We have been finishing the inside of a hobby house structure in our backyard. We changed a door into a window (insert your own tortured metaphor for the current state of our lives here), trimmed all the inside windows, fixed cracks and gaps, added molding to the ceiling, painted, and soon will be installing a heated floor. Our hope is to transform it into a combined workout/music/library room. Not a man’s cave but perhaps a sophisticated gentleman’s den–that is gentleman in the spirit of Amor Towles book. Or more appropriate for these times, a non-gender, non-binary place of refuge.
Last weekend we were high up on a ladder with a drill in one hand and a hammer in the other, about 20 feet from the ground (it’s an A-frame shaped structure) when suddenly the ladder bent and gave way starting to fall from beneath us. We grabbed a rafter—we were literally hanging from the rafters—and with our feet were somehow able to wrangle the ladder back into a standing position Jackie Chan-style before it fell completely to the ground. We gingerly tested the ladder with our weight and though it wobbled, it held us, and we carefully made our way back to terra firma to assess the situation. Which is what we try to do here each week on a more global scale, always hoping the world does not collapse below us. And so we carefully, gingerly, with a safety harness, assess where we are on peak oil, further explore world fertility rates, and examine the collapse of the Canada-China free trade agreement. It’s this week’s International Need to Know, aiming to be the Notorious INTN of international data and information.
We continue to sense a feeling of unease and worry amongst those we interact with as they grapple with each week’s fast-changing momentous events. To help them and you persevere, we present Davell Crawford–one of New Orleans many astonishing pianists–and an amazing chorus performing the old spiritual Down by the Riverside. Like we hope for all of you, the song grows more powerful as the performers rise to the moment.
Without further ado, here’s what you need to know.
A Blind Squirrel Discovers Oil
The squirrels run around our yard this time of year extra energized, preparing for the coming winter no doubt. Perhaps we are the only blind one among them but we, too, have found a nut. Over four years ago in January, 2016, we posited that we were near peak oil consumption for the world and might even have reached it in the U.S. We wrote, “We have not yet reached peak oil consumption worldwide but I wager we will be there soon.” A few months later we wrote, “there may be short and even mid-term price spikes but as we noted last month, oil prices in the long term will stay low.” Thus far, (two words every analyst should use), we have been proven correct. In the U.S., oil consumption has increased slightly since 2016 but has not risen above its peak in 2007. World oil consumption, as we expected, did continue to rise. But even there the increases have been slow. This year, the Covid-19 pandemic has artificially dampened oil demand, and presumably demand will increase again when the virus is fully contained. Or, maybe not. BP, in its annual energy outlook, creates three future scenarios for energy use—a rapid decline, a net zero use of carbon, and a business as usual scenario. Under business as usual, which assumes no big policy changes, global liquid energy consumption is essentially flat for 20 years and then slowly starts to fall in the 2040s. So we are essentially at peak oil consumption now or in the next five years with no policy changes. We now scamper into our backyard in search of other nuts and acorns.
No One Wants a “Bebe”
If youth is wasted on the young, then there will be very little waste around much of the world in the coming years. Last week, we documented the difficulties China will have trying to increase their fertility rate. Today, we remind you of the rapid decrease of the fertility rate all over the world the last 30 to 40 years. As you see in the chart below, Western Europe and the U.S. have long had a low birth rate. Beginning in the 1990s, Latin America’s rate felt below 3, as did Asia’s. You can see China’s rate plummeting in the 1970s as it instituted its one-child policy. China currently has a lower birthrate than the U.S., Western Europe, South America, Asia as a whole, and India. The only two places in the world growing at or above replacement level are India and Africa. But note that India is now down to 2.35. Unless trends change, the globe’s lower birth rate will mean a very different world twenty years from now and will have a huge impact on GDP growth, innovation, productivity, social services and much more. These impacts are still too little discussed and analyzed.
Down Goes the Canada-China Free Trade Agreement
You may not have known about or forgotten that Canada and China have been negotiating a free trade agreement. Well, you can banish such knowledge to the attic along with old Friends episodes and the Seattle Mariners making a playoff run because Canada has walked away from the negotiations. In an interview with the Globe and Mail Daily (not to be confused with the Monthly Mail and Globe), Canada’s Foreign Minister Francois-Philippe Champagne* said, “I don’t see the conditions being present now for these discussions to continue at this time.” The negotiation started four years ago and since that time China has kidnapped two Canadians named Michael—Kovrig and Spavor—in retaliation for Canada, under rule of law, legally detaining Huawei CFO Meng Wangzhou. If there is a new U.S. administration come January, we are curious to see how it works with Canada to confront and engage with China on a host of issues, including the two Michaels.