Kuala Lumpur, Malaysia – An attack in the Middle East. Oil prices surge as investors fear supply disruptions. Once it becomes clear that those disruptions are not materialising, traders calm down and so do oil prices. Life on the global markets returns to business as usual.
It’s a cycle that’s been repeated several times over the last 12 months, to varying degrees. The most recent incident happened on Wednesday, when Iran fired rockets at two Iraqi military bases that host troops from the United States. The attack was retaliation for the US’s assassination of Qassem Soleimani, the head of Iran’s Quds Force elite military wing, in a drone attack near Baghdad on Friday.
But even without the spikes, the price of oil has steadily increased over the last six months, as Iran and the US attacked each others’ interests and allies in the region.
And that has analysts in Asia worried. The region is home to some of the world’s biggest importers of foreign energy, including India, China, South Korea and Japan.
“The Middle East is a key source of Asia’s oil supply, making [Asia] particularly vulnerable in the event of a severe supply disruption, but a more likely threat is that of higher prices affecting the current account, slowing [economic] growth and fuelling inflation,” says Peter Kiernan, lead energy analyst at The Economist Intelligence Unit in Hong Kong.
“If, however, the current standoff between the US and Iran subsides, fears of economic collateral damage will be eased, but longer term [Asia] will need to look at its growing rate of oil-import dependence through the lens of threats to energy security as well as economic performance,” Kiernan told Al Jazeera.
Brent crude oil futures prices surged by up to four percent in early Wednesday trading in Asia, touching a five-month high of $71.75 a barrel, before drifting lower once it became apparent that no production, processing or transportation facilities had been affected.
In September, drone attacks on two Saudi Aramco oil installations resulted in the biggest-ever one-day jump in oil prices. But Aramco quickly repaired its facilities in Abqaiq and Khurais and resumed production, bringing prices back down.
In neither incident did the Strait of Hormuz between Iran and the United Arab Emirates become choked off for oil shipments leaving the region.
Even attacks on oil tankers last year in the Gulf failed to close off the crucially important shipping channel.
Heading higher?
But from the lows of early August, crude prices have risen by nearly 23 percent, according to data by Refinitiv. And they’re up almost 37 percent since the end of 2018. A combination of Middle East tensions and supply cuts by major oil producers helped keep prices buoyant.
According to the International Trade Centre – a joint agency of the World Trade Organization and the United Nations – China was the world’s biggest oil importer in 2018, accounting for 20.2 percent of global crude supplies. The US was second, with 13.8 percent, followed by India, with 9.7 percent of the world’s imports. Japan and South Korea rounded out the top five.
But India is far more dependent on oil imports for domestic consumption than China is. Crude imports accounted for 83.8 percent of India’s needs in its 2018-2019 financial year, figures from the country’s oil ministry show. For China, that figure was 69.8 percent, according to a report in the state-controlled China Daily newspaper last year.
“Net crude oil-importing economies such as Singapore, Thailand, South Korea and India are the most vulnerable to higher oil prices in Asia, given their relatively higher reliance on crude oil imports,” Lloyd Chan, an economist at Oxford Economics in Hong Kong, told Al Jazeera.
Indian consumers, like these at Sadar Bazaar in New Delhi, would likely take the brunt of a surge in energy prices [File: Anindito Mukherjee/Bloomberg]
“In particular, India is likely to be the most affected, as higher oil prices will raise inflation and worsen the outlook of its current account balance,” he added.
A growing energy-import bill is not something that Indian policymakers are likely to be relishing right now.
India’s Ministry of Statistics said on Tuesday that it expects its economy to grow by five percent in the year to March 2020. That would put it on course for its slowest growth rate since 2013.
And rising fuel costs could exacerbate growing anger on the streets.
On Wednesday, hundreds of thousands of workers and students across the country protested against what they described as Prime Minister Narendra Modi’s “anti-people” policies. They are angry at the government’s plans to privatise some public firms.
Diversification
Elsewhere in Asia, some countries have done a better job of diversifying their energy mix than India has as they try to buffer themselves against external oil-price shocks.
China, for instance, has invested heavily in renewable energy, even though it remains the world’s top emitter of greenhouse gases. But according to energy consultancy firm Wood Mackenzie, China’s cost of producing electricity from wind and solar poweris already cheaper than gas-fired power, and will be “competitive with coal-fired power by 2026”.
China has invested heavily in renewable energy, including projects like this solar farm near Jiaxing, Zhejiang province [File: Qilai Shen/Bloomberg]
Japan, though still heavily reliant on imported liquefied natural gas (LNG), is also boosting the proportion of renewable energy in its supply mix. The Institute of Energy Economics, Japan, estimates that around 11 percent of its power generation will come from renewable sources, not including hydroelectricity, this year. That’s up one percentage point from 2019. Meanwhile, the share of fossil fuels will drop from 47 percent in 2019 to 44 percent this year.
“Because energy needs [in Japan, South Korea and China] are largely fulfilled by LNG … and some renewables these days, I believe that the net impact to energy costs should be mitigated somewhat,” Lorraine Tan, Morningstar’s Asia regional director of equity research, told Al Jazeera.
But a major conflagration in the Middle East that chokes off shipments of oil and gas through the Strait of Hormuz could send energy prices much, much higher than even the recent spikes have reached.
If that happens, Asia’s economies could end up in truly uncharted waters.
TORONTO – Roots Corp. may have built its brand on all things comfy and cosy, but its CEO says activewear is now “really becoming a core part” of the brand.
The category, which at Roots spans leggings, tracksuits, sports bras and bike shorts, has seen such sustained double-digit growth that Meghan Roach plans to make it a key part of the business’ future.
“It’s an area … you will see us continue to expand upon,” she told analysts on a Friday call.
The Toronto-based retailer’s push into activewear has taken shape over many years and included several turns as the official designer and supplier of Team Canada’s Olympic uniform.
But consumers have had plenty of choice when it comes to workout gear and other apparel suited to their sporting needs. On top of the slew of athletic brands like Nike and Adidas, shoppers have also gravitated toward Lululemon Athletica Inc., Alo and Vuori, ramping up competition in the activewear category.
Roach feels Roots’ toehold in the category stems from the fit, feel and following its merchandise has cultivated.
“Our product really resonates with (shoppers) because you can wear it through multiple different use cases and occasions,” she said.
“We’ve been seeing customers come back again and again for some of these core products in our activewear collection.”
Her remarks came the same day as Roots revealed it lost $5.2 million in its latest quarter compared with a loss of $5.3 million in the same quarter last year.
The company said the second-quarter loss amounted to 13 cents per diluted share for the quarter ended Aug. 3, the same as a year earlier.
In presenting the results, Roach reminded analysts that the first half of the year is usually “seasonally small,” representing just 30 per cent of the company’s annual sales.
Sales for the second quarter totalled $47.7 million, down from $49.4 million in the same quarter last year.
The move lower came as direct-to-consumer sales amounted to $36.4 million, down from $37.1 million a year earlier, as comparable sales edged down 0.2 per cent.
The numbers reflect the fact that Roots continued to grapple with inventory challenges in the company’s Cooper fleece line that first cropped up in its previous quarter.
Roots recently began to use artificial intelligence to assist with daily inventory replenishments and said more tools helping with allocation will go live in the next quarter.
Beyond that time period, the company intends to keep exploring AI and renovate more of its stores.
It will also re-evaluate its design ranks.
Roots announced Friday that chief product officer Karuna Scheinfeld has stepped down.
Rather than fill the role, the company plans to hire senior level design talent with international experience in the outdoor and activewear sectors who will take on tasks previously done by the chief product officer.
This report by The Canadian Press was first published Sept. 13, 2024.
VANCOUVER – Mediated talks between the union representing HandyDART workers in Metro Vancouver and its employer, Transdev, are set to resume today as a strike that has stopped most services drags into a second week.
No timeline has been set for the length of the negotiations, but Joe McCann, president of the Amalgamated Transit Union Local 1724, says they are willing to stay there as long as it takes, even if talks drag on all night.
About 600 employees of the door-to-door transit service for people unable to navigate the conventional transit system have been on strike since last Tuesday, pausing service for all but essential medical trips.
Hundreds of drivers rallied outside TransLink’s head office earlier this week, calling for the transportation provider to intervene in the dispute with Transdev, which was contracted to oversee HandyDART service.
Transdev said earlier this week that it will provide a reply to the union’s latest proposal on Thursday.
A statement from the company said it “strongly believes” that their employees deserve fair wages, and that a fair contract “must balance the needs of their employees, clients and taxpayers.”
This report by The Canadian Press was first published Sept. 12, 2024.
MONTREAL – Travel company Transat AT Inc. reported a loss in its latest quarter compared with a profit a year earlier as its revenue edged lower.
The parent company of Air Transat says it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31.
The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.
Revenue in what was the company’s third quarter totalled $736.2 million, down from $746.3 million in the same quarter last year.
On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.
Transat chief executive Annick Guérard says demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty.
This report by The Canadian Press was first published Sept. 12, 2024.
