90 seconds at 9 am with BNZ

90 seconds at 9 am with BNZ: Oil price jumps on Mideast fears; European inflation stronger; Savings Working Group to report

1st Feb 11, 9:01am by Bernard Hickey

Bernard Hickey details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news that the oil price (West Texas Intermediate) surged 3% overnight to a two year high of US$91.5/bbl as concerns grow about the Egyptian revolution and the potential fallout through the rest of the Middle East. Brent Crude topped US$100/bbl. See more here.

10% of global trade and 2.5% of the global oil supply goes through the Suez Canal, which is controlled by the Egyptian government.

Egyptian protestors plan to stage a million person march in Cairo later today to demand the resignation or removal of President Hosni Mubarak. See more here.

The New Zealand dollar initially weakened overnight under 77 USc, but has since firmed again to be around 77.4 USc.

This relative strength in the New Zealand dollar may not be enough to stop the effect of higher oil prices filtering through to consumers and potentially boosting the price of regular over the 199.9 NZc a litre it has stuck at in most major centres over recent weeks. See our interactive petrol and oil price chart.

Meanwhile, Eurozone inflation rose more than expected to a two year high of 2.4%, pushing up the euro and pound. It raised the spectre of higher Eurozone interest rates and the potential for stagflation, where inflation and low growth happen at the same time.

Meanwhile back in New Zealand, the Savings Working Group is expected to deliver its final report later today, including a decision not to recommend a Compulsory KiwiSaver scheme. See more here.

Also in New Zealand, building consents slumped to a record low in December as first home buyers stay and section prices remain stubbornly high in the most popular cities. See more here.

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36 Comments

by Andrewj | 1st Feb 11, 9:08am 1296504482

And we are selling our farms in a hurry.

http://www.stuff.co.nz/business/farming/4601743/Germans-buy-3314ha-of-d…

We cannot afford them at these prices because the returns are too low and the farms owe too much to the bankers. The family silver is going out the door.

by Nicholas Arrand | 1st Feb 11, 9:15am 1296504910

When the option is bankruptcy or selling the family silver, there is little choice. I guess we could try pawning it, borrowing against it, first. Hang on, we've done that already ! So I guess the banks are just doing their 'ruptcy' bit....

by Andrewj | 1st Feb 11, 9:36am 1296506178

Or we could say 'bad luck' to the banks.

by walker janette | 1st Feb 11, 9:46am 1296506771

selling farms article above, the farms sold to Germans done through the asset management company AGinvest, that is My Farms.AGinvest has done work for Westpac and BNZ. AGinvest policy is to increase production and then sell in 5-7 years time.

Those farms that were sold would have had bank pressure, Strange how overseas investors see an opportunity but NZ banks have little apetite to supply capital for investment in NZ's ag scene.

by Andrewj | 1st Feb 11, 9:56am 1296507386

Zee Germans may not be happy with the return. I hope Ag-invest can swim with a lawnmower tied to their feet.

by steven | 1st Feb 11, 10:48am 1296510539

I have to scratch my head.....what they are saying is they can come in and make NZ farming more efficient to the extent its not only worth paying too much for but they will actually increase the value....

I dont believe NZ farmers are that in-efficient....the only way I can think of is via using more fertilizers or feed ie just consume yet more fossil fuel which will get to expensive....

Personally Im in the mind to let these idiots do so and let them fail and see a NZer in 5 to 10 years buy it off them at a sane price....

About the only thing I can see as sensible is to take paper money / profit out of the financial system and invest it in hard assets while they can.....ie to retain some value....

regards

by Andrewj | 1st Feb 11, 11:18am 1296512293

They can make it here because they are borrowing money for nothing. We on the other hand get to borrow at 7-8% and cannot compete. We need a %10 ROI and they need a %2 ROI.

Its a crazy crazy world and there is always a weasel ready to sell us down the road for personal short term gain.

by Kunst | 1st Feb 11, 10:10am 1296508230

The unrest in Egypt and the results on world markets demonstrates, how the world is interconnected like never before- a sign of how fragile the world has become. The world is changing and fast.

One can only hope Israel, the authorities among the Palestinians and the rest of the world will find solutions in order to avoid another most dangers war. The repression of the people of Palestine has to stop. http://www.youtube.com/watch?v=mDHNNtyjfts

by powerdownkiwi | 1st Feb 11, 10:28am 1296509310

Brent Crude - it's a name only, there's bugger-all Brent left - at $100.

Yes, Egypt and the Suez will have kicked it along, but it was always going there. As it has inexorably been doing for 10 years.

remember Bollard:

“But as oil prices rise, this places pressure on inflation not just in New Zealand, but globally, risking a bursting of the commodity boom just like the 2007-08 event. Indeed if oil prices escalate beyond US$100 for long, growth in much of the world will suffer again,”

Folk on 2700 pa complaining, are just part of the jigsaw.

Good graph, Bernard.

Had you thought that with one including oil imports, gas imports, internal coal use, internal hydro use, and modified by an 'efficiencies' factor, would give you the actual amount of activity in NZ?

So much better than tea-leaf reading and entrail-gazing, as practised by economists.

by Boatman | 1st Feb 11, 10:34am 1296509673

I am disappointed that Kiwi-saver is not going to be compulsory .

We are doing a disservice to future generations of Kiwi's who will have to fund our retirement, and we will never have robust Capital and Equity markets without compulsory savings.

The Asian Tigers like Singapore were built on compulsory retirement savings.

New Zealand is out of step with the rest of the world on this one.

by steven | 1st Feb 11, 10:54am 1296510841

Compulsory.....so be forced to pay into a fund that has risk and pays a small % or even makes a loss V paying down debt.....

My mortgage debt is real and is 6% odd....any kiwisaver accounts paying more than that? at a risk free rate?

No I dont think so.......

What happens as the Govn of the day encourages/forces kiwisaver to buy Govn debt? I think that's happening in Spain....in effect the public pension fund has a paper wealth based on worthless Govn debt/assets....

yes I like the idea provided its done right.....the devil is in the detail...........

regards

by Boatman | 1st Feb 11, 10:34am 1296509674

I am disappointed that Kiwi-saver is not going to be compulsory .

We are doing a disservice to future generations of Kiwi's who will have to fund our retirement, and we will never have robust Capital and Equity markets without compulsory savings.

The Asian Tigers like Singapore were built on compulsory retirement savings.

New Zealand is out of step with the rest of the world on this one.

by Kunst | 1st Feb 11, 10:39am 1296509981

Bahhh - what a monster approaches within the next days - for Cairns, Townsville and the wider region - unbelievable !!!!

http://www.bom.gov.au/products/IDX1299.shtml

http://www.bom.gov.au/products/IDQ65002.shtml

by pwilkie | 1st Feb 11, 3:21pm 1296526904

the tourism industry in far north q/land was r/s because of the floods--this will knock it out--like wise the mines have just got up and running--this will damage Australia,s economy significantly- refresh this link and it goe,s to real time

http://www.goes.noaa.gov/sohemi/sohemiloops/shirgmscol.html

by Kunst | 2nd Feb 11, 8:41am 1296589304

Just up to a category 5 cyclone.

http://www.bom.gov.au/products/IDQ65002.shtml

by Kunst | 2nd Feb 11, 5:33pm 1296621198

The latest on "Yasi" - an entire region (North Queensland) on the move.

http://www.news.com.au/breaking-news/floodrelief/north-queensland-braces-for-cyclone-anthony-as-cyclone-yasi-brews-behind-it/story-fn7ik2te-1225997552623

by pwilkie | 2nd Feb 11, 8:57pm 1296633456

walter---- this courier-mail link will give hourly update,s--unbelievable that people have stayed in their home,s to ride it out---remember we,re 3 hr,s behind--

http://www.couriermail.com.au/

by Kunst | 1st Feb 11, 10:55am 1296510926

After "Pike River" - good night minister Brownlee have another nice sleep.

" I don't think the effect will be as dramatic as some might think ... I don't see an absolute drove of people going over there." be affected. - oahhhhhh - oahhhhhh - I don't think the effect will be as dramatic as some might think ... I don't see an absolute drove of people going over there."

Full article: http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10703303

by steven | 1st Feb 11, 11:32am 1296513172

I wonder.......some areas there will be a drain on skills....from the little I can see the semi-skilled or high/specialist skilled, yes....a specialist skilled friend is leaving, He's seeing a starting salary offers around $120K+AU v $90kNZ......

Just who is this bad for?

regards

by Kunst | 1st Feb 11, 3:02pm 1296525720

Among 25 people from various countries - 15 male Kiwis for sale - directly imported from New Zealand, mid 20 no skill, but hard workers - cheap only 25’000 CNY each. Viewing: 25^th Febr. from 11am Buthi Vuthi auction house – Dongguan.

An add discovered in a Chinese News Paper in 2015.

by Boatman | 1st Feb 11, 11:10am 1296511820

Agence France Press (AFP) has reported oil went to $101.00 ......a barrel, briefly .

The Greens will be happy to see us on the bus when Petrol gets to $2,20 a litre.

by steven | 1st Feb 11, 11:40am 1296513613

$92USD....fill your tanks I guess....

So whats wrong with using the bus when it makes economic sense? I do, Im a bit of a greenie but its way cheaper to use the bus...

Get used to the price of oil / petrol....its our future, its going to be even more expensive and it might even be in short supply......we will probably see 90kmh restrictions....but buses only do 90kmh anyway so no biggee....

regards

by powerdownkiwi | 1st Feb 11, 12:44pm 1296517462

Boatman - my kids grew out of blameshifting early on.

The Greens were pointing out that supply and demand would put us at this point, sooner or later, and that we'd be better being prepared - ie with a cohesive public transport system in place.

It's not that they 'want' it.

It's just that they saw it coming.

Big diffo. They were right, the idiot brigade were wrong. No surprise.

Sorry, gotta go. Hugh is trying to assemble a deckchair on the foredeck and it's nearly underwater.

I saved him a pair of waterwings.

by martinv | 1st Feb 11, 1:35pm 1296520540

Well what do you think petrol should cost, given that it's created from a finite resource that's about half gone and for which the rate of consumption has multiplied a few times over in just one human lifetime?

Remember that oil is used primarily for heating, food production and transportation.

As a thought experiment, what proportion of the remaining oil do you think would ideally be used for each of these three activities?

Of course the idea of dividing up the remaining oil in some calm and reasonable way until the last drop is gone is absurd; inequality will make sure that the few will take the majority. They will keep driving around in their cars, stay warm in winter and continue to eat 2000-3000 Calories worth of oil-derived food each day. The other, less fortunate folk will increasingly go without; less heating (hopefully they live in a warm climate), less transport (there are about ten times as many people in the world as there are cars, so the poor people are already doing well), and ... less food. Take away their food though and you end up with riots in the streets (as is happening now).

So back to the original question, how much should petrol cost?

by powerdownkiwi | 1st Feb 11, 3:42pm 1296528137

exellent question. Got me thinking. (rare, that)

Given that oil underwrites all economic activity, I'm not sure you can disentangle what 'cost' is, without it. No oil = no activity, or at lest, such a reduced level as to closely resemble same.

So I can't say.

But I do think it should be parked, rationed and only used for essential services and items.

Won't happen, of course.

What will repeatedly happen is that somewhere north of $100, but south of $147 (we've proven that) is a place where 'the world economy' tanks.

That's without valuing it's ultimate, irreplaceable at any cost, scarcity.

So technically, north of that again?

by martinv | 2nd Feb 11, 9:50am 1296593431

Trying to work out the price of something that's irreplaceable* (oil/gas) in units of something that can be created at will (Dollars, US or any other fiat currency) is surely fraught with problems.

There are many more Dollars in the system now (thanks to US printing efforts of the world's reserve currency) than when the first dip of the global financial crisis occurred. So intuitively the price of oil should now go up further than the US$147/barrel it was at the peak, but then on the downside it's necessary to look at who is buying the oil and whether they actually have any more Dollars to spend on it than at the time of the last crash. Hmm.

I think Chris Martenson http://www.chrismartenson.com/ basically has it right regarding rate of oil usage; we'll see a number of cycles of peaks followed by slight drops. This will go on for a while until the trend changes to overall decrease year on year. How that translates to price I don't know but I'm sure we'll find out. I guess it's a moot point; petrol eg. now costing NZ$20/L is as affordable to us as if it remained at $2/L and our incomes dropped to that of countries presently known as the third world.

* certainly at the rate we're consuming it.

by Elley | 1st Feb 11, 3:53pm 1296528782

Time for me to learn horseriding I suppose.

by powerdownkiwi | 1st Feb 11, 4:14pm 1296530046

No - you're in Cant'y arent you?

You need a velomobile.

http://bicycleuniverse.info/eqp/

by Elley | 1st Feb 11, 4:18pm 1296530322

Looks cool! I quite like the Bike-Car...although a horse would be faster, and knights on white horses more romantic :)

by Andrewj | 1st Feb 11, 11:20am 1296512437

And I see oil has just gone up another %3.19.

http://www.directbroking.co.nz/directtrade/dynamic/marketsummary.aspx

by Gummy Bear Hero | 1st Feb 11, 1:00pm 1296518450

Poor old Egypt , if only you had some oil we'd take you seriously ........ But hey , you get $US 5 billion annually in royalties from the Suez canal ............ And does some of that " trickle down " , because your GDP is only $US 1700 / person ? ......

..... Hardly surprising those riots , are they ............. Why don'tcha bail up John Paulson for a loan , he made a cool $US 5 billion as a hedge fund manager last year ! ....

.......You silly Egyptians are in the wrong game . Derivatives trading is the way to go....... Get with the programme !

by powerdownkiwi | 1st Feb 11, 3:35pm 1296527713

GBH - tell 'em pyramid schemes never work

by Gummy Bear Hero | 1st Feb 11, 3:45pm 1296528310

Ha ha haaaaa , I'll tell that to Mummy .

by powerdownkiwi | 1st Feb 11, 3:54pm 1296528877

I met a traveller from an antique land

Who said: Two vast and trunkless legs of stone

Stand in the desert. Near them, on the sand,

Half sunk, a shattered visage lies, whose frown

And wrinkled lip, and sneer of cold command

Tell that its sculptor well those passions read

Which yet survive, stamped on these lifeless things,

The hand that mocked them and the heart that fed.

And on the pedestal these words appear:

"My name is Ozymandias, king of kings:

Look on my works, ye Mighty, and despair!"

Nothing beside remains. Round the decay

Of that colossal wreck, boundless and bare

The lone and level sands stretch far away.

Percy Bysshe Shelley

(ht to the automatic earth)

by Bernard Hickey | 1st Feb 11, 7:14pm 1296540840

FYI

The Securities Commission has commenced civil proceedings against Insured Group Limited, formerly known as Lombard Group Limited, in relation to alleged breaches in 2007 and 2008 of the continuous disclosure provisions of the Securities Markets Act 1988.

http://www.seccom.govt.nz/new/releases/2011/010211.shtml

cheers

Bernard

by Wolly | 2nd Feb 11, 5:51am 1296579072

What a joke...

"Taxpayers are picking up the tab for Children's Commissioner John Angus to commute to work in Wellington from his home in Central Otago, despite being paid more than $180,000 year.

The National Government has been publicly calling for a tightening of belts in the public sector since its election, but when Social Development Minister Paula Bennett appointed Mr Angus she agreed to pay for his flights and accommodation to get to work in the capital." stuff.co