Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
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- A350-1000 or 777-9? Part 2 April 11, 2024
- Pontifications: Boeing “transparency”–not so much. April 9, 2024
- Airbus charges and write-offs since 1999: more than €33bn April 8, 2024
ISTAT Day 1: There is uncertainty
Feb. 29, 2016 (c) Leeham Co.: “The world is changing very dramatically,” says Adam Pilarski, the economist for the consulting firm Avitas.
- We’re at the 2016 ISTAT AGM in Phoenix and will be reporting today and tomorrow on presentations and news from the sidelines.
Adam Pilarski of Avitas always looks like a sad basset hound but is one of the most entertaining speakers at the ISTAT AGM.
“It is changing in a way Hollywood couldn’t imagine,” he said. There is uncertainty.
Pilarski, who peppers his speeches to ISTAT with irreverent humor, pointed to Trump, Carson, Cruz and Sanders as changing the rules of the game.
Bernie Sanders admits to being a Socialist, which for Americans is like admitting to being a Communist, Pilarski said.
Red flags are dropping oil prices, China and politics. Pilarski years ago predicted $40/bbl oil, but for reasons far different than today’s reasons.
He said low oil prices for the average people, low oil prices are good. Why doesn’t Wall Street, he asks. The answer: falling oil prices indicate economy is weakening, or so the theory goes.
Why is anyone surprised at the current economic decline in China? Pilarski says nobody should be surprised by slowing growth.The signs were evident for several years, he says.
Growth rates in emerging Asian markets have dropped dramatically compared with 10 and more years ago.
The mystery of The Donald and Bernie is a return to old fashioned politics, Pilarski says. On the one hand, it’s blame everyone and on the other, it’s give everyone everything.
Oil and Aviation
Low oil prices mean higher airline profits–not a surprising relationship. Yet Pilarski says some airline analysts (without naming them) don’t understand this.
The future of oil and its implications: five years ago, Pilarski said oil prices will be below $40/bbl by the time the new airplanes fly (true). Now he predicts oil will begin going up, but to around $70/bbl. The risk is that airlines will expand capacity and labor costs will rise.
The OEMs that invested in new technologies won’t reap all the benefits they hoped because of the lower oil prices, he said.
Funny but I hope you didn’t have to pay for these wisdoms?
Bernie Sanders wants the US to look more like Scandinavia (and western Europe)*. Mr. Pilarsky is ruefully ignorant if he believes that in Scandinavia, the name of the game “is to give everyone everything”. It’s pretty pathetic, therefore, to try putting Mr. Sanders in the same boat as the Donald. For sure, Bernie appeals to “the generation of debt”, but the Donald has run so far to the right, and wallowed so much in racist, sexist, and xenophobic rhetoric, that this is no longer just about “blaiming everyone”.
* http://www.marketwatch.com/story/bernie-sanders-is-right-the-american-dream-is-alive-and-well-in-scandinavia-2016-02-26
OV99:
I think you need to be careful how you categorize Trump.
Clown, wacko, jerk, narcissist yes. But he is not a true conservative in the terms we think of in the US. Not a bad thing in and of itself, certainly a train wreck if elected.
His religious credentials (or lack thereof) are not there. Again, I am for that, but his altitude could use a good dose of decency at which many religious people I know adhere to (religion management is a whole different issue but then it always is religious or not)
It has been clear ( at least to me !) that the long term cost of oil will be set by the cost of extracting from Tar Sands, which used to be $70 a barrel, but now I understand that with volume and technology it is actually lower. There is enough oil there to last us a long time.
I am not so clear about the long term prospects for shale oil, since I don’t know what world reserves are or could be as technology improves, but clearly extraction costs are lower than for shale oil.
We should be very wary of what appears to be the Saudi effort to put tar sands and shale out of business, or at least to stop new investment.
We can always start it up again.
A hiatus on the fracing is not a bad thing.
And the tar sands is not loss, I would rather have nuclear. Coal mining in another form
I agree with you that other forms of energy would be preferable. My point is that it takes enormous infrastructure investment and time to make a large increase in oil production from shale, so while the long term price might be $70 per barrel or less, it is very easy to get much higher prices for a significant amount of time if the oil producing countries restricted production, as they have in the past. Why would Saudi Arabia not restrict production again when they are faced with going bust at present prices with their present rate of government spend. One hypothesis is that the current overproduction is deliberate and designed to hold off infrastructure development in other countries – just long enough for them to have high prices for an extended time when production is again restricted.
Intersting how history repeats itself…
The first trully efficient high-bypass turbofans were brought into life under the pressures of the 1973-79 Oil/Energy Crysis. The resulting technologies that were the most efficient at the time (eg. the PW2000 – with its revolutionary DEEC/FADEC and HPC/HPT/LPT ACC) had to be later “worsened” to increase TSFC (sic!) and time on wing. Those who made less performimg engines (with substantially higher TSFC but also slightly higher time on wing) were rewarded by a market that only cares about its immediate costs ($/seat-mile). What a waste of technology, resources and oblivious increase in CO2 emissions.
Are we going down again on an identical track?
Except for oil industry employees cheap oil is good news, more cash in pockets=more for the consumer to spend. China trying to turn into a consumer society is another plus, as long as they can pull it off, official stats show they are going in the right direction, if you can believe them. US needs to put more money in the average mans pocket though, no spare cash=no consumer=economic disaster. So maybe Boeing is financing him?
A lot of his remarks are typical out of touch.
The kind of attitude that the US exists for corporation and not its citizens.
I would call Bernie a populist and for good reason.
He would not prevail in his policies but its well past time we looked at who gets what and why.
One all the money is at the top you have Pakistan, Malaysia, Russia etc.
The rest of the western world would consider companies ‘giving their employees free health insurance’ as in the US model ( 61% of employees) a free handout.
The premiums paid by business are about $16k for a family and $6k for an individual.
Strangely most states have some sort of compulsory car insurance but those states will die in a ditch over a similar scheme for peoples health.
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