The Oil Price Rollercoaster

This year has without a doubt, seen the most volitile oil prices for several decades.  After reaching new record high prices earlier this spring, we close the year with one of the lowest oil prices for many years.

The question that springs to mind is why the price went so high in the first place.

Traditional Economics states that the markets set a price at the point where supply equals demand, if supply falls or demand increases then the price rises, and vice versa.

So what really happened in the early summer of this year, what were the real true physical factors driving the price increases, or was it purely an example of investor speculation.

It we get back in out time machines and travel back a year, then what the forecasters saw for oil consumption was a continued growing demand, both nothing particularly out of the ordinary.

What really happened in 2008? 

There were no invasions of oil producing countries, China continued at the begining of the year to increase it’s demand, but again, nothing that wasn’t particularly unforseeable, the US dollar was strong, but again, it had been for most of the year before.  There was continued political and military uncertainty in Nigeria, but again, nothing drastically different from that of previous years, or what was anticipated.

 All in all, in was expected that global oil production would increase by 2% to cope with 2008’s anticipated demand.

So, if we take the hard and fast, true physical reasons for oil price volatility, with hindsight, there doesn’t seem to be a great deal there.  Which leaves us with the intangilbe reasons, the suspicions & worries of the analysts, and the financial market traders, the doom & gloom dramatic predictions of the world’s media, desperate to find something to grab headlines and viewers, and then speculators, the forward traders & the short traders who place their bets and see where the dice fall.

Hindsight is a wonderfull thing, but sitting here at the end of a turbulent year, I really wonder just how much of the whole “oil crisis” was down to speculators making money, and how long the rest of the world will be paying for it.

Wii Sales not hit by US recession.

The Wii has sold record numbers this month in America. Despite the worldwide recession and the credit crunch. Looks like it’s going to be the platform to take gaming into the new markets.

DHL Ceo says Retail Companies are in de-stocking panic

John Mullen, the CEO of DHL, in an interview with the Times, likened the High Street Retail Stores panic destocking as the equivalent to a run on the banks.

A quick walk around the High Street will tell you that they have all given way.  And that even the hardest nosed of the retailers, those that target the upper end of the market and resist the urge to cut prices before Christmas, are now brandishing “20% off everything” signs all over their stores.

Even the ultimate January Sale – Harrods,  are going early this this year.  Harrolds, who have never in their history started their January Sales until the first working day after the new year, start their Sale on December 27th, as well has having 30% off various departments and seasonal reductions already.

The retailers seem to be dumping stocks as quickly as possible, in fear that there will simply be no future demand by shoppers, (even those companies who are generating profits and whose books are sound) and this creates the risk that this has become a self fullfilling prophesy. 

We saw in the last weeks of November and the First week of December a standoff between the retailers and the shoppers.  Retailers were holding off cutting prices in the hope that the shoppers would start buying, and the shoppers were holding off waiting for the retailers to drop the prices.  The shoppers won, and now all retailers are dropping prices further and further desperate to grab a bit of that Christmas spend.

The problem with such a large reduction in inventory levels is that it is likely to hinder the recovery, which will eventually come.  When companies have low invetory levels it prevents them from reacting quickly and flexibly to any upswing in demand.

Bash the Bush – The George Push Shoe Flinging Game

You’ve seen it on the telly, so for anyone that wants a go, here it is;

Fling the shoe, bash the Bush!

EA Profits fall as Wii sales Climb

EA has issued a second profits warning, and is planning further jobs (in addition to those announced in October), on the back of disappointing sales of their console & computer games.

Rumours are also around that EA is considering closing it’s Canada Black Box site, which produces the racing games. Need for Speed is one of the titles which has shown disappointing sales levels, along with Mirrors Edge and Rock Band.

The biggest factor in all of this seems to be the Wii, the newspapers are reporting daily record number of Wii sales, and the popularity of the newer platform with the family market, taking gaming out of the teenagers bedroom and into the family sitting room.

Nintendo publish most of their own games, and have 4 titles in November 2008 top ten games, as opposed to EA’s single title in position 4; Left 4 Dead.

All in all, EA seems to be the weaker player, struggling for market share in a market which is growing, with an estimated 22% increase in console and game sales than 2007. Making the video games industry one of the few retails sectors to see year on year growth. But one thing that these figures are telling us is that the traditional video game market, of shot & slash is diminishing, and that the larger untapped family market is where the growth of the future appears to be.