Siya Investment Forecast: Oil will rise to US$200 in the future


On January 28, 2018, the "Foresight of New Retail" New Year Forum, jointly organized by Zhejiang University and Alibaba Group, was held on the Zijingang campus of Zhejiang University, which opened the 2018 business and academic circles about new retail. During the meeting, Siya Investment and the School of Management of Zhejiang University jointly released the "2018 New Retail Investment Strategy Report". Siya Investment Zhang Landing shared the main points of the new retail investment strategy with the guests.


  Siya Investment put forward a clear forecast: the short-term crude oil price will reach and exceed US$90 per barrel, in the medium term, the price of crude oil will exceed US$150, and in the long term, the price of crude oil will exceed US$200. "Rising oil prices will change the pattern of the entire retail industry."


After 2000, crude oil prices soared. In July 2008, the spot price of British Brent crude oil exceeded 140 US dollars per barrel, and then crude oil prices fluctuated continuously. After the crude oil price fell below 30 US dollars per barrel in January 2016, The price has begun to rise, and so far, the price of crude oil has exceeded $70 per barrel. As a scarce resource and an important strategic resource of the country, crude oil prices will continue to rise in the future. Factors driving the rise of oil prices include tight supply and demand, declining inventories, and geopolitical influences.


   From the perspective of crude oil supply and demand balance, in 2018, production is expected to increase by 1.1-1.3 million barrels/day, and consumption is expected to increase by 1.3-1.5 million barrels/day. The original supply and demand have entered a tight state. From the perspective of crude oil inventories, the world crude oil inventories reached a high of 4.68 billion barrels in July 2016. Subsequently, as OPEC crude oil production cuts resulted in reduced production and steady growth in demand, world crude oil inventories began to decline. Since the implementation of OPEC's production cut in 2017 , Global crude oil inventories are decreasing at a rate of 350,000 barrels per day. EIA predicts that industrial oil inventories in the OECD area will fall to 2.964 billion barrels by the end of 2017.


From the demand side, the growth rate of oil demand in OECD countries is slow and in a downward trend. Among them, the Americas are basically stable, while the decline in Europe is more obvious. The non-OECD countries have a faster growth rate of oil consumption, of which China and India demand growth. The highest speed. The IEA predicts that non-OECD oil demand will accelerate by 1.35 million barrels per day in 2018, to 51.7 million barrels per day.


From the perspective of geopolitics, the center of resources is the center of geopolitics. As the world’s largest oil producer, the Middle East has always been the center of the storm of the world’s political game. Especially after the US strategic contraction in recent years, the situation in the Middle East has become increasingly chaotic. Fully out of balance. If Iran’s strategy shrinks, it will greatly increase Saudi Arabia’s geographic influence in the Middle East, which will also facilitate the better implementation of the agreement on freezing production. Oil prices are the lifeblood of the Saudi government. If oil prices remain at $55-60 per barrel, it is expected that Saudi foreign exchange reserves will be exhausted in 2019. According to IMF calculations, the oil price required for Saudi Arabia's fiscal budget to balance is 70 US dollars per barrel, which may become the Saudi government's oil price floor.


From the perspective of new energy substitution, the replacement of old and new energy sources is an inevitable trend in energy development, but the energy transition is not accomplished overnight. It will take a long time. In 2008, Smir wrote: "All energy conversion has One thing in common: They are all long-term processes that take decades. The larger the scale of current energy use and the larger the scale of conversion of alternative energy sources, the longer the replacement period will be." In addition, the high cost of renewable energy also means To a certain extent, it has slowed down the process of energy substitution.


  Petroleum is used as a basic energy source in all aspects of life, such as: plastics, asphalt, rubber, pharmaceuticals, chemical fibers, cleaning products, cosmetics, etc. The rise in oil prices will affect various industries.


  Three oil crises in history




Note: Crude oil prices are constant prices in 2014. Data source: Wind


   The first oil crisis lasted for three years and caused severe shocks to developed economies. The price of oil increased from US$3.011/barrel to US$10.651/barrel. In this crisis, US industrial production fell by 14%, economic growth in all industrialized countries slowed down, and the US Dow Jones Industrial Index fell in less than two years. By 45%. From 1973 to 1979, the inflation rate in Japan was 26.3%, the inflation rate in the United States was 10%, and the inflation rate in the United Kingdom was 13.2%.


In the second oil crisis, oil production dropped sharply. Oil prices began to skyrocket in 1979, from 13 US dollars per barrel in 1979 to 34 US dollars per barrel in 1980. This crisis became the cause of the overall recession of the Western economy in the late 1970s. main reason. OPEC’s oil price increase will bring an inflation rate of 2%-2.5% to the United States. The average inflation rate of other Western European countries and Japan is above 5%, and the global economy is plunged into hyperinflation.


   In the third oil crisis, international oil prices rose to a high of $42 due to the interruption of Iraq’s crude oil supply. The economy of the United States and the United Kingdom accelerated into recession, and the global GDP growth rate fell below 2% in 1991.


  Rising oil prices will bring about the following effects:


   First of all, rising oil prices will cause imported inflation. Judging from the two energy crises in global history, rising oil prices have promoted inflation to a certain extent. Studies have shown that if oil prices rise by US$10 per barrel for one year, the inflation rate in developed countries will rise by one percentage point one year later, which will have a greater impact on developing countries. As China is a major importer of crude oil, the rise in international oil prices will directly boost domestic oil prices, which in turn will bring about imported inflation.


   Again, rising oil prices promote structural inflation. The rise in oil prices directly affects the prices of transportation, transportation, and fuel; in addition, as the raw material for many important chemical products, rising prices will push up the cost of plastics, rubber, and chemical fiber, which will affect downstream industrial products. As the price anchor for bulk commodities, oil prices increase the prices of agricultural products, which in turn boost food prices. Through the transmission of the price chain, inflation will eventually be triggered. As the second largest economy in the world, China will have a huge impact on the global economy if inflation occurs.


   The increase in oil prices will also promote the overall increase in production and living costs, which will trigger an increase in the prices of products and services, further promote inflation, and lead to an increase in the overall level of prices.


  Price transmission caused by rising oil prices




As the retail industry is at the end of the industry chain, rising oil prices will change the pattern of the logistics industry, which in turn will affect the pattern of the entire retail industry.


   The increase in crude oil prices will eventually be transmitted to the logistics and transportation links. The cost of corporate fuel in logistics companies accounts for about 35%. For every 5% increase in oil prices, the cost of the logistics industry will increase by 2%. As the retail industry at the end of the industry chain, the logistics expense ratio is generally 7-8%. The transportation radius will be shortened, and small logistics companies will face high operating costs and will not be able to survive. The clustering effect of the logistics industry is becoming more and more obvious. Logistics companies also adopt efficient methods of operation. For example, in order to relieve cost pressure, express companies adopt the method of joint distribution at outlets, and this sign is becoming more and more obvious.


The increase in logistics prices will have a huge impact on e-commerce companies. Suppose an apple is taken as an example. When the price of an apple is only 5 yuan, but the logistics and transportation costs reach 50 yuan, the e-commerce company will not survive. As a consumer, if you need to bear such a high courier fee or the courier fee is superimposed on the price of the product itself, will you continue to buy the goods you need online? The answer is obvious. Therefore, rising oil prices will change the pattern of the retail industry. Online companies are going offline, and the integration of online and offline is an inevitable trend in the development of the retail industry in the future.