Posted on 12/11/2014 5:09:29 AM PST by Kaslin
We have two cautionary from overseas today.
One of them is from Iran and the other is from France.
Both of them demonstrate how wrongheaded, obtuse and shortsighted Democrats are on their policies and prescriptions for what ails the county.
To battle unemployment France is considering a body of laws that would make it easier for French firms to hire people, including allowing shops to open on Sunday and relaxing labor laws that make it virtually impossible for French firms to fire someone.
If you get a job in France, you apparently get a job for life whether your employer is a private firm or the government.
“The measures include relaxing rules on Sunday and evening opening hours at retail stores; removing some restrictions on new bus lines to increase competition with the national rail operator, SNCF,” says the New York Times, “and opening up regulated professions including notaries and auctioneers to greater competition.”
How dynamic. What will the all-important notaries and auctioneers do now?
As a result of the screwed up labor laws few French firms are anxious to hire even when conditions are good.
But conditions aren’t good. France’s economy is barely avoiding recession, and there is a good likelihood that next year will bring a contraction in economic growth.
French president Francois Hollande, a socialist, says that he will not run for reelection if he can’t tame unemployment. The proposed laws are aimed at curbing unemployment in the country, which has gone up to 10.4 percent.
Previously the government cut payroll taxes to encourage companies to hire, but that just drew thousands of business owners into the streets to protest the labor laws that make it hard to fire people.
Ah, Christmas time in Paris. The rioting by businessmen just makes it seem complete, cozy and anti-Christian.
What can you say about a country where the business owners are the disenfranchised?
Just exactly why is Obama trying to impose this European social system on America?
And then there is Iran.
If oil prices are dropping you know that there is an Iranian mullah mad somewhere. And indeed the president of Iran Hassan Rouhani has accused Saudi Arabia of treachery for refusing to support OPEC production cuts.
"Iran and people of the region will not forget such conspiracies, or in other words, treachery against the interests of the Muslim world," says Rouhani.
The proposed cuts, which would be aimed at stopping the slide of oil prices for the OPEC cartel, are being debated at a time analysts from the oil exporting countries are expecting the weakest demand for their product in 12 years, according to Bloomberg television.
Saudi Arabia controls about one third of OPEC production. OPEC makes up about 40 percent of worldwide oil supply.
However with the U.S. producers increasing production of shale oil the world’s top economy has been able to cut back on demand from OPEC.
Thanks to shale oil extraction the U.S. Geological Survey estimates technically recoverable oil shale to be 2.6 trillion barrels here at home. That’s about ten times the proven reserves of Saudi Arabia.
By my own calculation that’s 400 years of supply for the US, assuming all of it was extracted, which of course is unlikely.
But even at a 50 percent extraction rate, that’s still 200 years of proven reserves.
As I have been arguing for years right on this page, shale oil will change geopolitics and our economy for the better.
U.S. Geological Survey estimates technically recoverable oil shale to be...
Technically recoverable really isn’t meaningful unless you include economics. Oil that can be recovered with today’s technology but would cost $1,000 a barrel isn’t meaningful to the real discussion.
Let the Arabs and Iranians EAT SAND!
Of course, economics change rapidly. Oil that wasn’t even technically recoverable 30 years ago is economical to recover today.
The recent drop in oil prices gives drillers enormous incentive to develop more economically efficient ways to drill and frack.
What right is the government’s to tell people what hours they need to have? Carrefour is the second largest store chain (after WalMart), but it isn’t 24 hours. At least the one I visited was not.
You think they didn't have the incentive when prices were high and they had more revenue coming in to spend on R&D?
I keep seeing people making this comment. I don't understand the logic of it.
I’ll tell you the logic of it.
Staying alive provides a greater incentive than greater profit.
Necessity is the mother of invention and all that.
That’s why tech innovation is so rapid during wartime.
“Depend upon it, sir, when a man knows he is to be hanged in a fortnight, it concentrates his mind wonderfully.”
Pretty much the only reason for a business to "stay alive" is to make profit. It is the only reason they get capital available to do any work, production or R&D.
That’s why tech innovation is so rapid during wartime.
That is because government don't care what it costs, it isn't their money.
All very true if you think innovation is simply the product of how much money is thrown at a problem.
There is, however, a very well known method of encouraging innovation called the skunkworks. Take your most unconventional thinkers, put them in an underfunded lab and pit it against the “conventional lab” which is well-funded.
The skunkworks surprisingly often outperforms the “official” organization.
http://en.wikipedia.org/wiki/Skunkworks_project
A bunch of engineers in multiple small companies that are desparately trying to keep afloat creates a whole bunch of skunkworks.
Or maybe not. I guess we’ll find out.
Quite so. But I've been in companies when the money was rolling in without a great deal of effort, with high margins, and I've seen the complacency that results.
IOW, a company with 25% margins is not all that highly incentivized to increase it to 30%.
A company with a 5% margin is very highly incentivized to keep that margin or increase it to 10%.
Let me share my perspective, after a couple decades of having oil/gas/petrochem companies as clients.
Anyone in the business more than a few years with any reasonable comprehension skills, understand the bust is coming, regardless of how great the boom looks at the time. When and how long it lasts is beyond reliable prediction, too many variables too far removed from us.
If they didn’t prepare for the bust while the boom was going, their potential to survive intact is in question. When the revenue is climbing is when you have the ability to do R&D.
Once the bust starts, unless you adequately prepared, it is survival mode, selling assets to those that better prepared depending how deep and how long the busts lasts.
When the prices start falling this fast and deep, it is not the time to start large R&D expenses; that time has already passed. If you are in a positions of cash reserves because you planned well, it is a time to buy up assets of others who didn’t plan well, a discounted prices.
Sheesh - somebody needs an editor!
Carrefour? I have never heard of it but I did a search and found it is a French chain. You have to remember stores in Europe are not open 24 hours like they are here
Businesses tend to be complacent when profit margins are high because businesses are run by people, in fact businesses ARE people. Just as those who are enjoying a very good personal income may be tempted to buy a bigger house, another vehicle etc. rather than use that money to provide for a secure future, businesses are subject to the same tempation. When profits start to shrink they become VERY interested in cutting costs but by then it may be too late. Whether studying businesses or individuals it is amazing to see how those who plan for a rainy day are able to accomplish so much with so little while those who assume things will always get better can manage to starve in the midst of plenty.
Those that want to survive in the never-ending oil boom/bust cycle will approach it differently.
And each bust cycle brings to light those that did and did not.
This isn’t new to us that have rode this roller-coaster for decades.
It is new, to some investors that wanted to jump on the ride long after the climb up had started.
Progress, far from consisting in change, depends on retentiveness. When change is absolute there remains no being to improve and no direction is set for possible improvement: and when experience is not retained, as among savages, infancy is perpetual. Those who cannot remember the past are condemned to repeat it.
- George Santayana, The Life of Reason, Vol. I, Reason in Common Sense
1905-06
He doesn't want to get humiliated and lose by a landslide.
Change is continuous, companies who cannot change die. I worked for ten years for a company whose products were so successful that there was almost no such thing as an organization of any kind operating without using something they made. No one except us old timers knows anything about it now. In ‘72 when I started their products were in almost every store, every office, every printing business, every church, the list goes on and on but now they are a memory. At some point they realized that they needed a whole new business model and they had what was for the time a huge cash reserve but it was squandered on bad decisions that did not pan out. When I was hired they were just giving up on one new product that was in theory a good idea for the time but could not be made to operate for even eight full hours without problems. After a few months with the company I was shaking my head every time I thought about it, any of their experienced tech reps could have told them from the start that there was no way it would ever work reliably but somehow their product development people thought they knew better. I left ten years later as they were in the process of breaking the company into divisions and selling them off to try to salvage some core line that would be profitable. They wanted me to move hundreds of miles to a new territory with no guarantee that I would have a job six months later. I went into competition with them and had a very good business for almost twenty years doing maintenance on their old products that were still in use.
Without knowing anything else, I'll bet you didn't make that move at a point where the price of the product/service you would supply had dropped in value 40% over 6 months. Probably not a point where it was clear the current supply was out running the demand and predicted to do so over the next year or so.
Am I right?
There is no doubt there is need to innovate or be left behind by the competition. Iran and Venezuela are great demonstrations of that fact in this industry at this time.
But at this moment, in this industry, those in strong financial positions have great opportunity.
Assets are going up for sale a deeply discounted prices. The strong company can buy proved producing mineral rights on the cheap. That is the best spending of the dollar at this time.
This is a high-risk industry; those outside are often amazed at this time $10 million individual wells are still drilled with no economic return. Offshore add a zero and multiple by 5 and still no return sometimes. Passing up sure return and the ability to capitalize on the greatly with the eventual return of high prices is where most the money will go at this time.
That’s petroleum in a nutshell.
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