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Alex Carrick, Chief Economist at ConstructConnect
Alex Carrick, Chief Economist at ConstructConnect
Alex Carrick is Chief Economist for ConstructConnect. He is a frequent contributor to the Daily Commercial News and the Journal of Commerce. He has delivered presentations throughout North America on the Canadian, United States and world construction outlooks. A trusted and often-quoted source for … More »

By No Means is it the Same Old World (Part 3)

May 9th, 2016 by Alex Carrick, Chief Economist at ConstructConnect

Article source: CMDGroup

Parts 1 and 2 of this Economy at a Glance carried us past the halfway point of our extended jaunt through the major changes underway in society today.

It’s time to wrap up with economy- and, indeed, life-altering transitions (8) through (12).

(8) Logistics rule: One could be forgiven for thinking that better logistics is the holy grail of aspirations.

The best strategizing generals have always known that wars aren’t necessarily won by valor or military skill.

Nor even by a single decisive victory.

To arrive at such a desirable outcome, the winning side must first have good logistics – i.e., effective means to supply warriors and machines with food and fuel. These are the secure supply lines that are so touted in military jargon.

Otherwise, you’ll find yourself retreating from Moscow, à la Napoleon Bonaparte, subsequent to a fades-too-quickly glorious success at the battle of Borodino.

In today’s fiercely contested trading environment, the best logistics are a prime means to gain a competitive edge. The public sector’s focus on new and upgraded infrastructure is really about moving goods and commuters more efficiently. Or, in the case of sewer and water projects, about keeping people healthy so they’ll be able to work more productively.

Smoother functioning logistics is synonymous with infrastructure improvements while also equating with productivity-enhancements.

(8) Micro-power Generation: Mention was previously made of driverless cars, while not specifically pointing out how much of a boon that will be for makers of traffic signaling equipment, lighting gear and other logistics monitoring systems.

There are other earth-shaking technological changes underway, with wide-sweeping impacts, where progress has already progressed much further.

Residential and non-residential building construction are seizing on the benefits of micro-power generation.

The drive for renewable energy has been a catalyst to spur on solar panel and solar shingle production with progressively lower cost structures.

The advantages of micro power generation in terms of security of supply and control over expenses are obvious. But where does this leave the giant utilities that have been making ultra-large capital investments based on business models that assume a continuing solid base of customers?

This battle is already being fought in some jurisdictions, most famously in Nevada were Elon Musk’s upstart firm, SolarCity, is being challenged in court by Warren Buffet’s more traditional and much larger corporate entity, NV Energy.

The issue concerns what is known as ‘reverse metering’, whereby micro power owners and producers receive credit for selling some of their excess or off-peak electricity into the broader grid.

(9) An imploding OPEC: A cooperative effort among like-minded nations, which has served them so well in the past, be hanged. This appears to be Saudi Arabia’s new approach to not only its membership in OPEC, but also its leadership role.

Saudi Arabia has lately chosen to go its own way in ramping up oil production and the rest of OPEC has been left no alternative but to accept the fallout from depressed oil prices.

Public sector operating budgets are being shattered by shortfalls in royalty revenues. As a consequence, there are several OPEC nations on the verge of going broke, including Nigeria, Libya and Venezuela.

Government workers in Venezuela have been told to appear at their places of employment only two days a week, because there aren’t the funds to pay them. If any of those nations does collapse, the rest of the world will be left to pick up the pieces from resulting debt defaults.

As some analysts have pointed out, it’s as if Saudi Arabia has foreseen an end to the fossil fuel era and is determined that it won’t be the nation left with ‘product’ still in the ground. It’s going to move crude to international markets, principally China and Europe, and in spite of rival competition from Russia and Iran, come what may.

For a while, North America’s oil and gas sector was thriving as a result of shale-rock hydraulic fracturing activity. Over the past year, though, energy sector capital expenditures (‘CAPEX’) in many countries, Canada especially and the U.S. included, have screeched to a halt.

Employment in oil and gas exploration and extraction firms has been greatly curtailed. Standard & Poor’s just lowered Exxon Mobil’s Triple-A credit rating.

The trucking industry is no longer hauling as much mining machinery and equipment.

Oilfield service companies are recording lower profits. The number of on-site construction workers at former mega project sites has been slashed.

(Fort McMurray, the urban center closest to Alberta’s Oil Sands deposits, is experiencing a biblically savage year, first initiated by an energy sector crash and more recently compounded by a wildfire scourge that has forced 80,000 residents to evacuate the city.)

(10) Sustainability in all things: Sustainability in aid of the environment isn’t just being talked about anymore. It has transitioned to the mainstream.

Building product manufacturers understand the sales advantage to be gained from offering products that will reduce fuel and water intake, or improve air quality. They’ve also accepted the need to be more transparent about the materials going into the goods they are offering.

The design firms gaining the most favorable public and media recognition are the ones incorporating rooftop gardens in their projects. Or vertical vegetation enhancements inside and outside their buildings.

If air and water recycling systems can also be featured, so much the better. Or how about power-generating wind propellers, attached to turbines, incorporated into structural or curtainwall elements?

Last fall’s Paris Agreement was hailed by environmentalists as a crowning achievement for uniting nearly 200 countries in a shared commitment to fight climate change.

Except preceding point (9) does create a speedbump. Depending on how long the global price of oil stays low, one of the cornerstones of sustainability may potentially crumble. On a strictly dollars and cents basis, the incentive to curb carbon-emitting fossil fuel usage − with the price of oil falling from over $100 USD per barrel to $40 − has taken a blow.

(11) Genetic engineering: For our children and grandchildren to be able to handle, plus live longer to experience, all the foregoing highlighted transitions, there’s the quickly growing field of genetic engineering.

While major changes (1) through (11) may well be underway, as human beings we’re all still the same old collection of carbon mass and H2O that we’ve always been.

But, hey, there now appears to be a solution for that. Through such scientific advances as DNA mapping and stem cell research, we’re about to embark on a totally new era, outside any realm ever visited by human beings before.

Goodness knows where it will lead, but the hope is that it will foster wonderful progress in defeating dreaded diseases. It wouldn’t be so bad if it also boosted our collective ability to cope.

Meanwhile, good luck with all those efforts you’re making to stop your brain from frying.

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Category: CMD Group

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