Monday 21/03/22

  1. In OIL & ENERGY NEWS, Saudi Aramco plans to increase oil production, Germany secures alternative gas supplies, BoJo goes nuclear and looks to the North Sea while pubs and M&S suffer with higher utility bills
  2. In CONSUMER-RELATED NEWS, Brazil embraces online gambling and the average UK house price reaches a new high while cheap milk and meals get harder to come by
  3. In EMPLOYMENT-RELATED NEWS, ESG candidates are in massive demand, seniors return to the workplace and insurers feel unease about the P&O thing
  4. In MISCELLANEOUS NEWS, Facebook is hit by a new lawsuit, alt meat still has a future and the owner of Butlin’s eyes Parkdean
  5. AND FINALLY, I bring you something that you might not have been aware of…

1

OIL & ENERGY NEWS

So new sources of oil and energy are sought out while rising costs hit pubs and M&S

The crisis in Ukraine is beyond words. Many stories that we see now of tragedy, sacrifice and loss make everything else pale into insignificance. However, I will continue to bring you news on this and everything else in the business and financial markets news because it may well have repercussions that have major consequences for us all and that we still need to understand better.

Saudi Aramco to increase oil production to meet global demand (The Guardian, Joanna Partridge) shows that Saudi Arabia’s state-controlled oil company said that it would spend more on oil production to keep up with increasing demand whilst also posting an impressive doubling of profits in 2021. This performance was due to a combination of higher oil prices and better margins in its refining and margins business and the company expects demand to continue to increase. * SO WHAT? * Everyone’s watching the next move for oil. OPEC is due to meet at the end of this month and many countries will be hoping that they turn the taps on and produce a lot more than they are doing at the moment. So far, Saudi Arabia and the UAE are the only ones who have the capacity to make up for the Russian supply shortfall, but they’ve been dragging their feet about upping production.

Then in Germany says it has clinched long-term gas supply deal with Qatar (Financial Times, Joe Miller, Amy Kazmin and Silvia Sciorilli Borrelli) we see that Germany has managed to secure a long-term agreement with Qatar to import its LNG as part of efforts to wean itself off Russian gas – something that is needed urgently given that the country gets more than half of its annual supply of gas from Russia. Germany’s economy minister Robert Habeck was quoted as saying “We might still need Russian gas this year, but not in the future”. EU leaders are scheduled to meet in Brussels this Thursday to come up with a response to rising energy prices. Interestingly, the coalition government has dismissed the option of prolonging the lifespan of its remaining nuclear plants and will instead rely on LNG terminals to reduce its reliance on Russian supplies.

Meanwhile, Boris Johnson in ‘gung ho’ push for more nuclear power as energy crisis starts to bite (Financial Times, George Parker, Jim Pickard and Nathalie Thomas) shows that our PM is gearing up to give an almighty push to Britain’s nuclear power sector that could see a

quintupling in capacity by 2050. He said that he will be making “a series of big new bets on nuclear power”, with some saying that at least six new power stations could be built between 2030 and 2050. Big nuclear power stations can generate over 3GW, but cost around £20bn to build and one commentator said that we are targeting 24GW of capacity by 2050. * SO WHAT? * This represents a dramatic about-turn of the years following Fukushima where the world tried its best to turn its back on nuclear power. A combination of the shortfall of renewables and now a disruption of supply caused by the war raging in Ukraine has meant a lot of governments have had to rethink how they get their energy. There aren’t many overnight solutions, but there are longer-term ones. I think that current oil producing countries need to be mindful of this because their reluctance now to provide oil in the world’s hour of need could backfire spectacularly if no-one wants to buy their oil in the future. Having said that, though, we are nowhere near that point at the moment so oil producers can just do what they like.

Further to this, Soaring energy prices threaten last orders for struggling pubs (Financial Times, Gill Plimmer and Alice Hancock) shows that pub chains are having a nightmare at the moment having pulled through the nightmare of Covid – and there is a real danger now that they could be finished off by…utility bills. The article takes the example of the Admiral Taverns’ chain of 1,600 pubs whose £350,000 a year energy contract ends this month. If it stays with the same provider, it would have to pay ten times the price 😱😱😱. No-one is willing to give them a long-term contract at the moment. Most of their pubs pay for their own energy and this takes around 5% of turnover. * SO WHAT? * This is an absolute nightmare and it would seem like a cruel blow if pubs that survived the pandemic receive the coup de grâce from energy bills just when things were starting to look up. The leisure sector in particular with its hotels, restaurants and gyms is finding that power providers are reluctant to give quotes for long-term contracts and/or renew them (remember the Gym Group last week citing this as being something to keep an eye on). The pressure is ratcheting up on Rishi Sunak to do something here to help – and the latest figures from the Federation of Small Business, which show that the average gas bill for a small business in London has shot up by 258% in the year to February, just confirm this. Pubs have been raising prices to cope better (JD Wetherspoon raised its prices last week) but its seems that individual consumers’ protection is being prioritised at the moment by Ofem. Energy costs push up prices of M&S food and clothes (Daily Telegraph, Laura Onita (Daily Telegraph, Laura Onita) shows that it’s not just leisure that’s suffering either – it’s retail as well.

2

CONSUMER-RELATED NEWS

Brazil embraces online gambling and average house prices hit a new record while milk gets more expensive and cheap meals get harder to come by…

Gambling groups hedge their bets as Brazilian market opens (Financial Times, Michael Pooler and Alice Hancock) shows that a decades-long blanket ban on gambling came to an end when the country passed a law at the end of 2018 that paved the way for online sports betting. It has proved to be extremely popular since then with bookies like Entain (which owns Ladbrokes and Sportingbet) saying that betting revenues there more than doubled in 2021. Flutter, the world’s biggest gambling group, has also said that the country has great potential and all of the betting companies are now working to get their ducks in a row ahead of December’s football World Coup in Qatar. * SO WHAT? * Brazilian sports betting licences will soon be available and companies are lining up to get involved as, after the US, Brazil is seen to be the latest hot new market as some say that it could become a global top-5 regulated market. The number of smaller operators has mushroomed following legalisation but they might suffer if new regulations impose best practice – and this is likely to play into the hands of the big operators.

UK consumers continue to face ongoing challenges as per Average house price in Great Britain exceeds £350,000 for first time (The Guardian, Angela Monaghan) as property website Rightmove says that the average asking price for a

home has breached the £350,000 for the first time. It rose by 1.7% in February – the biggest monthly rise for this time of year in 18 years! The main reason for this was the lack of supply versus demand as there have been twice as many buyers as sellers. * SO WHAT? * Property prices continue to head to the moon despite ongoing pressures on household budgets and it seems to me that this suggests that the gap between the well-off and the less well-off is continuing to widen.

On a more basic level, Milk prices rise as Ukraine war threatens cow feed and fertiliser supplies (Financial Times, James Fernyhough) shows that milk prices are increasing as disruption of supplies of fertiliser and feed as well as rising energy prices combine with bad weather in New Zealand, the US and Australia have formed a perfect storm. Fun fact: did you know that New Zealand is referred to as the “Saudi Arabia of milk” due to it controlling 35% of global exports (!)? New Zealand’s Fonterra, the world’s biggest dairy exporter, said last week that it was already paying farmers 30% more for milk than it did a year ago, adding that the price would go up even more. Why cheap meals are no longer on the menu (Daily Telegraph, Hannah Boland) provides further examples of how supply chain disruptions are impacting “normal” daily life and resulting in “bargain meals” becoming less of a bargain. * SO WHAT? * There’s quite an interesting discussion going on in this article about how food was too cheap before this all kicked off and it’s possible that this will force supermarkets in particular to pay farmers more to take into account how animals are kept and how sustainable they want their suppliers’ businesses to be. In the meantime, casual dining venues are having to weigh up passing the increased costs on to customers and potentially losing them.

3

EMPLOYMENT-RELATED NEWS

ESG candidates get very popular, seniors come out of retirement and insurers turn on P&O…

Sustainable investing boom prompts fierce fight for talent (Financial Times, Adrienne Klasa and Brooke Masters) shows that things are getting soooo frenzied in the ESG investment space that employers are simultaneously paying more to hang on to existing talent and more to attract new joiners that is resulting in a bonanza of bidding wars and salary rises for those with ESG experience. * SO WHAT? * Given that assets in sustainable funds increased by 53% year-on-year to $2.74th in 2021, you can see why the demand for employees is growing. It used to be a bit of a backwater in terms of overall investment, but now ESG investment managers with experience are like rocking horse 💩.

Elsewhere, Early retirement: pandemic end could bring seniors back to the office (Financial Times, Lex) shows that more retirees in the US are now being tempted back to work because of the whole WFH thing and rising cost of living, perhaps something that we could see over here. Then in Insurers join outcry over P&O firings (The Times, Louisa Clarence-Smith) we see that the head of marine and aviation at Lloyd’s Market Association is calling for the government to review the ethics and benefits of foreign ownership of national assets following the shocking treatment last week of P&O employees. P&O, which is ultimately owned by the government of Dubai, has been warned that its actions may have been unlawful although our government has yet to respond officially. There is an interesting insurance angle here in that P&O’s change of crew could have presented an underwriting risk in that ships may not have been deemed to be seaworthy with a crew of unknowns, unfamiliar with the boat.

4

MISCELLANEOUS NEWS

Facebook faces another lawsuit, alt meat continues to develop and Butlin’s owner eyes Parkdean…

Claim by 44m UK Facebook users is given the green light (Daily Telegraph, James Titcomb) shows that a UK claim against Facebook that is looking for a £2.3bn payout for 44m users has been given permission by the Competition Appeals Tribunal to go for Facebook Ireland and Meta, alleging that Facebook used its dominance to “strike an unfair bargain with users” that enabled it to gorge itself on data that it then used to generate income. * SO WHAT? * This claim is not the full deal yet, but it is being backed by Unsworth, a litigation funder, and law firm Quinn Emanuel Urquhart & Sullivan that will take a fat percentage of any potential damages. This could get interesting.

After a bit of a quiet period on the alt-meat front, Lab-grown meat will feed your pets without costing the earth (The Times, Ashley Armstrong) shows that the first lab-grown meat is going to be available in British shops in

about 18 months’ time following a joint venture announced between Agronomics and Roslin Technologies. This will be the first cultivated meat to hit the UK market and will be in pet food. * SO WHAT? * I think that cultivated meat still freaks many people out so putting it in dog food should be less problematic and get the volumes up to improve production capacity without going crazy. Also, given that about 20% of all meat produced globally is eaten by pets it sounds like a good idea. Mellon sees cultured meat as bigger than electric cars (The Times, Ashley Armstrong) shows that British billionaire investor Jim Mellon reckons that lab-grown meat’s future is bright because production prices will fall dramatically, leading to a reduction in large herds within the next ten years. Interesting though, no?

Finally, in Butlin’s owner eyes bid for leisure rival (The Times, Ben Martin) we see that Blackstone, which owns Bourne Leisure, is considering a bid for a potential takeover of Parkdean resorts, which has been put up for sale by its current owner, Onex Corporation. We don’t know yet if there are any other bidders out there, but if the two got together they would form a staycation behemoth! Bourne Leisure already owns Butlin’s, Haven and Warner Leisure Hotels. We’ll just have to wait and see how this goes!

5

...AND FINALLY...

…in other news…

TBH I’ve always done this (because I think cinema popcorn is generally not good) but felt a pang of naughtiness while doing so. It seems that I needn’t have worried about it as per People are only just finding out that you can take your own food to the cinema (The Mirror, Paige Holland). Well it’s official!

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Some of today’s market, commodity & currency moves (as at 0759hrs green is up, red is down). THIS IS INTENDED AS A ROUGH GUIDE ONLY!

FTSE 100 *Dow Jones *S&P 500 *Nasdaq*DAX *CAC-40 *Nikkei **Shanghai **
7,405 (+0.26%)34,754.93 (+0.8%)4,463.12 (+1.17%)13,893.84 (+2.05%)14,413 (+0.17%)6,620 (+0.12%)HOLIDAY3,254 (+0.08%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿
$108.81$111.88$1,924.851.315131.10505119.2081.1904541,124.1

(markets with an * are at yesterday’s close, ** are at today’s close)