The Dandelions

.. the mutual admiration and bashing society.

Recession comes, nature’s respite?

Posted by jingoisticbuthornydesperado on January 4, 2009

Wow, time flies, it has been more than one month since I last blogged. I have to thank my fellow Dandelions for keeping this blog alive. There has been one issue which bothered me for a long, long time yet I have procrastinated for aeons. Finally, I managed to squeeze in some time to whinge.

As we all know, the world economy is in turmoil. The effects here in UK have been drastic in just roughly a month when I was away. Already one or two high street retailers have closed down one of its branches where I window-shopped. There are heavy discounts available at other still surviving high street retailers, although some retailers either stung by reality of bankruptcy or just being really innovative in their advertising gimmick nonchalantly flaunt the phrase ‘LIQUIDATION SALE’. Literally, it means ‘tau koh sale’ in hokkien or ‘tak ada duit sale’ in malay.

I did actually think that economic slowdown will give mother nature a temporary respite from unsustainable growth in the use of resources but I think I might have been slightly naïve. As economy unexpectedly goes from bad to worse, so does the price of oil which has tumbled to less than $40 per barrel (from an all-time high of $147 just less than 6 months ago) even when OPEC announced that they were going to drastically cut oil production! Already there have been reports that companies are cutting funds to more environmentally friendly research and technology due to the lack of cash. Also, since oil price has fallen so much (three fold), economically, there is no longer an incentive to invest in more expensive alternative energy. In the long term, such delays are bad for the environment since the more-resource-consuming practices and equipments will be phased out much later.

However, all is not lost. I have recently found out that BP and Shell have bought and stored up a lot of oil (when oil went down below $50 per barrel) in the form of off-shore super-tankers that they either own or rent. They are anticipating a surge in oil prices again later this year. This strategy of buying oil at low prices, store up then sell when prices are high and so earning millions or billions of dollars in profit. This reassured me that there is still hope for green technology. Companies with good foresight and planning will know that low oil prices are only temporary; hence cutting out excessively on green technology will hurt their long term growth and reduce their competitive edge against other more business and technology savvy frontrunners. So, maybe there is a temporary setback for green technology but the effect is not long-lasting as I have initially feared.

What happens to those who lack the foresight, thinking their political clout or superior lobbying at the White House allow them to be less competitive? Let’s take a look at General Motors, Chrysler and Ford, the Big Three of Denver as examples. Their automobiles on average are much more fuel consuming than an average European or Japanese automobiles. When oil price shot up to more than $100 per barrel, people including the Americans start abandoning the Big Three for their European and Japanese counterparts. When economy goes into recession with the accompanying credit crunch, oil price may have gone down too, but people’s wallets have gone tighter as well. They can’t switch to American automobiles with the current shortage of credit. That is why this recession is hitting these Big Three of Denver the most. Non-American automobile companies are of course suffering too but their situation is not as dire. I find solace in their quagmire because I know this will serve as reminder and reference to surviving industries that stupidity is an ill-afford ‘luxury’.

For now, I will sign off here and wish everyone a very Happy New Year.

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