NEW YORK: The US Department of Energy said on Friday it will sell 18 million barrels of crude oil from its strategic petroleum reserve on Dec. 17, as part of a previous plan to try to reduce gasoline prices.
The Biden administration announced last month it would release about 50 million barrels from its reserves in conjunction with other consumer countries including China, India and South Korea to combat the rising cost of fuel.
The White House has been trying to deal with Americans' worries about high fuel costs and inflation as drivers emerge from the pandemic, even though the president has few tools to deal with the price of crude, a global market influenced by numerous factors.
G7 considering ways of capping Russian oil price — German official
The proposal is part of broader G7 discussions on how to further crank up the pressure on the Kremlin over its invasion of Ukraine without stoking global inflationary pressures
Updated 10 sec ago
SCHLOSS ELMAU, Germany: Leaders of the Group of Seven rich democracies are having “very constructive” discussions on a possible cap on Russian oil imports, a German government official said on Saturday shortly before the start of the annual three-day G7 summit.
The proposal is part of broader G7 discussions on how to further crank up the pressure on the Kremlin over its invasion of Ukraine without stoking global inflationary pressures.
The Ukraine war, energy and food shortages and the darkening global economic outlook are expected to dominate the agenda of the summit that is taking place this year in Schloss Elmau, an alpine castle resort in southern Germany.
The United States, Canada and Britain have already banned imports of Russian oil while European Union leaders have agreed an embargo that will take full effect by end-2022 as part of sanctions on the Kremlin over its invasion of Ukraine.
With energy prices soaring though, the West fears such embargoes will not actually put a dent in Russia’s war chest as the country earns more from exports even as volumes fall.
A price cap could solve that dilemma, while also avoiding further restricting oil supply and fueling inflation, officials say, but for it to work, it requires buy-in from heavy importers like India and China.
“We are on a good path to reach an agreement,” the official said.
The official said the G7 was also discussing the need to combine ambitious climate goals with the need for some countries to explore new gas fields as Europe rushed to wean itself off Russian gas imports.
Inflation sparks global wave of protests for higher pay
Economists say Russia’s war in Ukraine amplified inflation by further pushing up the cost of energy
Updated 25 June 2022
NEW YORK: Rising food costs. Soaring fuel bills. Wages that are not keeping pace. Inflation is plundering people’s wallets, sparking a wave of protests and workers’ strikes around the world.
This week alone saw protests by the political opposition in Pakistan, nurses in Zimbabwe, unionized workers in Belgium, railway workers in Britain, Indigenous people in Ecuador, hundreds of US pilots and some European airline workers. Sri Lanka’s prime minister declared an economic collapse Wednesday after weeks of political turmoil.
Economists say Russia’s war in Ukraine amplified inflation by further pushing up the cost of energy and prices of fertilizer, grains and cooking oils as farmers struggle to grow and export crops in one of the world’s key agricultural regions.
As prices rise, inflation threatens to exacerbate inequalities and widen the gap between billions of people struggling to cover their costs and those who are able to keep spending.
“We are not all in this together,” said Matt Grainger, head of inequality policy at antipoverty organization Oxfam. “How many of the richest even know what a loaf of bread costs? They don’t really, they just absorb the prices.”
Oxfam is calling on the Group of 7 leading industrialized nations, which are holding their annual summit this weekend in Germany, to provide debt relief to developing economies and to tax corporations on excess profits.
“This isn’t just a standalone crisis. It’s coming off the back of an appalling pandemic that fueled increased inequality worldwide,” Grainger said. “I think we will see more and more protests.”
The demonstrations have caught the attention of governments, which have responded to soaring consumer prices with support measures like expanded subsidies for utility bills and cuts to fuel taxes. Often, that offers little relief because energy markets are volatile. Central banks are trying to ease inflation by raising interest rates.
Meanwhile, striking workers have pressured employers to engage in talks on raising wages to keep up with rising prices.
Eddie Dempsey, a senior official with Britain’s Rail, Maritime and Transport Union, which brought UK train services to a near standstill with strikes this week, said there are going to be more demands for pay increases across other sectors.
“It’s about time Britain had a pay rise. Wages have been falling for 30 years and corporate profits have been going through the roof,” Dempsey said.
Last week, thousands of truckers in South Korea ended an eight-day strike that caused shipment delays as they called for minimum wage guarantees amid soaring fuel prices.
Months earlier, some 10,000 kilometers (6,200 miles) away, truckers in Spain went on strike to protest fuel prices.
Peru’s government imposed a brief curfew after protests against fuel and food prices turned violent in April. Truckers and other transport workers also had gone on strike and blocked key highways.
Protests over the cost of living ousted Sri Lanka’s prime minister last month. Middle-class families say they’re forced to skip meals because of the island nation’s economic crisis, prompting them to contemplate leaving the country altogether.
The situation is particularly dire for refugees and the poor in conflict areas such as Afghanistan, Yemen, Myanmar and Haiti, where fighting has forced people to flee their homes and rely on aid organizations, themselves struggling to raise money.
Boeing expects demand to be back to pre-pandemic levels by 2024, says top official
Updated 25 June 2022
Fahad Abuljadayel & Dana Alomar
DOHA: Boeing anticipates global demand to see about 4 percent annual growth year over year for the next two decades, expecting to be back to pre-pandemic levels by 2024, said Omar Arekat, the company’s Middle East and Africa VP of commercial sales and marketing. He added that the growth for the Middle East would be slightly above that at 4.2 percent year over year.
During the Annual General Meeting of the International Air Transport Association, Arekat told Arab News that the market is growing, and there is a demand for roughly 3,000 cargo and freighters in the Gulf Cooperation Council region.
“We see that there is a recovery coming and our market is a very resilient market,” he added.
Despite a recovery, Boeing is still not quite at pre-pandemic levels, Arekat said. “We are seeing the recovery move much quicker than anticipated, especially on the regional and domestic fronts,” he informed.
Airlines returned to almost 100 percent of their operational capacity for regional and domestic travel, Arekat said. Internationally, it is growing, but it isn’t completely there yet, he added.
Based on peak season base, Boeing is 70 to 75 percent behind 2019, Arekat said.
He believed that the GCC is doing better than the rest of the world in terms of recovery. There has been strong growth in intra-regional travel, and international travel is increasing quickly, he said. “So we anticipate that we would see a recovery to 2019 levels by the year 2024,” Arekat added.
According to Arekat, the GCC region and the Middle East are important markets for Boeing.
Boeing and Qatar Airways signed a Memorandum of Understanding earlier this year for the purchase of up to 50 Boeing 737 Max aircraft, he said, adding that by 2024, the aircraft will begin being delivered.
“Qatar Airways announced a MoU for the purchase of 25 Boeing 737 Max with an option for another 25,” he said.
Arekat informed that Qatar Airways was the launch customer for 777-8 Freighter with a firm order for 34 jets earlier this year.
Boeing is currently working with Saudi Arabia on different opportunities. “The Saudi market has a lot of potential for growth,” he added.
Being a pioneer in sustainability, Boeing also plans to add the Boeing 777-200 to the sustainability program in 2023, he said. The company also has the Boeing 737 Max, which runs on sustainable fuel, and Etihad’s Boeing 787, the Greenliner. Boeing has been investing continuously in expanding its fuel-testing platform and leads the way in that area, he concluded.
“It’s in early stages right now and the demand will grow but the focus right now is on making sure that it’s affordable, and it’s available and produced widely,” he said.
Global supply chain impairs even as Saudi logistics industry shows signs of recovery
China’s COVID-19 restrictions, surge in oil prices and demand shock have shaken global services
Updated 25 June 2022
RIYADH: China’s stringent rules to curb COVID-19, the surge in oil prices and the worldwide demand shock have shaken the tectonic plates of the international supply chain and cast a long shadow on the global logistics business.
The troika has exposed not only the fault lines in companies’ distribution strategies but also the lack of resilience among logistics firms to cope with the vagaries of the global economy.
“China is sadly passing through another lockdown, impacting our volumes. The challenge has nothing to do with us; it is from China itself,” Abdulaziz Busbate, country general manager of DHL Saudi Arabia, told Arab News.
The leading logistic firm has seen a 20 percent rise in the cost of operations since the outbreak of the universal pandemic. The same holds true even for smaller supply chain companies.
“Before the pandemic, it took about $2,000 to import one container from China. Now it takes almost $7,000. Product prices are increasing daily,” said Muhammad Omer, co-founder and CEO of Aiduk Trading, a Riyadh-based company established in 2015.
According to Bloomberg Economics, a leading macroeconomic research service, China’s supply chain significantly dropped since April and is expected to worsen. What’s even worse? China’s port activity has fallen back to 2020-lockdown levels.
Global inflationary winds
The Russia-Ukraine conflict has impacted inflation rates of many food, commodities and raw materials. Countries neighboring Russia and Ukraine have been hit the hardest — Lithuania, Estonia, and Latvia have endured inflation rates of 14 percent, 12 percent and 10 percent, respectively.
“The combination of the war and the supply and demand imbalances, especially in energy, will push up base metals, precious metals and energy together,” Paul Christopher, head of global market strategy at the Wells Fargo Investment Institute, told Bloomberg Television.
According to Jadwa Investments’ inflation report, the Kingdom’s inflation is expected to rise 2.4 percent in 2022 as the Russia-Ukraine war, COVID-19 lockdowns in China and higher food consumption will add to the price pressure.
“Inflation globally is impacting us as well as the increase of fuel prices,” Busbate added.
The lockdowns in parts of China are adding more challenges to the already affected global supply chains, resulting in higher import costs from key trading partners such as Saudi Arabia.
Although the Kingdom’s inflation rate is expected to increase to 2.7 percent in 2023 — a 0.5 percentage point increase from 2022 — it will achieve the lowest inflation levels among the G20 economies and the third lowest worldwide, following Japan and Switzerland.
Within the G20, the Kingdom outperformed its peers, decreasing the annual inflation rate from 3.1 percent in 2021 to 2.2 percent in 2022.
Changing market dynamics
According to Busbate, the sector is seeing a growing demand in the business-to-consumer segment.
“During COVID-19, we took advantage of our e-commerce and B2C services as most people wanted to purchase online, while consumer behavior has completely changed in this current scenario,” he said.
DHL Saudi Arabia had a successful year in terms of revenues in 2020, thanks to a remarkable increase in their B2C operations.
Aiduk Trading also booked a significant increase in sales during the pandemic as people could not go out, and the online delivery market was booming.
“The industry of last-minute delivery during the pandemic was working day and night delivering goods to different consumers,” the CEO of Aiduk told Arab News.
However, business-to-business demand decreased heavily in 2020 as most industries were negatively affected by the pandemic.
“In 2020, we were 90 percent performing in B2C, while B2B was nearly 10 percent,” DHL’s Busbate said.
In 2021, businesses started to get back on track, and the B2B volume increased to 40 percent of their operations.
The company nearly doubled its crew in the call center to accommodate the number of calls they received and increased its drivers’ network by about 60 percent to deliver their shipments daily, pointed out Busbate.
Wading off the headwinds
Starting in 2015 with a 1,000- square-meters warehouse, Aiduk’s warehouse today is more than 20,000 square meters, offering e-commerce fulfillment services to their clients.
Meanwhile, DHL built three gateways in the major cities of Riyadh, Jeddah and Dammam, investing more than $50 million in the Kingdom since 2014.
A gateway is a point at which freight moving from one territory to another is interchanged between transportation lines.
The gateway in Jeddah is around 15,000 square meters, while Riyadh is about 12,000 square meters.
The German logistics behemoth is in no mood to stop as it plans to invest $8.5 million in its expansion plans in Riyadh.
The new expansion is expected to come into operation by the end of the year, said Busbate.
DHL today has a 58 percent market share in the Kingdom, managing around 20,000 shipments daily.
According to Riyadh-based Saudi Market Research, the Kingdom plans to inject $147 billion into the development of the transportation and logistics industry to turn the country into a transportation hub.
Saudi Arabia’s strategic location has attracted foreign players into the Kingdom’s logistics industry.
For instance, the US logistics giant FedEx has announced its decision to invest $400 million into domestic logistics operations to attract other foreign players to contribute to the vast developments, said the report.
The Kingdom is already the leading transportation and logistics operator in the Middle East and North Africa, earning $27.6 billion annually.
Also fueling the Kingdom’s supply chain ambitions is the development of new trade zones such as Jazan Economic City, NEOM Airport, SPARK zone, and the Red Sea Gateway Terminal.
The forecast exceeds the Kingdom’s pre-pandemic levels and is expected to continue its growth until 2025, when the industry reaches $50 billion in value.
Pylon targets emerging markets, aims to be the first MENA gigacorn
Becoming a gigacorn is more important than achieving exponential growth or high earnings: CEO
Updated 25 June 2022
RIYADH: Every startup’s dream is to hit a $1 billion valuation to become a unicorn. But, with the global need for a sustainable future, startups are itching to join the new gigacorn club.
Entry to this elite club requires a company to offset one gigaton of the 52 global gigatons of carbon dioxide emissions. Egypt’s infrastructure startup Pylon has drawn up plans to become a gigacorn.
In an exclusive interview with Arab News, Pylon CEO and co-founder Ahmed Ashour said that becoming a gigacorn was even more important than achieving exponential growth or high earnings.
“That’s quite a tough goal, so we believe that it will take us eight to 12 years to offset 2 percent of the world’s emissions,” Ashour added.
The firm offers software as a service in the electricity and water industry to help companies manage their operations better by reducing revenue loss and providing a tech-based system.
The company offers its services with a subscription revenue model that encourages its clients to use it without requiring a large budget.
“What we do is provide a smart grid infrastructure at the subscription model, which translates into installing our solution and giving the utility to operate that network in a smart way,” Ashour informed.
The company also offers financial services that play a huge role in its business model, giving Pylon a fintech side to make it even more interesting.
“The most important feature is the collection of the revenue because, at present, the utility market annually loses around 40 percent of its revenue,” the CEO added.
Ashour explained that digitalizing the collection of revenue in utility companies was extremely important as the global market lost almost $400 billion worth of revenue.
Revenue loss is the result of poor collection methods or utility theft which Pylon can also detect using its technology. Ashour also claimed that customers saw a 45 percent increase in revenue after using their services.
Although its operations can be tempting to pronounce Pylon as a fintech startup, Ashour insisted to label it as an infrastructure cleantech company.
Growth and expansion
Seeing around 250 percent growth year over year in 2021, the company is eyeing several markets in different parts of the world to help it accomplish its gigacorn dream.
At present, Pylon operates in Egypt and the Philippines with 12 utility companies using its services. It is eyeing markets such as Brazil and Indonesia, while studying the Saudi market. Although all these markets will help Pylon reach its goals, Ashour discussed that Egypt and the Philippines will probably have the highest impact in terms of its carbon emission goal.
“We work with covering all the big players when it comes to the private sector here in Egypt, or the majority of them, as well as five of the nine public sector companies, in addition to the Philippines for now,” he added.
Pylon is aiming to repeat its 2021 performance this year with plans to reach a penetration rate of 10 percent in emerging markets.
After raising $19 million in a seed funding round, the company has been studying multiple markets as well as penetrating the countries mentioned earlier.
“We’re studying the market, and we believe that there is a very good opportunity there which will add value to both, Saudi Arabia as well as Pylon, of course,” Ashour added.
Using the investment it received, Pylon started discussing partnerships in Africa as well as operations in Jordan and Nepal.