Author: Ben Debski

What low oil prices have taught us about Saudi Arabia

Posted on by Ben Debski

Speaking at the IHS CERAWeek energy conference in Houston, Saudi Arabia’s oil minister, Ali bin Ibrahim Al-Naimi, said his country could live with producing oil priced as low as $20 a barrel. “We don’t want to”, he told the room full of US oil bigwigs and various industry notables, “but if we have to, we will.” This sentiment was borne not of a desire to see low oil prices, but rather reflects the price the Saudis are willing to pay in order to not cut their own production. The Kingdom, the minister said, was not prepared to cut production in order to keep afloat less efficient producers.

Saudi Arabia now argues the market should determine the price, with low prices forcing less efficient producers out

This marks a change in Saudi Arabia’s position among oil producers, where it has traditionally acted as the guardian of oil prices – the so-called swing producer. At the same time, however, this policy is having ramifications for the country domestically. With the Saudi economy – and by extension its entire social and political structure – largely dependent upon large oil windfalls, declining prices have caused mounting fiscal pressure for the country.

No longer the swing producer
Saudi Arabia is often portrayed as the cause of the collapse in oil prices. It is often accused of having flooded the market, leading many to conclude the collapse in global oil prices and any ramifications they may have had for the Saudi state are its own short-sighted doing. Low oil prices have benefited the Saudis by putting pressure on producers unable to turn a profit at the current low prices, but it would be a mistake to accuse Saudi Arabia of having engineered the slide.

When prices began to fall in 2014, the Saudis did not export any greater amount of oil – indeed, the year ended with them exporting less crude than at its start. Rather, much of Saudi Arabia’s production increase actually went towards increased domestic use. It was only in 2015 that the Saudis began to significantly export more crude oil than before – a year into the start of the price decline. They have been producing at near capacity for many years now, with little room for manoeuvre. What this suggests is not that the Saudis decided to flood the market in 2014, but rather that they did not respond to the decline in prices by coordinating an OPEC-wide cut.

The Saudis, however, did want to pursue a cut in production – but only in concert with other producers. In late 2014, they met with two of the largest non-OPEC producers: Russia and Mexico. The Saudis had hoped to push for a consensus on an oil production cut with both OPEC and non-OPEC producers, but no agreement was reached, largely due to Russian reluctance. As CNN Money reported at the time: “When prices plummet, OPEC and non-OPEC producers come knocking at the door of Saudi Arabia and other Gulf countries, asking for them to cut production to support prices.”

But, this time, the Saudis did not want to act unilaterally (or in concert with OPEC) without the world’s other major producers joining in. Since then, a number of other meetings with various producers, OPEC and non-OPEC alike, have failed to yield any results. The latest position, as stated by Al-Naimi in Houston, is that there will be no cut from Saudi Arabia.

All this suggests a change in Saudi policy. The country no longer wishes to act as the swing producer – either inside or outside OPEC. While the country did not precipitate the global glut in oil prices, it has allowed the glut to carry on by not playing its traditional role of reigning in production. Rather, it now argues the market should determine the price, with low prices forcing less efficient producers out. As its spokespeople have repeatedly said, they will not “carry the market”.

This is not an attempt to gain market share, but rather, defend market share. A combination of high prices and cheap credit in years past led non-conventional oil extraction methods, particularly in the US, to soar. And this is something the Saudis take into consideration when deciding not to cut production without non-OPEC countries doing the same.

Low prices have started to tug at the strings of the Saudi state’s purse

But the consideration is not an attempt to kill non-conventional extraction methods outright. With the Saudis near capacity and world demand still rising – albeit at a slower pace – extra supply must come from elsewhere. And the Saudis reluctantly recognise US non-conventional oil as playing an important role in this. Saudi refusal to scale back their own production is, rather, a refusal to keep less efficient producers afloat. Those efficient enough to swim through the world oil glut will survive.

Saudi social contract
The question, however, is how long the Kingdom itself can fare within such a glut. The Saudis are able to produce at around $10 a barrel, meaning that – unlike for many higher cost producers – such low prices still provide a return. However, it is a depleted return and a marked fall in revenue compared to what Saudi society has become accustomed. Low prices have started to tug at the strings of the Saudi state’s purse.

When oil prices started to decline, the Kingdom did not immediately feel the squeeze. As Dr Courtney Freer, a research officer at the LSE Kuwait Programme, told The New Economy: “The Saudis didn’t really feel the impact of low oil prices until [2015]”. That year,“their fiscal deficit hit a record $98bn, or 15 percent of GDP, which I think was a wake-up call”. As a consequence, she said, “we saw substantial spending cuts listed in the 2016 budget”.

The budget cut, in the words of Freer, “was huge”. The government announced it “would adjust water, electricity and fuel subsidies over the next five years – a huge and unprecedented step for the Kingdom”. While the lavish lifestyle of various members of the extensive Saudi royal family may go for the most part unaffected, the average Saudi will see generous state subsidies dry up.

The Saudi economy is almost entirely dependent on oil revenues, and in many ways the legitimacy of the House of Saud is tied up with its ability to provide its subjects with the dividends the revenues allow. Already the state has had to start scaling back on the fiscal privileges it affords its citizens – which raises questions as to how much longer it can last. As the world remains awash in cheap oil, this social contract looks increasing under strain.

The US attacks India’s solar programme

Posted on by Ben Debski

Following a complaint from the US, the World Trade Organization (WTO) has ruled against India’s National Solar Mission. Claimed to be part of the country’s bid to meet its United Nations Framework Convention on Climate Change, the plan is for India blanket its country in solar panels. However, the WTO took issue with one aspect of the programme’s plan: its stipulation that Indian-produced solar cells should be used.

Carefully planned protectionism has often been the precursor to industrialisation

This should not, however, be seen as an attack by the US on the solar industry or some sort of attempt to sabotage climate change commitments. The US complaint was that India’s solar programme discriminates against international solar energy manufacturers. This is against the principles of the WTO, of which India is a signatory.

Excluding non-Indian-made solar cells would hinder the programme anyway, as it would mean – protected from outside competition – Indian solar cell producers would be able to produce the parts less efficiently or charge higher prices. The result of this would be to make turning India into a solar-energy powerhouse even more expensive and, by extension, the energy created would cost more – which would, in turn, have repercussions for Indian consumers and any Indian business making use of that energy.

However, favouring Indian-produced components would benefit India in terms of allowing its manufacturers to work under protected conditions, providing a boost to India’s domestic industrial sector. There is a sound argument in this, as India, along with many other developing nations, needs to foster its industrial sector. Indeed, carefully planned protectionism has often been the precursor to industrialisation – South Korea and Taiwan are the best examples.

The US also engages in protectionism, so India will probably launch a counter-complaint. The WTO ruling is negative for Indian solar manufacturers – and perhaps by extension the overall health of the Indian economy – but it isn’t necessarily detrimental to India’s hope to build its solar energy capacity. If anything, importing better- and cheaper-made US-manufactured cells – or at least exposing Indian producers to international competition – would result in cheaper and more efficient solar energy production. However, if the priority was to provide a boom to Indian industrial growth over any pie-in-the-sky environmental commitments, that would not be unreasonable on India’s part.

Facebook wants you to love, laugh, cry and get angry with new Reactions

Posted on by Ben Debski

After much talk and frequent feedback requests, Facebook has finally introduced a broader range of emotions to it’s famous ‘Like’ button. Up until now, Facebook users have been limited to simply ‘liking’ posts, leading many to call for a ‘dislike’ function for several years. Now, millions of Facebook users around the world can hold down the Like button to choose from ‘love’, ‘haha’, ‘wow’, ‘sad’ and ‘angry’ to express their reaction to content shared by friends and sponsored material.

Facebook now has over 930m daily average users

Given Facebook now has over 930m daily average users (as announced in its Full Year Results for 2015), there has neem a growing demand for users to be able to respond to content more easily than by typing out comments – which is why emojis were chosen.

The new feature is expected to be of great value to publishers and advertisers, which will be able to gain a deeper understanding of the reactions consumers have to their materials and products. What’s more, as Facebook now has over a billion users around the world, more detailed customer analysis is priceless. That said, the algorithm by which Facebook personalises users’ news feeds has not changed; it will be decided at a later date whether the new function will change what users see and when.

Following over a year of in-depth research, including surveys and focus groups, Facebook maintains the decision to roll out ‘Reactions’ was made in order to allow people to show greater empathy on the social platform. The new additions were narrowed down on the basis of the reactions people most commonly chose in trials, as well as the comments and emojis already used in posts.

It was decided ‘dislike’ would not be added, as doing so had the potential to turn Facebook into a forum that voted on the popularity of posts. “That doesn’t seem like the kind of community that we want to create”, Zuckerberg said at an event, according to CNN Money.

Experts predict the new function will provide greater levels of engagement for users, helping to boost profits even further for the tech titan.

Xiaomi launches world’s most powerful smartphone

Posted on by Ben Debski

China’s leading smartphone maker kicked off its first media event in Europe with a flagship product announcement and vague plans to take the Xiaomi brand global. The new Mi5 handset is in keeping with Xiaomi’s usual strategy of undercutting its rivals Samsung and Apple with a high-end phone at a relatively low price.

Xiaomi last year missed its sales target of 80m units by 10m and made limited progress overseas

“This is basically ahead of the pack in many ways when it comes to flagship devices”, Hugo Barra, Xiaomi’s Vice President of International Operations, told the Associated Press. “You’re looking at a third to a half of the price that you would expect to pay for another flagship device with similar capabilities.”

Barra, who joined Xiaomi from Google, made much of the company’s new patent-licensing deal with Qualcomm and said the Mi5 was the most powerful smartphone on the market based on benchmarking scores.

The new handset comes in three versions. The most expensive, the Mi5 Pro, is priced at CNY 2,699 ($413) and has more memory and a nano-ceramic zirconia casing, while the cheapest, the 32GB Mi5, costs a modest CNY 1,999 ($305). All three will launch in China on March 1, and, though the Mi5 will be available in India and “other countries”, no formal announcement was made on wider release dates.

The world’s fifth biggest smartphone maker sells a whopping 90 percent of its handsets in China, and is under pressure to expand outside its domestic market to escape a gathering economic slowdown. Xiaomi last year missed its sales target of 80m units by 10m and made limited progress overseas.

Barra took the opportunity at World Mobile Congress to reassure those in attendance Xiaomi was looking to markets outside its own for new opportunities. “It begins a process of building a brand and we want to be global”, he told The Wall Street Journal. “It doesn’t mean we’re going to launch in these markets, but eventually we want to get there.”

Saudis say they won’t cut oil production

Posted on by Ben Debski

Speaking at the annual IHS CERAWeek energy conference in Houston, Saudi Arabia’s oil minister said his country will not be cutting production. In the heartland of US oil, Ali bin Ibrahim Al-Naimi said higher-cost producers should leave the market first in order to address the global gut.

The high price of oil at the start of the decade, he said, had encouraged inefficient producers to grow their output

The high price of oil at the start of the decade, he said, had encouraged inefficient producers to grow their output. “The producers of these high-cost barrels must find a way to lower their costs, borrow cash or liquidate”, he said. “It sounds harsh, and unfortunately it is. But it’s the most efficient way to rebalance markets.”

He noted Saudi Arabia could and would still be able to profitably produce oil at $20 a barrel. “We don’t want to, but if we have to, we will”, he told attendees. This no doubt worried the many US oil executives in the room as most of the country’s producers would be unable to produce oil profitably at such low prices, and America has already seen a wave of shale oil producer bankruptcies. Al-Naimi, however, was quick to say the kingdom has not “declared war on shale”, and that his country welcomes “new, additional supplies, including shale oil”.

The minister also cited a lack of trust between oil producers as a reason a production cut “is not going to happen”. Mistrust between producers to follow through with output agreements has been a recurring theme in recent discussions. The fear is producers not adhering to a cut or cheating on output quotas – as many OPEC members did in the 1980s – will result in those sticking to the agreement losing market share.

Tech companies fear the ad-block bomb

Posted on by Ben Debski

Yahoo and Google have butted heads with the ad-blocking industry at Mobile World Congress. Executives from the two companies exchanged verbal blows with Shine’s CMO Roi Carthy after he likened his company’s solution to a “nuclear weapon” threatening the industry. Carthy called the service “a stellar opportunity to reset the relationship with consumers”, and, while he was not against advertising per se, he did say: “New rules of engagement need to come about”.

Shine blocks all smartphone ads and doesn’t ‘whitelist’ certain publishers

Although the panel discussion was originally billed as an opportunity to discuss why consumers use ad blockers and what marketers can do to improve online ads, much of the conversation centred on Shine’s own services. Unlike rival blockers, it blocks all smartphone ads and doesn’t ‘whitelist’ certain publishers. Carthy said this “blunt” strategy was intended to highlight the way in which consumers were being bombarded.

“Every individual using a mobile handset, smartphone or desktop is being abused by ad tech – that’s not selective, that is 100 percent”, he said. “Consumers do not have the ability to protect themselves. I understand that there is a criticism that all publishers are being painted with a single brush – there needs to be more nuance here – however, where the conversation is right now with ad blocking is less about nuance and more about sending a very clear signal.”

The use of ad-blocking software was up a whopping 41 percent in the 12 months to August, and, according to PageFair, there are 198m active ad block users worldwide. A survey conducted by Adobe recently showed 42 percent of a 260-person sample believed ad blockers improved their computer’s performance. The issue was predicted to cost advertisers $22bn in lost revenue in 2015.

Nick Hugh, Yahoo’s Vice President and General Manager of Advertising in Europe, the Middle East and Africa claimed such a “blunt” instrument could destroy “the value exchange and the ecosystem” in choosing not to discriminate between good and bad ads.

Pete Blackshaw, Nestlé’s Vice President of Digital and Social Media, took a more balanced standpoint when he said: “What’s good about the debate is that it’s forcing us – as we should as marketers – to stay very close to consumer opinion and sentiment… Somewhere in the middle there is a more accepted ad model that consumers will accept, similar to how consumers ultimately accept the paid music model when everyone kind of concluded that would never happen.”

Apple is battling the FBI to protect privacy

Posted on by Ben Debski

On 16 February, Judge Sheri Pym of US District Court in Los Angeles demanded Apple provide “reasonable technical assistance” to investigators seeking to unlock data on an iPhone owned by Rizwan Farook, one of the San Bernardino shooters. In response to the 2 December mass shootings, the FBI order requests Apple modify its encryption so federal agents can more easily unlock the phone.

Apple estimates it would take someone five and a half years to try every single combination

The passcode feature of the iPhone is so secure Apple estimates it would take someone five and a half years to try every single combination. The court demanded the tech company cut that delay for Farook’s device, but Apple argued that, even for one device, bypassing the feature would “undeniably create a backdoor”.

In a statement on Apple’s website, Chief Executive Tim Cook opposed the court order, claiming it was “compromising the security of our personal information” and could “ultimately put our personal safety at risk”. Refuting the government’s suggestion the tool could only be used once, Cook highlighted the danger of the technique by comparing it to a master key, which could be used over and over again on a number of devices.

“In the wrong hands, this software – which does not exist today – would have the potential to unlock any iPhone in someone’s physical possession”, Cook said. “The government is asking Apple to hack our own users and undermine decades of security advancements that protect our customers.”

The critics
Apple has faced fierce criticism for its stance, on a personal and political front. On 18 February, the family of UK Fusilier Lee Rigby, who was murdered by Islamist terrorists in 2013, condemned Apple’s decision. Rigby’s uncle told the BBC the company was “protecting a murderer’s privacy at the cost of public safety”.

At a press conference the day before, White House spokesman Josh Earnest pledged his full support for the Justice Department and the FBI, rejecting Apple’s statement that the FBI was asking it to create a backdoor to one of its products. Other politicians, such as John Kasich and Donald Trump, also defended the court order.

One of the most surprising critics of the company’s decision was the founder of Microsoft, Bill Gates. Breaking with Silicon Valley, Gates backed the US Government, saying tech companies should be forced to cooperate with law enforcement. He rejected the assertion the FBI was demanding Apple create a backdoor, arguing the company could give access to the shooter’s phone without setting a wider precedent.

The privacy advocates
Those in agreement with Apple’s position also voiced their support. Gates aside, most Silicon Valley executives who have spoken up have backed Cook. Speaking at Mobile World Congress, Mark Zuckerberg said: “I don’t think building backdoors is the way to go, so we’re pretty sympathetic to Tim and Apple.” Tech company leaders and privacy advocates have taken to social media to show their support. Google’s Chief Executive Sundar Pichai tweeted:

None who defend Apple deny the need for public security, but reject the notion security must prevail at the cost of privacy. Public safety and national security are top priorities of any state, but it is questionable when public safety is invoked as a tool to take on new powers of surveillance. Since Edward Snowden’s revelations about the NSA, tech companies have suffered as their customers’ trust has been undermined by government surveillance. Fearful that allowing the FBI access to private information could set a precedent, tech companies support the fight against what could be a damning future.

Snowden himself tweeted to criticise law enforcement:

He also warned of the detrimental effect this could have around the world, suggesting China would most likely follow suit and impose encryption regulations on all multinational companies.

Snowden called the stand-off between Apple and the FBI “the most important tech case in a decade”. With the potential to be taken all the way to the US Supreme Court, the tensions between privacy protection and public safety are emotionally charged. A recent poll from Pew Research Center suggested the majority of the general public sides with the FBI, but protestors are set to back Apple and its fight for privacy. It is too soon to tell which side will win.

:O Emojis are killing our phones

Posted on by Ben Debski

The Blancco Technology Group has released its State of Mobile Device Performance and Health:Q4 2015 report, which found nearly three in four mobile devices returned to manufacturers in Europe and North America were found to have no problem. The report showed user behaviour was the more likely cause of mobile issues, and the sudden increase in mobile failures in Europe was triggered by the increased use of emoji apps.

Some 85 percent of issues found on smartphones were on Android devices

The quarterly trend report is based on data collected from millions of iOS and Android smartphones and tablets that underwent diagnostics testing on the SmartChk platform. The report highlighted some other significant findings.

Some 85 percent of issues found on smartphones were on Android devices, compared to just 15 percent for iOS devices. The Android manufacturer with the highest failure rate was Samsung at 27 percent, followed by Lenevo at 27 percent, Motorola at 18 percent, Xiaomi at 11 percent and Asus at eight percent.

The top culprits for device failures worldwide were camera, touch controls, battery charging, microphone and performance. In Asia, the causes for failure were the frequent use of social networking apps and messaging application, such as Facebook, WhatsApp WeChat and Line. The increasing use of emoji and productivity apps in Europe played a contributing role in the increase in device failure rates during the second half of 2015.

Pat Clawson, CEO of Blancco Technology Group said: “Being able to detect with certainty the causes and types of device problems is important. For mobile network operators and manufacturers, it allows them to automate and scale the device diagnostics and repair process to deliver a consistent customer experience. It also helps enterprise businesses support the needs and increase the productivity of their mobile workforce.”

LG wants you to buy Friends with its G5 smartphone

Posted on by Ben Debski

LG has revealed its latest handset, which features an expansion slot for add-ons. Unveiled at the Mobile World Congress in Barcelona, the LG G5’s base is modular and can be replaced with several different function-expanding accessories.

Modular smartphones have so far proven difficult products to crack for manufacturers

Two different modules, which LG are calling ‘Friends’, have been unveiled so far. The first is a camera grip that gives the smartphone a dedicated shutter button, zoom dial and extra battery life. The second is a Bang & Olufsen 32-bit converter and amplifier, improving the audio quality of the device. The amplifier can be clipped into the smartphone’s base or used on its own. Though only these two modules have been unveiled so far, the door has been left open for third-party manufacturers to design their own.

While swapping components has always been possible in personal computers, smartphones have so far remained closed devices. With a modular smartphone, if a single part such as a camera became obsolete or damaged it could be easily replaced. A fully modular smartphone would also have a longer lifespan and create less waste. Though the LG G5 is not yet at that point, it is a step in that direction.

Modular smartphones have so far proven difficult products to crack for manufacturers. Google’s Project Ara, a design featuring completely replaceable individual parts, has been delayed into 2016 after a planned 2015 trial launch. Other designs, such as the Xiaomi Magic Cube and the ZTE Eco-Mobius, have only been shown as prototypes.

LG also unveiled several other ‘Friends’ for the new handset, though these were more like accessories than modular parts. They included a 360-degree camera, a lightweight virtual reality headset and wireless headphones. The device has not yet been priced, but a release is expected in the coming months.

Samsung is getting over its Chinese burn

Posted on by Ben Debski

Speaking at the 2016 Mobile World Congress in Barcelona, Samsung’s mobile chief said the worst of the company’s troubles are over. DJ Koh said his firm’s position in the Chinese smartphone business had reached a stable point, and signs of growth would soon start to appear.

Samsung was once a dominant player in the Chinese smartphone market, but in recent years has faced tough competition. Challenges from both domestic and international companies have squeezed the South Korean firm’s market share.

Samsung’s market share in China was 7.7 percent in 2015, down from 20 percent in 2013

Samsung’s market share in China was 7.7 percent in 2015, down from 20 percent in 2013. As a result of the declining market share in China, the firm was forced to cut thousands of jobs in 2015.

The fall was partly due to rising prosperity and economic development in China: Western-produced smartphones, such as Apple’s iPhone, hold a greater prestige for newly rich Chinese consumers, while domestically-produced smartphones are both increasing in quality and lower in cost.

Speaking to World Finance in 2015, Konstantinos Venetis, an economist at Lombard Street Research, said: “Competition in important market segments has intensified, not least as Chinese players are gradually moving up the value chain. For example, lower-cost Chinese smartphone manufacturers have been making their presence felt largely at the expense of Samsung.”

Koh recognised the enduring threat posed by lower-cost Chinese producers, who are also likely to catch up with Samsung’s push towards making virtual reality mobile phone hardware in a few years. Samsung is, according to The Wall Street Journal, “looking for ways to build up an ecosystem where ordinary consumers could easily make their own content and use virtual reality to communicate with their friends”, in order to stand out from the competition.

The mobile chief also spoke of trying to change the corporate culture of the company, to foster more innovation and debate. He lamented the fact that “in Samsung, in the meeting room, if a senior executive says something, nobody argues”. He said he hoped to cultivate a new “Silicon Valley spirit” within the firm, whereby the higher rungs will more readily listen to the input of junior staff.