Economist 1/29/16

  1. Chinese drink 40 billion litres of bottled water each year, up over 13-fold since 1998. That growth has a long way to go if China ever consumes as much per person as Mexico.But finding clean supplies is difficult; rivers, lakes and even groundwater in China are often foul.Thanks to massive investment in infrastructure, be taken to coastal cities: Tibetan glaciers.Tibet already sells Qomolangma Glacier water, named after the Tibetan word for Mount Everest. The Tibetan government has licensed 28 more companies to increase the province’s bottling capacity 50-fold by 2020.Assuming companies do not mine the glacier ice itself, they will bottle only the meltwater that flows out of glaciers in summer. It is true that Himalayan glaciers on the Tibet-Qinghai plateau have retreated over the past 30 years by about 15%. But this is because of climate change. Bottling will not cause them to lose mass any quicker.More worrying is the possible threat that the industry will pose to the Tibetan environment. China has an atrocious record of looking after its pristine areas.
  2. In Brazil, the economic slide continues. The number of jobs in the formal sector fell by 1.5m in 2015, the fastest pace of job destruction since comparable records began in 1992. Another 1m could be lost this year, analysts reckon. Sales of vehicles dropped by a fifth last year. The IMF now predicts that GDP will shrink by 3.5% in 2016, more than three times as much as it expected in October.Male breadwinners make up a higher proportion of the newly unemployed than in previous downturns.As misery grows, the government’s capacity to tackle its causes is diminishing.Prosecutors investigating the vast bribery scandal centred on Petrobras, the state-controlled oil-and-gas giant, are expected to file additional charges against senior figures in Ms Rousseff’s Workers’ Party.Her weakness makes her more dependent on the goodwill of the PT and trade unions aligned with it, which are viscerally opposed to the reforms needed to steady the economy.In effect she admitted that the government cannot stabilise its finances if it continues to devote 40% of (non-interest) spending to pensions.
  3. BETWEEN them Sotheby’s and Christie’s, the Western world’s two largest auction houses, have been in business for 522 years.Christie’s, a private company owned by a French luxury-goods billionaire, François Pinault, gives little away. But in a brief overview of its 2015 results, released on January 26th, it admitted that sales were down by 5% compared with 2014, to £4.8 billion ($7.4 billion).More worrying was the news that the slump was not just in Old Master paintings, in which buyers have for some time been losing interest. Sales also slipped in the areas that have been the engines of recent growth: watches, wine, even post-war and contemporary art.Sotheby’s new chief executive, Tad Smith, told analysts in New York that its sales were flat compared with 2014’s, that the firm would post fourth-quarter losses of up to $19m and that it was scrapping its dividend. Sotheby’s shares have fallen by more than half in the past six months.In part the weakness of the big two’s sales is because of the world’s wealthy, Russians especially, drawing in their horns. But in part it is because their business model is looking outdated, leaving them vulnerable to sprightlier rivals.
  4. The high cost of protecting this duopoly is most visible in guarantees that the auction houses make to sellers about the price they can expect if they sell their treasures. In deciding where to consign their works, rich collectors play off one auction house against the other to force up the guarantee.This is not the only source of pressure on the auction houses. In the past decade the contemporary-art world has ballooned, with new fairs, biennials and exhibition spaces opening everywhere. According to a recent report by Clare McAndrew, a respected art-market analyst, $33.1 billion-worth of art and antiques were sold at auction in 2014, half of all sales.
  5. The two houses realise there is much that they must do to protect their dominance.They must draw new buyers into the art market by first enticing them to buy watches, wine and other luxuries. They need to improve their online-auction platforms.Phillips, a smaller auction house, may have been founded in 1796 but it has recently showed the ambitions of a startup.The focus is on getting the new rich hooked on buying, first, watches and then contemporary art; and on finding out what such clients want and providing it.The strategy is working. From a standing start, Phillips sold $80.3m-worth of watches in 2015. Total auction sales, at $523m (mostly of contemporary art), were 34% higher than in 2014.

Economist 1/28/16

  1. Itu Aba, the biggest natural island in the Spratly archipelago, in the much-disputed South China Sea. It is garrisoned by Taiwan, but also claimed by China, the Philippines and Vietnam. The Philippines and Vietnam are incensed; China less so: it maintains the fiction that there is “one China”, and Taiwan’s territorial claims are its own. Mr Ma wants to show that the island can sustain human life, and so is entitled under international law to a 200-nautical-mile (370km) exclusive economic zone. He will also advertise his own “South China Sea Peace Initiative”, announced last May but largely ignored.
  2. The computer used a program, called AlphaGo, developed by DeepMind, a London-based artificial intelligence (AI) company bought by Google in 2014 for $400m. It took on Fan Hui, European Go champion, beating him 5-0, according to a report in Nature. Beating a champion at Go has long been considered a “grand challenge” in AI research, for the game is far harder for computers than chess. Go players alternately place black or white stones on a grid of 19×19 squares with the aim of occupying the most territory. The size of the board, and the number and complexity of potential moves, make the game impossible to play via brute-force calculation.
  3. While Germany is coping with a vast flood of Syrian refugees, France is attracting only a trickle.Overall asylum applications rose last year by 22%, but to just 79,000—nothing remotely close to the million-plus who registered in Germany. In 2015, 158,657 Syrians completed asylum applications in Germany, compared with only 3,553 in France. Last year the European Union agreed on a relocation programme to share 160,000 refugees from Italy and Greece. By mid-January France had taken in only 19; another 43 arrived this week.The explanation seems to be a mix of migrants’ relatively weak ties to France, and the limited opportunities in a country with 10% unemployment.there is no French political appetite to speed matters up. The xenophobic National Front continues to shape the debate. In a recent poll, 60% of French said they do not want more refugees, and terrorism has hardened sentiment.
  4. Winemakers typically depend upon testing the level of sugar to determine if their berries are ready, but that is not terribly accurate. As pinot noir grapes reach late stages of maturity, the rate at which they gain sugars slows down just as the rate at which they accumulate the aromatic compounds that can grant wine a good “nose” goes up. And in wine, the aroma is a fundamental part of its appeal. Varying rainfall, temperatures and soil conditions all affect the rate at which aromatic compounds enter grapes.The researchers report in the Journal of Agricultural and Food Chemistry that they detected 49 aromatic compounds in the grapes from the two years during both the early and the late sampling periods. Most of these compounds remained at low levels throughout the growing period. However, four of them (ß-damascenone, which carries a floral and tea-like smell; vanillin, the key compound in vanilla; 4-vinylguaiacol, which smells like cloves, and 4-vinylphenol, which is reminiscent of spicy almonds) were found in much higher concentrations in the mature grapes than in the early-season ones.
  5. THE mosquito-borne Zika virus, which has spread to 22 countries and territories in the Americas, is terrifying to pregnant women and their partners. The virus may cause birth defects in babies whose mothers were infected during pregnancy.It started after a handful of governments advised women to delay getting pregnant. Colombia, which has the second-highest number of infections after Brazil, advised women to wait six to eight months. Jamaica issued a similar recommendation, even though no cases of Zika have yet been reported there. El Salvador’s government suggested that women should delay pregnancy until 2018.Some women find this advice rather bossy. Others say that governments have done little to help women control their fertility.The Guttmacher Institute, a think-tank, found that 56% of pregnancies in Latin America and the Caribbean are unintended.Rather than calling on women to delay pregnancy, Brazil is sensibly concentrating its efforts on the real culprit, the Aedes aegypti mosquito, which also carries dengue and yellow fever. The country had stamped out the menace by 1958 but let down its guard and allowed it to return.

Economist 1/27/16

  1. APPLE posted the largest quarterly earnings of any company, ever, yesterday. It made $18.4 billion in profit in the three months to December 26th 2015, beating the record it set a year earlier by a few hundred million dollars.Thanks to turmoil in emerging markets, chiefly in China, where it makes a quarter of its sales, quarterly revenue is expected to fall by about 11% year-on-year. That would mark the end of a remarkable run for Apple—51 quarters of consecutive year-on-year revenue growth—just as it nears completion on its $5 billion new HQ.Apple’s fortunes are dominated by the iPhone, from which it earns around two-thirds of its revenues. Over the past ten years the company has sold 900m iPhones, compared to: 350m iPods, 300m iPads and 140m Macs. The much-hyped smartwatch has sold perhaps 12m-15m units since it was launched in April, earning around $4 billion in revenue. Nevertheless, Apple can now boast a new landmark: one billion active devices over the past 90 days
  2. Didi Kuaidi was forged last year by the merger of rival taxi-hailing apps controlled by Alibaba and Tencent, two Chinese internet giants. It now dominates China’s online market for personal transport. Last year it arranged 1.4 billion rides in China, more than Uber has done worldwide in its history. It has perhaps two-thirds of the market for private-car service (the source of most of its revenues) and provides a taxi-hailing service in several hundred cities.It has also forged alliances with, and invested in, Uber’s rivals elsewhere: GrabTaxi in South-East Asia, Ola in India and Lyft in America. Jean Liu, Didi’s president and a former Goldman Sachs dealmaker, helped Didi raise $3 billion to take on Uber.A growing number of Didi’s drivers want to buy a new car, and many have a steady income thanks to the app, but often lack formal credit. Didi and CMB will start offering car loans—first to drivers, but in future perhaps to passengers as well.
  3. UNDER European Union law, companies are prohibited from sending EU citizens’ private information abroad to a country that does not meet European standards. According to a ruling in October 2015 by the European Court of Justice, the EU’s top judicial body, America does not meet those standards, largely because of the intrusiveness of its National Security Agency (NSA). That ruling ended the 15-year-old “Safe Harbour” agreement, which had enabled American firms to move data around easily.
  4. Today more than 4.5m students are enrolled in colleges and universities outside their own countries.Australia is the leader: a quarter of its tertiary students come from abroad, a bigger share than in any other country. Education is now its biggest export, after natural resources. For a while the influx of brainy foreigners was slowed by an overvalued currency and the reputational damage from the collapse of some badly run private colleges.Canada, until recently an also-ran, now emulates Oz. In 2014 it set a goal of almost doubling the number of foreign students by 2022. It has streamlined visa applications and given international students the right to stay and work for up to three years after graduating.
  5. America, by contrast, is horribly complacent. In absolute terms, it attracts the most foreign students, thanks to its size, its outstanding universities and the lure of Silicon Valley and other brainworking hotspots. But it punches far below its weight: only 5% of the students on its campuses are foreign. Its visa rules are needlessly strict and stress keeping out terrorists rather than wooing talent.Britain is even more reckless. It, too, has the huge advantages of famous universities and the English language. But its government has pledged to reduce net immigration to 100,000 people a year, and to this end it is squeezing students. Applying for a student visa has grown slower and costlier. Working part-time to pay fees is harder. And foreign students no longer have the right to stay and work for two years after graduation.

Economist 1/26/16

  1. On January 4th Sweden introduced border controls on the bridge as part of an effort to curb an influx of Middle Eastern asylum-seekers. Businesses warn that the border checks will upset decades of planned integration between Copenhagen and Malmo, the Swedish city on the far side of the bridge.Swedes are pleased with Denmark’s high salaries. The strong Danish krone helps, making prices about 10% higher than in Sweden.The Danish are pleased with the Swedes, too: many say their arrival has made Copenhagen a friendlier place.The new Swedish border checks, Madeleine and Sandra say, will add 30 minutes each way to their commutes.Although the loss of a few thousand Swedish workers might seem like a marginal problem, business leaders fear serious damage to the local economy.
  2. America and the world are now waking up to the series of misguided austerity policies, bad public policy-decisions and attempts to cover up the mess that have led to the exposure to poisonous lead of the entire population of a poor, mostly black Midwestern city blighted by unemployment and high rates of crime.The people of Flint were vindicated, at last, when state officials changed their mind in early October last year about the findings of a research group. The trouble is that the state acted too late.Flint’s water still isn’t safe because the lead pipes have been so damaged by the water from the Flint river that they still leach lead into the tap water. Moreover, as many as 9,000 children between zero and six might have been poisoned. They are the most vulnerable to the exposure to lead, a neurotoxin, because their neurological system is still developing.
  3. The Baha Mar missed its first ribbon-cutting in December 2014. It hired 2,000 staff and stocked its casino with $4.5m cash in preparation for a second deadline the following March. But with three days to go the resort was still not quite ready. A long-simmering quarrel between its main investor and the Chinese contractor, which had broken out early on, boiled over. The opening was put off again.For the Bahamas the disaster is much bigger. The project’s $3.5 billion cost is two-fifths the size of the country’s GDP. At full strength, its workforce of 5,000 employees would represent more than one in 40 Bahamian workers.Although it is the region’s second-richest economy, income from tourism, its biggest industry, has faltered for most of this century. It took a knock after the 9/11 terrorist attacks in 2001, and suffered further from the housing-market debacle in the United States. The number of tourists has dropped from around 1.6m in 2006 to 1.3m in 2015.The American embassy has warned its citizens about the country’s high crime rate. Bahamian hoteliers dread the day when Cuba begins to draw American tourists in large numbers.
  4. Divorce rates are rising quickly across China. This is a remarkable transformation in a society where for centuries marriage was universal and mostly permanent (though convention permitted men to take concubines).The trend reflects profound economic and social change. In the past 35 years, the biggest internal migration experienced by any country in human history has been tearing families apart. Traditional values have been giving way to more liberal ones. Women are becoming better educated, and more aware of their marital rights (they now initiate over half of all divorce cases).As long as both sides agree on terms, China is now among the easiest and cheapest places in the world to get a divorce. In many Western countries, including Britain, couples must separate for a period before dissolving a marriage; China has no such constraints. In 2014, the latest year for which such data exist, about 3.6m couples split up—more than double the number a decade earlier. The divorce rate—the number of cases per thousand people—also doubled in that period. It now stands at 2.7, well above the rate in most of Europe and approaching that of America, the most divorce-prone Western country.
  5. But marriage is not losing its lustre. In most countries, rising divorce rates coincide with more births out of wedlock and a fall in marriage rates. China bucks both these trends. Remarriage is common too.It is tradition itself that is partly to blame for rising divorce rates. China’s legal marriage age for men, 22, is the highest in the world.As a result of China’s one-child-per-couple policy (recently changed to a two-child one), many people have no siblings to share the burden of looking after parents and grandparents.Women are more likely to be the ones who suffer financially when this happens. Rising divorce rates reflect the spread of more tolerant, permissive values towards women, but legislation tends to favour men in divorce settlements.In 2011 the Supreme Court went further. It ruled that in contested cases (as about one-fifth of divorces are), the property would be considered that of one partner alone if that partner’s parents had bought it for him or her after the couple had got married. In addition, if one partner (rather than his or her parents) had bought a home before the couple wed, that person could be awarded sole ownership by a divorce court.

Economist 1/25/16

  1. Plans to develop a successor for Tomhawk, the long-range stand-off missile (LRSO), before the old ones are retired in 2030—part of the Obama administration’s plan to overhaul America’s nuclear deterrent over the next 30 years at a cost of $1 trillion—are now under attack.The argument is that nuclear-armed cruise missiles are a “uniquely destabilising type of weapon”, because potential foes cannot tell whether they are being attacked with a missile carrying a conventional warhead or a nuclear one.Some, like Gordon Adams of the Stimson Centre, a think-tank, argue that land-based missiles are no longer necessary to maintain nuclear deterrence. They are the minority. The counter-argument is that as long as Russia builds all the 700 deployed missiles and bombers it is allowed under the New START treaty, America’s land-based force will still be needed—if only as a “sink” providing targets to absorb a nuclear strike.
  2. In addition a new aircraft, the Long Range Strike Bomber, (LRS-B) will be built as the principal carrier for the two weapons. In October the air force awarded Northrop Grumman the $55 billion contract to develop and build around 100 of these bombers, which should enter service in 2025 as the B-3.With computerised guidance, manoeuvrable tailfins and a warhead whose explosive power can be dialled up and down from 50 to 0.3 kilotons (from three times the yield of the Hiroshima bomb to 2% of it) to reduce collateral damage, they will be accurate to within 30 metres.Yet in nuclear deterrence such technological advantages bring their own problems. Precisely because it is so accurate and its yield can be made so small, the new bomb could make crossing the nuclear threshold a lot easier and therefore more tempting for commanders.Mr Murdock and Pentagon strategists fear that if America only has hugely powerful ballistic missiles at its disposal, it will be, in effect, “self-deterred” from responding to limited nuclear attacks (or threats of them) from opponents.
  3. Whatever the term, the prediction is the same: that Angela Merkel is on the brink of reversing the generous policy towards asylum-seekers that saw more than a million of them reach Germany last year.The winter weather has dented the refugee flows to Greece from Turkey, but not as quickly as hoped. Over 1,600 a day have reached Greece this month, a higher rate than last July when the crisis was already in full swing.Wrong-footed by the explosion in arrivals last autumn Mrs Merkel’s government tightened asylum rules, but few were put off. A growing number of Moroccans and Algerians, hailing from poor but peaceful countries, are coming to Germany, exploiting the trail blazed by Syrians and Afghans.To cut the numbers reaching Europe, Mrs Merkel has turned to realpolitik. German officials aim to strike deals with countries in the Maghreb and Asia to make it easier to return failed asylum-seekers, and are prepared to use development aid as a weapon.Their main hopes, though, lie in an “action plan” the EU cooked up with Turkey in October, which promised money and other prizes in exchange for efforts to stem the migrant flows.But, despite the incentives, there is little sign of Turkish action so far.
  4. To deal with the influx Mrs Merkel has backed an EU plan to register asylum-seekers arriving in Italy and Greece and to relocate them around the club, with national quotas calculated in Brussels. A million asylum-seekers should be no great burden for a union of 500m people. But the relocation scheme has flopped too: many countries want nothing to do with refugees, and refugees have no interest in most countries.In the meantime, Germany is beginning the difficult work of integrating hundreds of thousands of newcomers.But bringing refugees into the workforce, the main engine of integration, represents at least as big a challenge.Mrs Merkel is racing against time.The anti-immigration Alternative for Germany party is notching up double-digit polling results for the first time.Despite the pressure Mrs Merkel is unlikely to shut Germany’s borders, because she wants to preserve the EU’s passport-free Schengen zone. But other plans are being drawn up inside the chancellery, including a sealing of the Greece-Macedonia border across which most refugees travel to reach Germany.
  5. ZIKA, a mosquito-borne virus that arrived in Brazil last May, is an avid traveller—and an increasingly feared guest. It has since found its way into 17 other countries in the Americas. Until October, Zika was not thought much of a threat: only a fifth of infected people fall ill, usually with just mild fever, rash, joint aches and red eyes. Since then, though, evidence has been piling up that it may cause birth defects in children and neurological problems in adults.Alarm bells started ringing in October, when doctors in Pernambuco, one of Brazil’s north-eastern states, saw a huge increase in babies born with microcephaly: an abnormally small head, often with consequent brain damage.There is another fear. After Zika arrived in Brazil, and also in El Salvador, both saw a sharp increase in severe neurological and autoimmune problems.Dengue and chikungunya—mosquito-borne viruses with similar symptoms—are common where Zika is making the rounds.Unlike the one for Ebola, though, which had been in the pipeline for a decade when the epidemic in West Africa began, a Zika vaccine is “at ground zero”, says Alan Barrett, also of the University of Texas. That is where potential antiviral drugs are, too.

Economist 1/22/16

  1. On July 1st 2015 Britain’s hottest ever day was recorded there: 36.7ºC. New data from NASA and the National Oceanic and Atmospheric Administration now declare that 2015 was, globally, the hottest year on record.Ten of 2015’s monthly global temperatures either tied or broke existing records; overall the year proved 0.90ºC warmer than the average recorded between 1901-2000. The 20th century truly began to sizzle in its final decades. And the 21st has been scorching: 15 of the 16 warmest years have occurred since 2001. Until now, 2014 had been held as the toastiest year to date, but globally averaged temperatures in the 12 months after it rose another 0.13ºC.Kevin Trenberth of America’s National Centre for Atmospheric Research says El Niño could account for “most of the difference” in warmth between 2014 and 2015. And as the water-holding capacity of air increases by about 7% per 1ºC of warming, many of El Niño’s impacts will be more brutal as a consequence. But the world is getting hotter, even without El Niño’s handiwork. A new study published in Nature Climate Change suggests that the oceans have absorbed as much heat in the past 18 years as in the previous 130 years.
  2. The inquiry into the lethal poisoning of Alexander Litvinenko( a fugitive former KGB officer who was advising Britain’s spy service)came about only after a dogged legal battle by Mr Litvinenko’s widow, Marina. Its report, published on January 21st, vindicates her husband, who on his deathbed accused the Russian state of ordering his murder. Sir Robert Owen, a retired high court judge, firmly identified the longtime suspects in the case, Andrei Lugovoi and Dmitri Kovtun, as the people who put polonium into Mr Litvinenko’s tea.It found that the two men worked on behalf of the Russian security service, the FSB, and that their actions “probably” had the direct approval of not only the then head of the FSB, Nikolai Patrushev, but also the Russian president, Vladimir Putin. In reaching this conclusion, the inquiry heard secret evidence, probably including eavesdropped Russian government communications.Having largely refused to co-operate with the British inquiry, Russia has dismissed its findings, calling it “politicised”.
  3. A global Gallup poll found that 19% of 15-29-year-olds wanted to move permanently to another country—more than twice the proportion of 50-64-year-olds and four times the share of over-65s who felt the same way.Young adults are more footloose within their own country, too. The average American moves house 6.4 times between the ages of 18 and 45 but only 2.7 times thereafter, the census shows.And in developing countries, young people are 40% more likely than their elders to migrate from the countryside to a city.Movement within countries follows a similar pattern. Migrants, again mostly young, go where the best jobs are. This has led to rapid urbanisation. Today 54% of the world’s people live in cities, up from 30% in 1950. The UN predicts that by 2050 the proportion will rise to 66%.Westerners looking at the crowded shantytowns around Manila or Nairobi cannot imagine why anyone would leave a picturesque village to live there. Migrants see it differently. They are giving up lives of back-breaking toil, stifling tradition and periodic hunger. They are moving to places with bright lights, better wages and infinite variety.In rich countries young people—especially the brightest—are clustering in big, vibrant cities.Nearly half of Canada’s immigrants live in Toronto, for example, and 40% of America’s live in New York, Los Angeles, Miami, Chicago or San Francisco.
  4. There are 1.8 billion young people in the world, roughly a quarter of the total population. (This report defines “young” as between about 15 and 30.) All generalisations about such a vast group should be taken with a bucket of salt.But the young do have some things in common: they grew up in the age of smartphones and in the shadow of a global financial disaster. They fret that it is hard to get a good education, a steady job, a home and—eventually—a mate with whom to start a family.This report takes a global view, since 85% of young people live in developing countries, and focuses on practical matters, such as education and jobs. In some respects the young have never had it so good. They are richer and likely to live longer than any previous generation. On their smartphones they can find all the information in the world. If they are female or gay, in most countries they enjoy freedoms that their predecessors could barely have imagined. They are also brainier than any previous generation.
  5. Yet much of their talent is being squandered. In most regions they are at least twice as likely as their elders to be unemployed. Over 25% of youngsters in middle-income nations and 15% in rich ones are NEETs: not in education, employment or training. The job market they are entering is more competitive than ever, and in many countries the rules are rigged to favour those who already have a job.Education has become so expensive that many students rack up heavy debts.For both sexes the path to adulthood—from school to work, marriage and children—has become longer and more complicated. Mostly, this is a good thing. Many young people now study until their mid-20s and put off having children until their late 30s.Throughout human history, the old have subsidised the young. In rich countries, however, that flow has recently started to reverse.Politicians in democracies listen to the people who vote—which young people seldom do. Only 23% of Americans aged 18-34 cast a ballot in the 2014 mid-term elections, compared with 59% of the over-65s. In Britain’s 2015 general election only 43% of the 18-24s but 78% of the over-65s voted.

Economist 1/21/16

  1. REAL MADRID remain the richest club in Europe, extending their unbeaten run to 11 years, according to Deloitte’s football money league. Their arch-rivals Barcelona have closed the gap significantly over the past year, leapfrogging Manchester United into second place after a hugely successful season in which they won a league, cup and European treble. English clubs increasingly dominate the ranking. Thanks to a lucrative broadcasting deal agreed in 2012, there are now nine Premier League clubs in the world’s top 20, and 17 in the top 30.
  2. In the solar system itself, the list of planets has actually shrunk—Pluto having been downgraded from that status in 2006.Now, a pair of astronomers from the California Institute of Technology think they have evidence that will restore the sun’s tally to its previous value. Their analysis of objects orbiting in the Kuiper Belt, a ring of frozen asteroids that circle beyond the orbit of Neptune (and of which Pluto is now regarded as the largest member), suggests to them that something about ten times as massive as Earth has distorted those orbits.
  3. The rule of thumb is that a 10% fall in oil prices boosts growth by 0.1-0.5 percentage points.In the past 18 months the price has fallen by 75%, from $110 a barrel to below $27. Yet this time the benefits are less certain. Although consumers have gained, producers are suffering grievously. The effects are spilling into financial markets, and could yet depress consumer confidence.Saudi Arabia is pumping at almost full tilt. It is widely thought that the Saudis want to drive out higher-cost producers from the industry, including some of the fracking firms that have boosted oil output in the United States from 5m barrels a day (b/d) in 2008 to over 9m b/d now. Saudi Arabia will also be prepared to suffer a lot of pain to thwart Iran, its bitter rival, which this week was poised to rejoin oil markets as nuclear sanctions were lifted, with potential output of 3m-4m b/d.Despite the Saudis’ efforts, however, producers have proved resilient. Many frackers have eked out efficiencies.They will not pack up so long as prices cover day-to-day costs, in some cases as low as $15 a barrel.
  4. In the past cheap oil has buoyed the world economy because consumers spend much more out of one extra dollar in their pocket than producers do. Today that reckoning is less straightforward than it was. American consumers may have been saving more than was expected.Cheap oil also hurts demand in more important ways. When crude was over $100 a barrel it made sense to spend on exploration in out-of-the-way provinces, such as the Arctic, west Africa and deep below the saline rock off the coast of Brazil. As prices have tumbled, so has investment.The possible financial spillovers are hard to assess.With GDP in Russia falling, the government could well face a budgetary crisis within months. Venezuela, where inflation is above 140%, has declared an economic state of emergency.
  5. SINCE he took over as China’s leader in 2012, Xi Jinping has been a busy globetrotter. Last year he visited more countries than Barack Obama, America’s president (14 against 11).He just visited Saudi Arabia.He then visited Egypt and was due to finish his tour in Iran. No Chinese president had toured the region since 2009. China’s leaders had worried about getting embroiled in the region’s intractable disputes. But China has a big stake in the Middle East. It is the world’s largest oil importer and gets more than half of its crude from the region.Mr Xi, like his predecessors, likes to present China as a non-interfering champion of peace. In the long run, China may find it hard to avoid taking sides. To some extent it has already done so in Syria: it talks to representatives from both the Syrian government and the opposition, but by vetoing UN resolutions on intervention it tilts, in effect, in the government’s favour.