All posts by Jonathon Bowes

About Jonathon Bowes

Jonathan Bowes started his career in banking. After a few years, he took courses in business and finance and worked his way up the corporate ladder. Today, while writing part-time for Business District, Bowes assists talented people to find jobs in the field of economics. Contact Bowes at Jonathon[at]businessdistrict.com

Oil Prices Rise on Increased Demand

Energy News, , , , ,

The price of crude oil futures climbed a bit on Monday as demand from Asia and the US edged up as well.

Brent crude surged by 2 cents a barrel to $65.39 at 03:12 GMT. US crude showed a steeper climb, leaving it a bit below Brent crude, at $59.86 per barrel.

Energy Aspects, a London-based publication which discusses  the energy markets, commented on the increased price of oil:

“Global oil demand continues to surprise to the upside, with April data showing no signs of slowdown despite a pick-up in prices.”

Japan’s Ministry of Finance said that crude oil imports to Japan increased by 9.1 percent to 3.62 million barrels per day in April, compared to one year earlier. China hit a new record of crude imports, reaching 7.4 million barrels per day in April. That surge is despite China’s slowing economy which is offset by vigorous car sales.

“We expect Chinese imports to be high in H2 15, potentially averaging 7.5 million barrels per day. This is due to the start-up of 39 mb (million barrels) of commercial storage, five SPR (strategic petroleum reserve) sites and linefill for Kunming refinery—buying for which is ongoing we believe, even though the refinery won’t start up till early 2016,” Energy Aspects said.

On the other side of the globe the United States is now entering its peak season for driving with the Memorial Day weekend just coming to an end. According to the American Automobile Association, road travel in the US is expected to reach a ten-year high over the weekend, tightly correlated with higher oil use.

Trade War with Canada and Mexico Looms Over US

News, , , , , ,

Angered by US laws requiring that meat sold to consumers be labeled with the name of country to animal was born, grown and killed, Canada and Mexico won a formal complaint they had lodged with the World Trade Organization against the US requirements.

Mexico and Canada say these rules discriminate against imported meat, and are threatening to take steps to retaliate in what could become a full-blown trade war.

“Our governments will be seeking authorization from the WTO to take retaliatory measures against U.S. exports,” stated the Mexican and Canadian ministers for trade and agriculture.

Canada has already published a list of potential products to target for trade sanctions, such as wine, chocolate, ketchup and cereal. Mexico has not released a similar list, yet.

The beef and pork industries in Canada point to the fact that the US restrictions increase their expenses, reducing livestock exports. They say they have lost an estimated $1 billion a year in revenue as a result of this law.

Michael Conaway the Republican chairman of the House of Representatives Committee on Agriculture would like to see Congress do something fast.

“It is more important now than ever to act quickly to avoid a protracted trade war with our two largest trade partners,” Conaway said.

Republicans have a majority in the Congress, but they will most likely come up against a strong Democratic response to leave the labeling regulations in place. The top Democrat in the Committee on Agriculture, Collin Peterson, said he would oppose a change in the law. He added that he believes there are still steps that can be taken at the WTO before making any big changes.

The focus of the dispute is a law enacted in 2009 that requires retail outlets to label meat and pork in a way that gives consumers more information about the safety and the origin of the meat they purchase and eat.

Successful Social Media Giants Fail in Profitability

Uncategorized, , , ,

Despite the importance and influence social media sites have had on the way we journey through the world, as businesses, they are almost universally failures.

Yelp was founded in 2004, and went public in 2012, boosted by the millions of people who were using the site to rate local businesses and read those ratings. Prior to the IPO the company raised $56 million in venture capital investments. The IPO brought in an additional $107 million. Still not able to switch to black ink after all this time, a secondary stock offering raised $250 million. Yet, profitability remained an elusive dream.

Before we judge Yelp to harshly, this is a good moment to point out that profitability for social media sites is the exception and not the rule. Today there are only two such online platforms that can be said to make money rather than lose it. Those two are Facebook, which took years to reach profit-making status, and LinkedIn, which has a paid pro subscription, making it less dependent on advertising. You will be looking long and hard to find another social media company that is in this exclusive club. Not YouTube. Not Twitter. And not Yelp.

Now Yelp is looking for a buyer. But its prospects are not good. This is a quote from the company’s annual report:

“We expect that our revenue growth rate will decline as a result of a variety of factors, including the maturation of our business and the gradual decline in the number of major geographic markets, especially within the United States, to which we have not already expanded.”

Over its lifetime Yelp has raised a total of about $400 million from investors. The company has a market value of $3.51 billion, and in 2014 they did manage to eke out a profit for the first time in their history. Over its lifetime, however, Yelp has reported a total of $34 million in losses.

Who will buy this company is yet to be seen. If they do, it will be not as a source of income, at least not soon, but as a way to provide this service to its otherwise loyal customers.

Amazon Expanding into Online B2B Marketplace

News, , ,
Amazon Logo courtesy of Bernard Goldbach
Amazon Logo courtesy of Bernard Goldbach

As of Tuesday businesses can stock up on their supplies via a new marketplace launched by Amazon.com, the astoundingly successful online retailer. Amazon will now be a player in this quickly growing market estimated to be valued at over $8.2 trillion in the United States.

The new platform will be called Amazon Business. It will offer supplies to a huge variety of businesses from biotech companies to oil and gas firms. The new marketplace will also offer special pricing and discounts for buying large quantities, two-day free shipping for purchases over $49, tax exempt status and the possibility to receive products with an Amazon guarantee.

The move will help Amazon get a foot in the door of the fast-expanding online business-to-business (B2B) marketplace. The online sector of B2B is expected to make up as much as 12 percent of all B2B sales in the US by the year 2020, according to Forrester Research estimates.

Forrester believes that over the next five years a compound annual growth rate of 7.7 percent can be expected.

“Now, business customers have access to products that are only available to businesses as well as business exclusive pricing on a number of products,” Amazon Vice-President Prentis Wilson stated.

In order to better help businesses find what they need Amazon Business will divide its products into categories such as office supplies, IT equipment, janitorial supplies, healthcare products, large industrial equipment, education, and food service supplies.

Now such impossible to find items such as traffic signs, industrial-sized deep fyers, antibodies, 55-gallon steel drums, and even a machine to pull out dents are only a click away.

Sales Drop While Business Inventories Rise for Second Consecutive Month

Economy, ,
Inventories up, sales down in October and November
Inventories up, sales down in October and November

The Commerce Department announced on Wednesday the US business inventories rose during the month of November while sales fell for the second month in a row.

Business inventories grew by 0.2 percent, a figure that is consistent with the expectations of economists.  The number also followed a similar gain in October.

Inventories are an important part of the total gross domestic product. Excluding cars, retail inventories went up by 0.1 percent after posting a gain of 0.3 percent in October.

In November sales shrunk by 0.2 percent and 0.3 percent in October. It would take approximately 1.31 months for businesses to clear their shelves is sales continued at November’s tempo.