Thursday, July 31, 2008

The Leadership Malarkey

In the lather of excitement caused by David Miliband's article in the Guardian, everyone has forgotten just how difficult it is to remove a Labour leader against his will. Or perhaps they simply don't know - ignorance in the press of how the Labour party works is breathtaking, especially when you consider that Labour has been governing for the last eleven years.

If you want to remove a Labour leader against his will, potential candidates need to gather nominations of 20% of MPs (currently 71 MPs). Then a majority of Labour party members need to vote in favour of having a leadership election at the party conference. Only then can the general secretary be informed, and I think another vote from the members is required before the election proper can proceed.

Therefore a leadership challenge can't take place without a majority of members agreeing to the challenge. Essentially the leader gets to appeal over the heads of MPs to the members, who are all volunteers, and who belong to the party because they believe in the Labour movement, not because their careers/incomes depend on it in the manner of the MPs. This makes the Labour party a completely different animal from the Tories and LibDems, where it is purely up to MPs to mount a challenge.

This is the main reason Brown never moved against Blair prior to Blair pre-announcing his retirement in late 2004. Blair had the option of appealing to the members, who would almost certainly have slapped the challenge down. It wasn't till 2006 and Lebanon that the membership started to get fed-up with Blair (Iraq only made a small dent, because most dissenting members chose to leave, and if you leave, you cease to have any power over the Labour party).

Of course if the leader resigns, it's a different story. You then simply need 12.5% of MPs to nominate you (currently 44MPs), and then the election proper starts, and you have to win the three electoral colleges. That too is pretty difficult, as each college is quite different in character; the working classes are mainly represented by the unions, the middle classes are concentrated in the constituency parties, and then you have the MP's in the third college.

In the Labour party, leaders are rarely challenged - I think the last time there was a successful challenge was at the party conference of 1935, when Lansbury, a pacifist, was defeated in a vote led by Ernest Bevin, a hawkish anti-fascist anti-appeaser. Lansbury resigned after losing the vote and was replaced by Attlee. But it was a dramatic era - at stake was the evil represented by Hitler, who had decimated the German trade unions and whom Bevin and Attlee believed was a dangerous warmonger. Removing Lansbury meant that Labour could vote against appeasement, while the Tories voted in favour, which in turn led to a disgusted electorate purging parliament of Tory appeasers in 1945 and giving Labour a massive majority - so you could argue it was worth deposing Lansbury. Attlee and Gaitskill also faced leadership challenges, but they came to nothing. And as time proceded challenges became rarer and rarer. Most Labour leaders are allowed to face the electorate in at least one election and even if they lose, they sometimes get another go. Wilson, a sitting prime minister, announced his retirement suddenly, and Blair pre-announced his retirement in late 2004, taking everyone by surprise.

So we are in new territory here. I think the press are simply expecting Gordon Brown to resign. However, he could choose to stick to the rules and invoke the appeal to the membership. It's high stakes, but if the constituency members decide they don't want a leadership challenge, Brown's position would be immensely strengthened. When he became leader because of overwhelming nominations from MPs, members didn't get to vote. Winning a member vote not to have his leadership challenged would therefore enhance his legitimacy. Would Brown wish to risk it? Only he knows how fed-up he is of the current situation.

Would members vote to refuse permission for a leadership challenge? No one knows. Many members are uneasy. They don't know what changing the leader this soon and in this manner, would do to Labour's prospects. They would also shy from humiliating Brown, who lets face it, has done a tremendous amount for the Labour party and the Labour government over the last 15 years. Members are always less ruthless than MPs. It's worth remembering that had Thatcher had the ability to appeal to her members in a similar fashion, she would have stayed...

The whole business is fraught. I fear that people are so unused to Labour challenges that they have not thought through the implications. It's easy I suppose, over beers with journalists who are only familiar with Tory leadership challenges, to get carried away and not to realise just how tough this is going to be.

Monday, July 28, 2008

Will Labour recover when the economy strengthens?

Many pundits say we won't, citing the way John Major's government fell, despite the economy recovering from the 1990/2 recession.

To understand why John Major's government fell, you need to go back to 1992 and Black Wedneday. At the time I owned a small flat with a mortgage and was at work, when around 10 a.m. we got news that interest rates had risen from 10% to 12%. Around noon we heard that rates had gone up again to 15%. We were in shock and no one did much work that afternoon. Instead we sat at our desks thinking, S**t, my mortgage payment has increased by 50% and frantically bashed our calculators in a futile attempt to rejig household budgets to accomodate the rise. It was real stomach sinking stuff.

It wasn't until 7 p.m., after the nation had been stewing in fright for a good seven hours, that Lamont announced that Britain had come out of the ERM and rates would remain at 10%. The only other time I've experienced a similar crisis day of the oh-my-god-is-this-really-happening sort, was 11th Sept 2001 (by 7th July 2005, we'd got inured to bombs, especially as ours followed Madrid's).

Rapidly the papers started to dub it "White Wednesday", as outside the ERM, interest rates could continue to fall. The feeling was very much that the markets and George Soros had rescued us from the idiocy of our own government (who prior to this also had the Lawson boom and bust, surging inflation, and the severe recession of Q4 1990 to Q2 1992 to it's charge sheet) by forcing them to see sense. The Tories had spent the '80's claiming that the markets were good and governments were bad - and this too played into the narrative. The good markets had rescued us from our bad Tory government. In other words the markets got all the credit for the recovery. John Major and his government got none and instead were despised as the people who would have tried to force us to bear 15% interest rates in a downturn.

Fast forward to 2008 and the situation is quite different. The markets this time are the villains. The public believes that banks are staffed with idiots who bought US sub-prime paper without realising the risks; that Northern Rock was run by idiots who thought they could finance mortgages through the money markets rather than traditional deposits; that the shareholders of Northern Rock were idiots for not overseeing the Northern Rock management properly.

The narrative this time is, who will protect the good citizen from the heedless foolish markets. Naturally, the public approved when Alistair Darling guaranteed bank deposits. And they approved of Northern Rock being nationalised. (Nationalisation is no longer a dirty word - even the Americans are doing it).

People knew that the Labour government protected the country from the world-downturn of 2001-2005 (though some ignorant Tories persist in claiming that this period - during which the USA, France, germany, Italy and Japan all dipped into recession at some stage - were the "good times"). So naturally they looked to the Labour government to protect them from this crisis too.

So we come to the budget of 2008. This is the point when Labour's ratings start to fall off a cliff. While people agreed with the individual policies that Darling announced, he simply didn't provide the firm and staunch assurance they were looking for (and which Labour had provided in 2001-2005). This got compounded by Brown pointing out that there was a world problem and that we didn't control oil prices for instance. The oil and food price spike is down to global factors not in the control of the government. But voters don't want to hear that their government can't do anything. It makes them feel even more helpless.

The government should simply state that we will do whatever we have to do to protect people, and then firmly announce what they are doing to safeguard people. So far Alistair Darling (who is becoming more confident) has announced intention to increase the deposit guarantee to £50,000 and has revised the rules on banking supervision. The Bank of England's Special Liquidity Scheme, which came into effect in April, has eased things in the money markets. All these are good moves - if only they'd been able to get more publicity for them. Mr Darling is modest, but should seek the limelight more. Mr Brown should stop talking about the rest of the world and cede the limelight to Mr Darling.

We will get through this difficult period, and this time, the markets won't get any credit for the upswing at all. All that belongs to government, as long as government remains firm and steadfast and projects confidence (difficult I know when Brown is being assaulted on all sides for his leadership).

Saturday, July 26, 2008

What Labour has done for Britain - Maternity and Paternity Leave

This is the first in an occasional series to examine just what the Labour government has changed in the last eleven years.

When Labour came to power in 1997, women who were expecting babies got just 14 weeks paid maternity leave, at £52 per week. The Labour government increased this to 26 weeks from 6th April 2003, and from 1st October 2006 this was increased to 39 weeks (6 weeks at 90% of your pay, and 33 weeks at a flat rate of £117.18 per week). The intention is that this is increased to 52 weeks by 2010.

Unsurprisingly, the fertility rate, which had reached a low of 1.63 in 2001, started to climb as the new rules came into effect, and reached 1.84 by 2006. This was a relief to the government. These new babies are future tax payers, future consumers, future entrepreneurs and future contributors to society. If Bangladesh indicates the problems you get when your fertility rate is too high, Japan indicates the problems you get when your fertility rate is too low. The ideal is a fertility rate at or near replacement rate, so that the population holds steady over times and no single generation is overburdened with responsibilities to the old or young, compared with other generations.

Our maternity leave policies compare well to those in other mature economies. Americans get no paid maternity leave at all. In France, you get 16 weeks leave at 100% of your earnings, rising to 26 weeks at 100% earnings for the third child - so they get less leave, but higher pay. In Germany it's 14 weeks at 100% pay, and 12-14 months at 67% pay not exceeding €1800 per month. Spain provides 16 weeks at 100% pay. Sweden's maternity pay is an extravagant 16 months at 80% pay for the first 390 days and a flat rate for the final 90 days.

The female labour participation rate has increased from 62.5% in 1996 to 65.5% in 2007.

Paternity leave of two weeks paid, was introduced in April 2003. From April 2003, parents of children under six or disabled children under 18 have the right to request flexible working.

David Cameron, who claims he is in favour of supporting families, voted against extending maternity leave and pay, voted against introducing paternity leave and voted against introducing flexible working.

Friday, July 25, 2008

UK Economy grew by 0.2% in Q2

Figures out today from the ONS showed that the UK economy grew by 0.2% in Q2 2008 - identical growth to that which we had in Q1 2005, just before the 2005 general election.

Conservatives who have been confidently predicting that we were in recession in Q2 will be bitterly disappointed. As expected, construction decreased sharply, but transport, service and communications increased strongly (by 2.2% compared to 0.7% in Q1). Post and telecommunications made the largest contribution to the aceleration. I expect this is because people are taking to ordering goods cheaply online (which requires post delivery) rather than going to town centres. Financial services were weak, but computer services were strong.

The significance of this GDP result is that New Labour have now completed 11 full years of consecutive growth in GDP - a record that no other British government has ever achieved. It's a pity that the news has come on the day of the by-election defeat in Glasgow East and thus overshadowed.

Still, whatever happens, we have set the benchmark for all future governments this century. Any government who cannot deliver eleven consecutive years of growth will be deemed a Failure.

I'm sure Tories are rushing to claim that this was all down to "favourable world conditions". Actually, world conditions in the last eleven years have been anything but favourable. In 1998, Russia defaulted on her sovereign debt, a hedge fund went bust, there was a credit crunch similar to that today and there was a capital flight out of the asia economies plunging them into recession (including Japan, whose economy contracted by 2% in 1998 and by 0.1% in 1999 - a very severe recession by any standards). In 2001 the USA was in recession for eight months following the dot-com bust and 9/11. In 2003, France, Germany and Italy all went officially into recession. In Germany things got so bad that unemployment climbed to over 10%, the highest since the 1930's.

But in Britain, we just sailed on. If it was really down to "world conditions" then the USA, Japan, France, Germany and Italy would not have experienced any recession either, seeing as "world conditions" applied to them too.

I believe we will come through the current global crisis too, as long as the Labour government is in power. We have been living in a fantastic golden age, which will come to an end when New Labour finally exit the scene. Apr├Ęs New Labour, le deluge.

Tuesday, July 22, 2008

Anniversaries - The Brussels Treaty of 1948

It is just over 60 years since the historic Labour government of 1945 was elected, so it's inevitable that we are celebrating the anniversaries of the momentous institutions that government put into place.

However, with everyone concentrating on 60 years of the NHS, other equally important milestones have been overlooked, so I thought I'd belatedly pay tribute to the Brussels Treaty of 1948.

Readers are probably saying, The What Treaty? The Brussels Treaty of 1948 was the forerunner of NATO (which was signed in 1949), and the treaty was the tool with which Ernest Bevin and the Labour government used to persuade the Americans that NATO was a good idea.

It is often assumed wrongly that the USA imposed NATO onto Europe. Actually the idea was born in within the Labour government, which was intent on tying the Americans tightly to us.

When WW2 ended, Americans went home and were determined to get on with their own lives, and leave Europe to theirs. Since the early 19th century, Americans had a horror of any permanent alliance with European countries, believing that Europe was colonialist and everything bad. Hence they had refused to participate in the League of Nations, and Roosevelt was only able to enter WW2 when the Japanese bombed Pearl Harbour and the Germans declared War on the Amercans. And after the war, there was enormous pressure to stop the loans and other help to Britain and other Europeans, as the incoming Labour government quickly found out. Americans felt that Europeans should take care of their own security and the Americans would merely help as necessary. The Senate at the time was led by isolationist Republicans, and any transatlantic treaty involving security needed ratification by them.

So Ernest Bevin set out to prove that Western Europe could take care of her own security. It was always his intention to involve the Americans, but it was a high stakes strategy as it was possible that it ended up being just a European effort only, with the USA not participating at all. But first he had to persuade other Europeans. Luckily events played into Bevin's hands. The communists took over Czechoslovakia, which concentrated thought. The UK, France and the Benelux countries signed the Brussels Treaty in March 1948, pledging collective defence, and President Truman sent warm wishes and support.

Once Western Europeans had acted to take care of their own security, it was easy to persuade the Americans that they should develop ties to the Brussels Treaty group with a new treaty, and again the USSR helped things along by blockading Berlin, which helped to persuade the Republican senate that NATO was a good idea after all. Even so, Article 5 of the Washington Treaty - the one that declares that "an armed attack against one or more of them in Europe or North America shall be considered an attack against them all" - had to be watered down with extra wording to appease the US senate, who were worried about what they were committing themselves to.

The Washington Treaty setting up NATO was eventually signed by Bevin on April 4th 1949. But it would never have happened without Ernest Bevin and the Brussels Treaty.

So you could say that 1948 was about the Tale of the Two Bevins - Nye Bevin who founded the NHS and Ernest Bevin who founded NATO and gave us the nuclear deterrent.

The underlying theme that connects the NHS to NATO (which on the surface seem like different organisations) is the Principle of the Collective, something dear to the heart of the Labour party. Collective Medicine in the NHS and Collective Defence in NATO.

The achievements of 1948 are still here. It's actually stunning how much of modern Britain was shaped by the Attlee government. The only major contribution of the Conservatives is taking us into the EU and signing the ground-breaking Single European Act and Maastricht Treaty, bringing EU harmonisation into all our lives.

But while the Labour party is bursting with pride at founding the NHS and NATO (and the other Labour achievements such as clearing the slums and rebuilding Britain, nationalising the BoE (1946) and setting up the independent committee to set interest rates (1997), and delivering peace to Northern Ireland), the Conservatives are increasing ashamed and hostile towards their great achievement of the EU. Weird.

Sunday, July 20, 2008

The Baltic Dry Index

The Baltic Dry Index is an index compiled by the London Baltic Exchange which tracks the cost to book cargoes of raw materials (iron ore and other metals, coal, grain, cement, oil etc) by sea across the world.

It's important because it is a leading indicator - it doesn't deal with the shipping of finished goods, but with the shipping of raw materials from which those goods are made. It's also one of the few indexes that is free of speculators - people only book freight ships if they have stuff to ship. The supply of ships is inelastic as it takes up to two years to build a new ship, therefore the index tells very quickly whether there has been an increase or decrease in demand for ships.

In other words the Baltic dry index is the best indicator there is as to what is going on with world trade. And where world trade goes, oil demand goes too.

The graph above shows the Baltic Dry Index over the last year, and you will notice that it peaked first at 11033 on 29/10/2007, and then fell to 5615 on 29/01/2008. The index then made another surge to 11689 on 5/06/2008 but has fallen back to 9012 on 18/07/08. The oil price doesn't track it exactly, due to the speculative element, but it did hit $100 in early Nov 2007, and fell back to $87 in last January, before powering up to $147 on 4/07/2008. Nymex closed at $128.81 on 18th July.

If the Baltic Dry Index continues to fall, it indicates demand for raw materials is dropping, which means orders are slowing down. The oil price will be bound to follow.

Saturday, July 19, 2008

Mervyn King and Payrises

Much has been made of how good Mervyn King has been to reject a £100,000 payrise that would have taken him from his current £290,000 to £390,000. The payrise had been recommended by a consultancy Towers Perin, who are tasked with the recommending pay for the BoE. Yes, he was right to reject the pay award, especially as the government had voluntarily frozen their own pay and the Prime Minister gets paid £180,000, £110,000 less than Mervyn.

Yet, as the FT pointed out, King still earns more than his counterparts at the Federal Reserve Bank of the USA and the European Central Bank. Ben Bernanke earns $191,300 (£95,722) and Jean-Claude Trichet earns €345,742 (£273,903). Both Bernanke and Trichet have far more responsibility than Mervyn King, dealing with far bigger, more complex economies.

Americans in particular certainly don't pay their civil servants much at all. In Britain, though, we pay them extravagantly more than the politicians - and even when civil servants cock up they tend to get their pay rises and then get a place in the Lords. Meanwhile the politicians get relatively poor pay, get put through the mill taking all sorts of abuse (some deserved, but for the majority honest politicians, undeserved) and then get ruthlessly culled by the electorate if the political wind changes. Something is askew here. Still, even civil servants don't get paid as extravagantly as political journalists, and even they don't get paid as extravagantly as failed chief executives like Adam Applegarth, formerly chief executive of Northern Rock, who got a £760,000 pay off plus a £346,000 pension top-up.

Friday, July 11, 2008

PR and the Prime Minister

Gordon Brown has held one of the four great offices of state for 11 years now. Until recently, he had a good reputation. His decision to give the Bank of England independence was lauded. His decision to block Blair on the euro met with similar sighs of relief from the public. People generally were reassured when he stood up at the dispatch box saying "billions" in his gravelly voice.

Indeed, when the 2005 election campaign was going badly under Alan Milburn's management, Alastair Campbell, who was brought back for the campaign, insisted that Brown be given a big role, and then sent him round the country shoulder-to-shoulder with Blair on a "Vote Blair, Get Brown" ticket.

So why have things changed, and when did they change? They changed in 2008, upon the appointment of Steven Carter in January. Carter was brought in because Brown was getting overwhelmed by the number of people simply walking into his office and wanting to dump problems on him, or have a chat. Carter was meant to control the Prime Minister's time better and handle his PR more effectively.

Unfortunately, the Steven Carter era has not been a success. In December 2007, YouGov showed Labour 5 points behind the Conservatives (perfectly manageable in mid-term), but we suddenly plunged to 24 points behind (the latest poll shows a mild recovery to 13 points behind).

At root were what could only be termed as mishaps or gaffes. All of a sudden stuff started to get leaked to PR Week. So you started to get stories there that Brown was cold-calling people at 6 am. Brown has been calling people for 11 years, but the records showed that no-one was called early in the morning. We've had damaging tittle-tattle that the PM is supposedly obssessed with Tory spindoctor Andy Coulson, stories about who has had rows with whom, leaks about re-organisations. Lots of the stories have no basis.

The leaks can only be coming from Carter's team. If Labour people want to leak (and by and large MPs and their advisors and staff are extremely disciplined and rarely do this), it is to one of the mainstream newspapers and tabloids, not to PR Week.

Even worse is the lack of political nous of the new team. For example the advice to the Prime Minister to dash from one TV studio to another - Blair never did that, his appearances on TV were rationed and other ministers always appeared first. And then there are the oh-my-god-I-can't-believe-they-did-that moments. As Lance Price says in the Telegraph,

For sheer embarrassment, the picture of Gordon Brown sitting down to an eight-course dinner just hours after telling us all to waste less food surely takes the biscuit.

........ Somebody should have seen this particular PR disaster coming. It's the equivalent of allowing the Prime Minister to be photographed next to a door with a large sign marked "Exit". Even the most junior press officer should be able to spot a blunder as glaring as that one.


Colin Byrne, ex Labour party press officer, made the same point on his blog, except more pungently:

Quite what prompted the incompetents - as they clearly are these days for all their fat salaries and big job titles and egos - in the No10 bunker to have the PM telling us to eat up our crusts one day and be photographed waving a glass of wine around the G8 dinner table as he tucked into the conger eel the next is beyond this simple communications guy’s understanding

It's hard not to agree that Byrne's characterisation of Carter and his team as "incompetants with fat salaries and egos" is on the mark.

The fact is, Gordon Brown did much better in his pre-Carter days, when he was awkwardly shambling along with his in-house team and open-door policy. Because he was authentic then, till Carter got hold of him, and the public sensed it.

I think Brown should sack his new PR team, and ask old Labour hands to come in to help - Campbell, Byrne, Price and others. At least the Labour hands understand politics. And they are always loyal to the Labour party.

P.S. I understand that Steven Carter gets paid £180k, which is the same as the Prime Minister, and Carter's secretary is paid £70k, which is more than MP's. It adds insult to everything. The Prime Minister is responsible for the whole government, Carter merely has to deal with PR, and he can't even do that properly. What a waste. By contrast when Brown was in the Treasury, his advisors were low paid, and some like Sue Nye, worked unpaid out of loyalty, and they did a sterling job. Just goes to prove that bringing in highly paid outsiders doesn't guarantee success.

What Davis has achieved...

...nothing at all, and the clue is in the turnout of 34%.

The proper place to discuss civil liberties was at the general election, when both parties put their different visions in their manifestos and everyone got to vote, and what's more the turnout would have been high too.

Instead Davis declared that fighting his own safe seat (after persuading his main opponents, the Lib Dems not to stand) was a referendum and that everyone would be enthused enough to debate. Well they weren't enthused.

Some will say, never mind, by-elections don't normally have high turnouts. Well, there is a very good reason by elections don't have large turnouts - and that's because the by-elections don't decide anything of importance. Only in hung parliaments do by-elections have a significant effect on who runs the country, and hence on legislation. By producing such a low turnout, the voters in H&H were saying "nothing important here to decide, I'll stay indoors". And that's the most damning judgement of all.

Actually no, I'm being unkind to David Davis. He's achieved one thing - he's ensured that the shadow cabinet member who took the most Labour scalps is exiled to the backbenches, and his replacement is a wet noodle who won't trouble us. For that, the Labour party thanks him.

Friday, July 04, 2008

Oil consumption - who consumes what?

The price of oil is now circa $146 per barrel and an argument is raging as to whether it is down to speculation or increased demand. The following figures on consumption come from BP. I thought it would be instructive to compare 1997 to 2007. To view the full table click here.


Thousand barrels 1997 2007 change b/d 2007
daily ten year share
period of
total

US 18621 20698 2077 23.9%
Canada 1888 2303 415 2.6%
Mexico 1767 2024 257 2.3%
Total North America 22276 25024 2748 28.7%

Argentina 451 492 41 0.6%
Brazil 1968 2192 224 2.4%
Chile 242 342 100 0.4%
Colombia 272 228 -44 0.3%
Ecuador 142 181 39 0.2%
Peru 154 145 -9 0.2%
Venezuela 452 596 144 0.7%
Other S. & Cent. Americ 1110 1317 207 1.6%
Total S. & Cent. America4790 5493 703 6.4%

Austria 246 281 35 0.3%
Azerbaijan 110 93 -17 0.1%
Belarus 179 145 -34 0.2%
Belgium & Luxembourg 629 839 210 1.0%
Bulgaria 92 120 28 0.1%
Czech Republic 170 210 40 0.3%
Denmark 229 197 32 0.2%
Finland 213 226 13 0.3%
France 1948 1919 –29 2.3%
Germany 2913 2393 -600 2.8%
Greece 379 443 64 0.5%
Hungary 150 168 18 0.2%
Iceland 18 21 3
Republic of Ireland 136 198 62 0.2%
Italy 1969 1745 –224 2.1%
Kazakhstan 213 219 6 0.3%
Lithuania 66 61 -5 0.1%
Netherlands 856 1044 188 1.2%
Norway 223 221 -2 0.3%
Poland 391 532 141 0.6%
Portugal 293 302 9 0.4%
Romania 276 229 -47 0.3%
Russian Federation 2689 2699 10 3.2%
Slovakia 72 80 8 0.1%
Spain 1290 1615 325 2.0%
Sweden 336 364 28 0.4%
Switzerland 276 243 -33 0.3%
Turkey 646 666 20 0.8%
Turkmenistan 67 107 40 0.1%
Ukraine 292 325 33 0.4%
United Kingdom 1752 1696 -56 2.0%
Uzbekistan 145 119 -26 0.1%
Other Europe & Eurasia 474 581 107 0.7%
Total Europe & Eurasia 19738 20100 362 24.0%

Iran 1239 1621 382 1.9%
Kuwait 139 276 137 0.4%
Qatar 38 95 57 0.1%
Saudi Arabia 1391 2154 763 2.5%
United Arab Emirates 345 450 105 0.6%
Other Middle East 1272 1608 336 1.9%
Total Middle East 4423 6203 1780 7.4%

Algeria 187 270 83 0.3%
Egypt 531 651 120 0.8%
South Africa 444 549 105 0.7%
Other Africa 1146 1485 339 1.8%
Total Africa 2307 2955 648 3.5%

Australia 822 935 113 1.1%
Bangladesh 69 102 33 0.1%
China 4179 7855 3676 9.3%
China Hong Kong SAR 192 341 149 0.4%
India 1828 2748 920 3.3%
Indonesia 963 1157 194 1.4%
Japan 5762 5051 -711 5.8%
Malaysia 431 514 83 0.6%
New Zealand 131 151 20 0.2%
Pakistan 339 362 23 0.5%
Philippines 389 298 -91 0.4%
Singapore 630 917 287 1.2%
South Korea 2373 2371 -2 2.7%
Taiwan 773 1123 350 1.3%
Thailand 785 911 126 1.1%
Other Asia Pacific 399 608 209 0.7%
Total Asia Pacific 20063 25444 5381 30.0%

TOTAL WORLD 73598 85220 11622 100.0%


The first thing to notice is that demand in Europe plus Eurasia has been flattish. While the Benelux countries, Spain, Ireland and Poland have increased consumption strongly, the big countries, France, United Kingdom, Italy and especially Germany have all taken pains to reduce demand and have succeeded in doing so. The world oil spike is not caused by Europe & Eurasia.

The big surprise is how much oil is being consumed in the Middle East. Saudi Arabia, population 27 million, consumes more oil than the UK, population 62 million. Indeed while India, population 1 billion, increased demand by 920k barrels a day over the decade, Saudi increased consumption by 763k barrels a day over that same period, and most of that increase in demand has taken place in the last five years. Clearly, the people in these countries are flush from earnings from oil, but they are pricing it very cheaply domestically, which means that it's being consumed as though it was practically free. This is in contrast to the approach taken by Norway and the Russian Federation, who have preferred to keep domestic demand low in order to export as much as possible (Norway's fuel tax is the most eye-watering on earth).

Another surprise is Singapore, population 4.6 million, which uses 917k barrels a day while Ireland, population 6 million, uses 198k barrels a day - even though Singapore is a city-state and you would think they didn't need much oil for transportation at all. South Korea's consumption is pretty big, given their population of 48 million, as is Australia's (population 21 million). Japan has reduced consumption, but are still consuming a stonking amount given that they are just 125 million people.

Poor China and India have been blamed for the increased world demand for oil, but their consumption is actually reasonable and moderate given their huge populations and rapid industrialisation.

The real culprits are the other Asia Pacific countries, who subsidise oil, and the Middle East. And of course the United States.

From a European point of view, it's rather depressing. We didn't cause the problem and are already doing everything we can to reduce oil demand, so can't really do much more to solve the problem either. We can only wait on the rest of the world to see sense, and do what we did 25 years ago, which is to take steps to reduce oil demand using the tax system. Our only consolation is that by acting early, we have made our economies less dependent on oil and therefore more resilient to the shock than other economies.

China and India have already reacted - China reduced subsidies putting prices up by 18%, and India has reduced subsidies, putting prices up by 10%. But it's not really enough. The problem won't be solved until the USA and the rich Asia Pacific countries act. People should expect no help from the Middle East - demand there will continue to increase profligately as long as they are earning tons from oil.