04 March 2013/21 Raby’ ath-Thani 1434/14 Esfand 1391
While glancing at news reports out of Japan, my eye was caught by a report that said eyeglass prices were going up, because of oil, or more specifically petrochemicals!
Most eyeglasses are actually plastic made with petrochemicals, and petrochemical prices have jumped. In January 2013 overall petrochemicals prices were up 12% from January 2012.
Towards the end of 2012 reports said prices started to come down due to decreased demand. But then supplies dipped so low that prices recovered in January/February 2013. Now prices are going to go higher because demand is going back up!
In Riyadh, Saudi Arabia, their equity market closed up on 02 March 2013 because of increasing demand for petrochemical shares.
The latest Wall Street Journal (WSJ) report said that Dow Chemical is upset because many U.S. oil companies want to export their petrochemicals feedstock. This will reduce supply available within the U.S. and affect the price Dow, and other companies will pay for their feedstock (basic ingredients used to make products).
The same WSJ report also said that U.S. oil companies’ desires to export their product is part of why fuel prices are going up at the pump, even though U.S. oil prices are stuck in the $90 USD per barrel range.
According to a 2005 CATO Institute commentary, petrochemicals make up 17% of every barrel of oil used in the United States. It doesn’t sound like much, but realize that petrochemicals are used to make a huge variety of products, most taken for granted by the average consumer.
Here’s a small list: Carpeting, clothing, crayons, plastics (including kitchen items, toys, model kits and eyeglasses/medical devices), detergents, deodorants, fertilizers, ink, paint, pesticides, chewing gum, adhesives/glue, even those recyclable plastic grocery bags (please recycle them), and prescription and non-prescription drugs.
Corporate officials in Japan are warning consumers to expect to pay more for their everyday consumer goods.
As far as economic recovery in the real estate market, a report out of the Cityscape Jeddah Residential and Affordable Housing Summit, in Saudi Arabia, sums it up: “With maximizing profit as main objectives, banks are not incentivized to diversify their business to cover real estate projects. You might see a bank financing a petrochemical project, but you will not find any bank interested in financing a real estate project for low and mid-income people. In addition, we don’t see enough effort from SAMA [Strategic Account Management Association(?)] to encourage banks to finance residential projects.”-Stephen Atkinson, ARIEIT Investment Holdings
In other words, petrochemicals are King (Beast), and we are at their mercy!