia, Singapore and Oman. This is the first case of this type in India.
Producers, as we predicted on this blog earlier on, will be increasingly attempting to protect their home markets as everyone searches farther and farther afield to place distressed volumes.
Expect also that countries such as India - which much more lower applied than bound tariff rates under its WTO agreement,- will seek to raise tariffs to maximum levels predicted by the international trade body.
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Is it just me or is sentiment in chemicals markets even more erratic than usual? Only two weeks ago people were talking about an imminent supply glut in polypropylene, but now the talk is of tightness and stable prices.
Perhaps those with more time on their hands have more time to talk.
This lack of visibility must be making planning very difficult indeed.
Any excuse to make a reference to the late, great and wonderful Ian Dury.
I sent the following email to my friend in response to the stock market rallies and the green shoots of optimism seemingly turning into beautiful May flowers:
"I take it nothing can has fundamentally changed? The confidence couldn't possibly be so self-fulfilling that all the consumer and corporate debt somehow vanishes into a great big black hole?"
His response, justifiably caustic, was:
"Of course, that's the answer. We wake up on May 1, and its all been a nightmare.
"Suddenly houses are still worth what they were there years ago, and are still increasing in price on a monthly basis.
"None of the banks have been nationalised, and the shadow banking systems is still the same size as the normal banking system.
All is fine with the world, and neither Chrysler nor GM are close to bankruptcy."
Quite. Enjoy it while it lasts.
"Nobody can see until the end of the month - never mind into the third quarter," commented an olefins trader recently.
"The reason is that very senior managers are too busy micro-managing everything, from getting involved in trying to track commodity chemical price direction to insisting on signing off every expenditure over a few hundred dollars.
"The problem with these senior guys when they track markets is that they are so out-of-the-loop - assuming that they have ever actually been in the loop - that they don't know what they are doing."
I heard of one big company where the CEO has even insisted on signing off travel authorisation to next week's APIC conference in South Korea.
In these days of tight credit and collapsed sales, it's understandable that much tighter control on spending is essential.
And during the boom years, can we all honestly say that every single trip we made was entirely commercially justified - and that we were always sufficiently foused on the bottom line to get maximum value out of each trip? Look back at your old expenses forms and count up the number of genuine "drinks with Mr Kim" entries.
It will be interesting to see how the lessons being learnt today will be remembered when the economy has fully recovered.
But from a HR perspective, a tough sign-off regime needs to be well-communicated.
So does the senior guys tracking shifts in chemicals pricing - whether competently or incompetently - otherwise the workers on the ground are likely to become demoralised.
They are unlikely to be able to leave in this current climate, but will surely perform far worse if they feel their opinions are being ignored for no good and well-explained reasons.
Off-the-record, of course, how does your company measure up?
And did you fiddle your expenses during the good times?
Like this for a while longer?
Source of Picture: Bahnuprasad.net/blog
The question, of course, is what is the right kind of growth?
If you are trader of whatever kind the only growth you care about is in aset values. In other words the more bubbles the better and as long as you get out in time before they pop, marvellous.
But if you are government or a company it's obviously a lot different as this excellent column from Lex of the Financial Times points out.
India's alarm over inflation raises a quandary: Does it rein back spending on infrastructurre to bring govt spending (the main culprit of the rising cost of living) under control or raise corporate taxes and attack the hugely overmanned civil service.
The big and well-connected companies are likely to resist tax hikes with equally well-placed civil servants unlikely to lobby fo their own extinction.
The end-result could be a slowdown in the infrastucture spending necessary to unlock all that rural potential - meaning chemicals consumption remains a fraction of what it is in China.
By John Richardson
Manufacturers yesterday reported rising output and improved employment prospects in the US, Europe and Asia.
China's Purchasing Managers' Index (PMI), involving a survey of more than 700 manufacturers, increased for the eighth straight month in a row - and is now back to where it was in May 2008. This is exactly the same length of time that China's chemical imports have been booming.
In the US, too, the Institute of Supply Management (ISM) survey for October showed that the employment index had expanded for the first time in a year.
But dig a little deeper and the same old doubts and muddle re-emerge.
New orders rose at a slower pace in October than in September, added the ISM. This could be an indication that the process of re-stocking is coming to an end, points out the Short View in the Financial Times.
The rate of bank lending to private companies has turned negative in the Euro Zone for the first time since the data was first gathered, according to this post on The Economist's Buttonwood blog.
Nobody in the chemicals industry is getting excited about the prospects for 2010, least of Jurgen Hambrecht of BASf on the release of the German giant's Q3 results..
He warned of the need for more concerted efforts by governments and industries, as there was no easy way out of the crisis.
One easy way might be China. But as we keep going on and on about, what are all the chemicals being shipped to China going into?
As long as this uncertainty lingers, so will the fear that it will come to a sorry and sudden end.
If you're selling in China and merely looking towards your year-end bonus, this endless head-scratching might not matter if China can hold its ground until end-December.
But anyone with a slightly longer-term perspective needs to be a little more worried.
By Malini Hariharan (Malini is now joint blogger for Asian Chemical Connections)
It pays to have a domestic focus and Reliance Industries has shown this again in its results for the first half of fiscal 2009-10.
Its petrochemicals division delivered Rs43bn in earnings before interest and taxes (EBIT), a 23.8% growth over the same period last year. The company attributed this to higher margins on improved domestic realisation. The concentration on India helped the company maintain nearly 100% utilisation and hold inventory at low levels.
The Indian market often gets lost in the larger Asian/global picture which is very much dominated by China. But this market has been seeing steady demand growth since last year and it is one of the few markets to have expanded despite the economic crisis.
Reliance estimated PP demand growth at 28% in the last six months; PE at 15%; PVC at 36% and polyester at 15%. Packaging, infrastructure and auto sectors were the key drivers.
The company anticipated a stable margin environment in 2010 as India is expected to keep growing. It also emphasised that it would continue its 'predominantly domestic market orientation in order to sustain high operating rates' - a plan that will no doubt be helped, in the case of PP, by hefty anti dumping duties imposed on imports from Saudi Arabia, Singapore and Oman. A second investigation on PP imports from South Korea, Taiwan and the US is due to be launched soon and there have also been reports of producers asking for an investigation into PE imports.
Expanding the domestic focus will not be easy. India is oversupplied in PP and likely to remain so for another couple of years despite the high demand growth numbers. PE would also be oversupplied once Indian Oil Corp starts its new cracker complex.
IOC expects to achieve mechanical completion of the cracker by the end of this month and start commissioning activity in December. The derivative plants (PE, PP and MEG) are likely to start at end-March or early April.
This is the schedule on paper. But given the many project delays around the world, don't be too surprised if this one also slips.
Source of picture: www.prisonplanet.com
Misleading perceptions can be very dangerous - especially when they apply to the crude-oil futures markets.
"The price has more than doubled this year partly because of the belief that the recovery in Chinese oil-import demand is all about booming local consumption" said a source on the sidelines of this week's APPEC oil and gas conference in Singapore.
But China is adding around 25m tonne/year of refinery capacity in 2009, which, of course, requires a lot more oil to operate.
Liberalisation of fuel-price controls has raised refinery profitability, resulting in recent operating rates of more than 80%.
This high throughput hasn't been matched by an equivalent increase in gasoline consumption, despite the humongous increase in vehicle sales.
"People seem to be buying lots of new cars, driving them home to impress the neighbours but not driving them much after that," said Jason Feer, vice-president and general manager, Asia Pacific, of the Argus Media Group in a speech at the conference
Fuel-price liberalisation has pushed the cost of gasoline close to US levels, he added afterwards.
This miss-match between supply and demand could be a factor behind China becoming a bigger exporter of gasoline and diesel.
China exported 505,505 tonnes of gasoline in September - 153% higher than a year earlier, according to China Customs.
Diesel exports have also risen, reaching close to 400,000 tonnes in August and 293,759 tonnes in September.
This led to talk of overseas refinery margins being put under pressure for the long-term by China's exports.
But another source said: "This is just one of those conspiracy theories about China. Any company will export when it makes more economic sense.
"China's refiners are listed, remember, and so operate like listed companies. Exports are not a long-term strategic objective."
Another factor behind the rise in fuel exports was unwinding of big inventories built ahead of last year's Beijing Olympics, he said.
What's clear is that the rise in oil imports this year - expected to be around 5% - isn't just a sign of an immediate surge in domestic consumption.
And as we've already covered on this blog, China's overall growth story is not as straightforward as crude and equity markets appear to believe - another nail in the bull's coffin.
A further misleading view was that we were already in a V-shaped recovery, believed a number of delegates.
"I expect the recovery to be W-shaped," said Gati Al-Jebouri ,Chief Executive Officer of Lukoil, in a speech to the conference.
One of the economic threats he highlighted was fiscal tightening.
Australia has twice raised interest rates over the past few weeks, Norway recently raised rates and India has tightened reserve requirements for the country's banks because of inflation concerns.
A string of comments from US Fed hawks indicate a possible change in direction.
If fiscal tightening isn't timed properly, it might come too soon for a fragile recovery.
Higher interest rates could narrow the contango that's helped make storing crude, gasoline and diesel etc a low-risk option.
Very high storage levels don't fit with current crude prices.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in December traded at $79.71 a barrel this morning, down 69 cents in the Globex electronic session.
December Brent crude on London's ICE Futures exchange fell 70 cents to $78.19 a barrel.
I found it hard to find any delegate who found much logic in today's price of oil.
"It could easily more or less half to $40 a barrel in the New Year. That's where it should logically be," said one delegate.
Admittedly, though, one tends to seek out those who support your biases - and I could be described as a tad pessimistic about this recovery.
By Malini Hariharan (Malini is now joint blogger for Asian Chemical Connections)
The Indian government has announced 17 November as the date for a public hearing to discuss the provisional anti dumping duties that it had imposed in June on imports of polypropylene (PP) from Saudi Arabia, Singapore and Oman.
The hearing will give a chance to all affected parties to present their case. Such hearings are usually a formality and do affect the end result which is a confirmation of the provisional duties.
But I have been told that it may be different this time as the Saudis, led by Sabic, are likely to put up a spirited defense. The Saudis have been busy pulling lots of government strings for the duties to be revoked.
Sabic and Advanced Polypropylene were hit the hardest - duties on their PP exports range from $440-$820/tonne. I was told that one of the reasons for the high level of duties was 'the lack of cooperation in sharing data' when the Indian government had sent its questionnaire earlier in the year. However, this attitude appears to have changed.
There's a lot at stake here and this is why the 17 November hearing is crucial. India is already in surplus and looks likely to be in this position for the next couple of years. So there's every reason for Indian PP producers, Reliance Industries and Haldia Petrochemicals, to check competition. On the other hand, many Indian processors are unhappy as the duties would force them to rely on local supply.
For the Saudis, and also other Middle Eastern producers, India is not such a big market for PP. But the ADD threat is a worrying global trend that they want to ensure does not take off.
Besides India, China is investigating methanol and 1,4-butanediol (BDO) imports from Saudi Arabia. And the European Union (EU) is investigating on polyethylene terephthalate (PET) imports from United Arab Emirates (UAE) and Iran.
The growing protectionist measures have provoked a long chain of protests with the most recent one being in October by the Gulf Petrochemicals and Chemicals Association (GPCA).
The GPCA Secretary General Dr. Abdulwahab Al-Sadoun has said that the association will strengthen coordination with Gulf Cooperation Council (GCC) Governments to ensure that exports of petrochemicals and chemicals from the Gulf region are not restricted by anti-dumping regulations and other trade restrictions
"The GCC industry and our governments will not accept the application of anti-dumping regulations against exports of petrochemicals and chemicals from the Gulf. We have seen a surge in protectionist actions brought by countries to block imports. These cases are baseless and violate international rules," he said.
The investigations may not sound fair to GCC producers but they face an uphill task in convincing the Indian and Chinese governments to ease protection to local producers. A lot will depend on what the GCC governments can offer or withhold.
By Malini Hariharan (Malini is now joint blogger for Asian Chemical Connections)
Talk of Reliance Industries acquiring LyondellBasell is once again gaining momentum. A report in today's Economic Times says that the company is close to announcing a major overseas acquisition with the target being part of the assets of LyondellBasell. The announcement is likely to be made on or before Reliance's annual general meeting on 17 November. Reliance shares rose 3.1% in morning trade.
Citing a banking industry source the report states that the transaction could be around $6bn, nearly double the estimate made by another media report in September.
One my industry sources says that something is brewing and Reliance is on a shortlist of companies that will be participating in LyondellBasell's reorganisation. The source was unable to give names of others on this shortlist.
Details about the proposed buy are still sketchy and today's media report, like the previous one, raises more questions than answers. In what form is Reliance likely to participate - will it be by acquiring an equity stake that LyondellBasell's creditors will soon get through the company's rights offer? Or will it be an outright purchase of some/all assets? Can it happen before LyondellBasell completes its reorganisation or will Reliance be participating in the reorganisation by buying assets/equity?
One analyst thinks that today's report of an imminent announcement is a little premature and a major development is likely only after LyondellBasell emerges from Chapter 11.
It is difficult to evaluate how beneficial the deal would be to Reliance without knowing much of the details. There are certainly parts of LyondellBasell that would be a good fit for Reliance - its PP assets, a global marketing and distribution network and the technology portfolio.
Reliance certainly has the cash for a big ticket acquisition. But the company is not known to be very aggressive when bidding for overseas assets and this is one of the reasons why it lost out on acquisition opportunities in the past. Will it be the same story this time?
By Malini Hariharan (Malini is now joint blogger for Asian Chemical Connections)
The 17 Nov public hearing arranged by the Indian government at Delhi to discuss provisional anti dumping duties levied on PP imports from Saudi Arabia, Singapore and Oman was postponed at the very last minute causing a great deal frustration among lawyers and industry executives who had flown in from out of the country.
The hearing was postponed because of bereavement in the family of the government bureaucrat heading the hearing. Efforts to get another bureaucrat proved to be futile. A new date has yet to be set but I am told it should be soon.
And I have received some information from Japan on the likely candidates for the Rabigh party. One of the products being considered by Petro Rabigh for its second phase is superabsorbent polymers (SAP). As Sumitomo Chemical does not have technology for this product, it is rumoured that Nippon Shokubai or Sumitomo Seika could be joining Petro Rabigh for this project.
Abu Dhabi ahead in the race?
Source of picture: www.gulftrackservices.com
By John Richardson
The global basic chemicals industry is likely to end up under the dominant control of the Middle East, and possibly Asia, within the next 3-5 years, a senior chemicals industry source told this blog.
"We have known for a long time that the centre of gravity is shifting from West to East, but the economic crisis has accelerated this whole process.
"It was easy credit that enabled the West to keep on growing despite high oil prices with some of that credit going into speculation that helped drive energy costs higher.
"Now that the credit bubble has burst we are left with deeply entrenched and very long-term problems, while the Middle East is sitting on a hydrocarbons cash-pile thanks to the extraordinary global economic growth of 2005-2008."
The only barrier to acquisition of a lot more Western assets - including quite possibly high-value technology positions that have to date remained off the table - was politics, he said.
But a second source added: "While I agree that the shifting of ownership has been speeded up by the crisis, I think the West will keep hold of technology positions - especially in downstream specialities.
"Chief executive officers (CEOs) of US and European countries are under pressure to move away from basis chemicals, and so differentiation needs to be preserved.
"But it is true that we have already seen transfer of very valuable polymer technologies."
SABIC's acquisition of GE Plastics was one such transfer with the renamed SABIC Innovative Plastics now seeking to buy high-end polycarbonate (PC) technologies.
The economic recovery, which the second source believed would be sustained, would also give the CEOs some breathing space to negotiate better terms with prospective buyers of basic petrochemicals.
These comments came after ICIS reported that the Abu Dhabi-based International Petroleum Investment Co (IPIC) was in talks with Bayer MaterialScience and four other global petrochemical groups.
But an IPIC spokesman later said: "At present there are no firm plans to do anything with Bayer MaterialScience, or any other chemical company. A number of initiatives are under consideration internally, but nothing has been decided."
IPIC has already acquired Canadian-based polyolefin major Nova Chemicals and is planning the huge Chemaweyaat chemical city in the new Mina Khalifa Industrial Zone.
It also has a 64% of Austria-based polyolefins group Borealis.
"What's interesting about the Chemaweyaat project is, first of all, its sheer scale (it includes several crackers, including a 1.45m tonne/year one due to start-up in 2012) and the fact that the range of derivatives downstream will be more diversified than is already common in the Middle East," the first source added.
"On a straight cost competitiveness basis, you might think that liquids cracking, which is going to happen at Chemaweyaat, doesn't make sense. But this is more than being about straight economics - it's about economic development and job creation."
And my colleague, Nigel Davis, recently wrote: "Dow Chemical on 12 November laid its cards on the table regarding its so-called 'asset light' strategy.
Dow is working through an arbitration process following its failed deal in Kuwait. The company says it is now talking to two potential partners for a proportion of it olefins assets and its polyethylene business. "
The future ownership of US petrochemicals assets in the US is also attracting a great deal of interest because, despite what could be deeply ingrained economic problems, it's a huge polymer and chemicals market.
And as Nubuo Tanaka - executive director of the International Energy Agency (IEA) - said in a presentation in Singapore earlier this week, shale gas had resulted in a "silent revolution" in US natural-gas supply since 2007.
With 70% of US ethylene production based on natural-gas liquids, according to the American Chemistry Council (ACC), the ground has shifted thanks to this unconventional shale-gas supply.
"Gas supply has become tight in the Middle East and abundant in the US perhaps for the long term, meaning that US petrochemicals is not dead and buried," claimed the first source.
"I expect export competitiveness from the US to be strong for at least the next three years on the comparatively low prices of natural gas over naphtha."
Thermoplastic exports from the US rose by 16% in the year-to-date as a against a 14% decline in domestic sales, said the ACC in its latest weekly report.
SABIC's GE Plastics acquisition gave the Saudi giant a foothold in this huge market, where handling and distribution costs can act as an effective trade barrier.
There have also been unconfirmed reports of Reliance Industries being interested in acquiring LyondellBasell.
Reliance Industries has made an offer for LyondellBasell says an official statement released yesterday on the LyondellBasell website:
"LyondellBasell has received a preliminary non-binding offer from Reliance Industries Limited to acquire for cash a controlling interest in the company contemporaneously with the company's emergence from Chapter 11 reorganization.
"This offer is in addition to the previous non-binding equity financing proposals received by the company and represents a potential alternative to the initial plan of reorganization previously filed by the company."
This confirms months of rumours to this effect. According to an unnamed merchant banker quoted by the Times of India, Reliance would have to pay at least $12bn - double an earlier estimate by the Economic Times.
India could be playing a major role in the shift of basis chemicals ownership from West to East - along with the Middle East
After failing in its efforts to capture Innovene and then
Dow Chemical's commodity petchems unit, this is Reliance's fresh attempt to
move into the global top league. The ICIS top 100 places LyondellBasell at the
No 4 slot of top chemical companies globally.
Reliance, it appears, is evaluating other opportunities too
in its core businesses.
Reliance Industries - which is attempting to buy LyondellBasell - is offering $10-12bn, according to this report from Reuters quoting two sources with direct knowledge of the deal.
This would be one of the biggest-ever acquisitions by an Indian company. In 2007, Tata Steel bought Corus for $13bn.
Reliance raised $660m through a share sale in September.
It has $4bn in cash, $8bn in treasury stock that can be sold and if it doubles its current net debt-to-equity of 0.35x it can borrow another $10bn, the Reuters report adds - quoting a recent Macquarie research note.
He's not bad at making money
Source of picture: www.dealbreaker.com
SOME of the logic behind Reliance Industries' bid for LyondellBasell could be a recognition that the globalisation of petrochemicals markets may have gone into partial reverse.
A climate bill passed by the House of Representatives has a provision for taxing imports from countries where emissions standards are more lax than the US.
This defensive measure, no doubt the result of pressure from heavily polluting industries such as refining and chemicals, recognises that the business-as-usual scenario outlined by the International Energy Agency in its World Energy Report 2009 won't come true.
The scenario involves no significant improvements in energy conservation and no great shift to renewables, leading to a rise in global temperatures of 6 C.
Even if an international carbon tax and/or cap-and-trade system isn't established, individual countries seem likely to step up their efforts to lower hydrocarbons consumption.
Whether or not global warming is man-made, energy security is by itself a big enough reason to boost energy efficiency and develop green technologies.
Then there is what Nubuo Tanaka, Executive Director of the IEA, calls "the silent revolution" since 2007 of increasing US gas supply.
Breakthroughs in shale-gas technology and very long global liquefied natural gas (LNG) supply are contributing to what the IEA describes as a worldwide supply glut that could have "far-reaching consequences for the structure of gas markets".
This will put LyondellBasell's US polyethylene (PE) assets in a strong position in the medium and possibly even the long term.
It has long been assumed that when the US polyolefin market is eventually in deficit, the shortfalls will be supplied by the Middle East and Latin America - notwithstanding extra logistics costs that amount to effective trade barriers.
But a sufficiently high price on carbon would undermine this assumption, along with cheap US natural gas.
This is still the world's biggest economy and therefore the world's biggest chemicals and polymer market when all the hot air about China has been expelled.
What was right for Warren Buffett could prove to be right for Reliance.
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