Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Oil bubble, aviation trouble & more... - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Jun 4, 2008

    Oil bubble, aviation trouble & more...

    High food prices bad news for world's poor...
    The world is moving towards a long period of rising food prices, if one were to go by a report released by the United Nations (UN) and the Organisation for Economic Cooperation and Development (OECD). The report states that while food prices should ease from their recent record peaks, they are expected to average well above the mean of the past decade over the next 10 years. This should ring alarm bells for policymakers, especially those in developing countries who are net importers of food. The UN-OECD reasons that drought in some of the world's main grain-producing regions (like Australia, which is one of the largest exporter of wheat), changing diets, urbanisation, economic growth and expanding populations are likely to be the factors that will keep food prices higher in the coming ten years.

  • Growing worries of rising food prices

    In the meanwhile, the UN seems to be on the side of developing countries when it comes to the food crisis. Some of its officials have indicated that resolving the global food crisis could cost as much as US$ 30 bn a year, and wealthier nations are doing little to help developing nations face the problem.

    The UN has, in fact, sharply criticised the developed world for cutting spending on agriculture programs for the world's poor and ignoring the loss of rain forests while spending billions on carbon markets, subsidies for their own farmers and biofuel production. Food versus fuel? Aha! The argument continues!

    ...and high oil bad for the entire world
    ...so says George Soros, one of the world's most successful hedge fund manager, thereby painting a grim picture of the oil economics. As quoted on Bloomberg, Soros has said, "Oil bubble is working with fundamentals in the market that may lead to a recession in the world's largest economy. The rise in oil prices aggravates the prospects for a recession.'' However, suggesting that the current oil prices have a strong foundation in reality, he has indicated that a crash in the oil market is not really about to happen. Bad news for consumers in countries like India and China, which have not really seen any slowdown in fuel demand despite fears of rising prices.

  • Crude trouble for carmakers

    In India for instance, the government (through the oil marketing companies) has taken most of the hit of rising crude prices. We do not believe this to be sustainable. Who'll take care of the inflation, which remains understated, and the fiscal deficit, which remains insulated from rising subsidy bill?

    Airline companies would vouch for that!
    Perhaps the first and most brutal impact of rising oil prices is being felt by the global airline industry, which has seen almost a couple of dozen players shutting shop (due to their inability to maintain profitability) globally over the past few weeks. While Indian airline companies have managed to survive till now, they are seeing their profits shrink.

    In order to counter the issue and take some pressure away, some of the players like Jet Airways have raised their fuel surcharge for the third time in as many months. As reported on Bloomberg, Jet Airways and its low-cost venture JetLite (erstwhile Air Sahara) will charge an additional Rs 300 rupees on flights of up to 750 kilometers and Rs 550 rupees beyond that. The report further states that Jet's closest competitor, Kingfisher Airlines and its affiliate Deccan Aviation will raise the surcharge by a similar margin.

    As an instance, taxes and surcharges (fuel levy, passenger service fee, congestion charge - you name it and they have it!) will now account for as much as 85% of a ticket for a budget airline between Mumbai and New Delhi. This could very well impact the passenger growth needed to support seven new airline companies that have taken wings over the past four years. And if you are a frequent flier, get ready for some rough weather ahead. Suddenly, your 'free' in-flight meal has gotten all the more expensive!

    Indian mobile jamboree goes on unabated
    The country has recorded an addition of 8.2 m new mobile users in the month of April 2008, thereby maintaining the momentum in the world's fastest-growing mobile services market. At the end of this month, India had nearly 270 m wireless users (combined for GSM and CDMA technologies), which is a growth of 57% YoY. The monthly addition, while remaining stupendous, came in lower than the 10.2 m new subscribers added during the previous month (March 2008). Also, while the party continues in the mobile space, the declining trend in the fixed line subscriber base continues with the same falling by 200,000 during April to touch 39.2 m subscribers.

  • Opportunities in the Indian telecom sector



    Equitymaster requests your view! Post a comment on "Oil bubble, aviation trouble & more...". Click here!


    More Views on News

    How to Ride Alongside India's Best Fund Managers (The 5 Minute Wrapup)

    Jun 10, 2017

    Forty Indian investing gurus, as worthy of imitation as the legendary Peter Lynch, can help you get rich in the stock market.

    You've Heard of Timeless Books... Ever Heard of Timeless Stocks? (The 5 Minute Wrapup)

    Aug 19, 2017

    Ever heard of Lindy Effect? Find out how you can use it to pick timeless stocks.

    Why NOW Is the WORST Time for Index Investing (The 5 Minute Wrapup)

    Aug 18, 2017

    Buying the index now will hardly help make money in stocks even in ten years.

    Trump Takes a Beating (Vivek Kaul's Diary)

    Aug 18, 2017

    Donald J Trump, a wrasslin' fan, took a 'Holy Sh*t!' blow on Tuesday.

    How To Read Your Mutual Fund Account Statement Correctly (Outside View)

    Aug 17, 2017

    PersonalFN simplifies the mutual fund account statement for you.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 18, 2017 (Close)