When Barbarians Are at the GatePeriodical 12 // JUNE 2015

For a long time, economists have generally presumed that lower oil prices generate positive effects on growth. Even without the political dimension, this time it all seems to be a whole new ball game. The reason for this is a fundamental change in the industry logic: for some time now, highly leveraged US shale oil has come into the game, leading to an oversupply, leading in turn to Saudi Arabia’s reaction to it. At the same time, oil majors are forced to compensate their huge capex programs of the last ten years, resulting in even more surplus. But with every turn, drilling becomes more complex, and capex therefore more expensive.
As a result, prices are falling and nobody can bear to stop producing – leaving the industry in a paradox: while supply needs a price above $100, demand cannot, and probably will not, afford $100, at least not in the short term. Almost the same formula of new technology, idle capacity, and falling prices will soon apply to many more industries. Depending which side of the fence you are standing on – this disruption may be welcomed or even seen as barbaric.
How should we deal with these threats? The first thing that springs to mind may sound almost too obvious, but nevertheless is of primary concern: be prepared. There may be scores of dire scenarios, but there will be just as many smart decisions to be made – as long as you have a keen eye, not only for current developments, but for the coming ones too.
Again, we have gathered some of the smartest decisionmakers and most acute thinkers to share examples of how this preparedness can be achieved: we do this directly by referring to the oil crisis, where falling oil prices are a welcome support in further diversifying the economy, or indirectly, by focusing on the insights provided by big data, the spectacular evolution of robots, intelligent and efficient infrastructure, and the importance of human capital.
These topics are vital in many sectors, but we shine a light also on the financial sector in particular, which is in the midst of disruption, and we also bring some facts to the latest developments in the showdown between Greece and its creditors. Last but not least, we give you an insight into the Stern Stewart Institute’s Africa Projects which again underline the importance of human capital for the continent.
No matter how different these essays may seem, all of them deal with vital questions for today’s and tomorrow’s economy, and all of them reinforce one important adage: business will go on – no matter on which side of the fence.