COST ACCOUNTANTS OPPORTUNITY FOR INDIAN RAILWAY

In the recent budget Indian railways have highlighted on adoption of Activity base costing in Indian railways. Its nice to find that Indian railways are adopting and changing’s its mindsets and policy towards cost optimization and to recover from losses despite of higher revenues. We all know that Indian railways earns a lot through advance ticket booking but it has loses on its books. This is very reason that after independence Indian government is aggressive looking ahead for adoption of costing methods in its railways operating process. Before I move ahead I would like to inform my readers that I will cut down on words and would give images to portray the concepts of  Cost Management in Indian Railways. Now this activity based costing adoption in Indian railways is going to be wider scope since it has many functions and many departments linked under several segments. If we make a quick look towards the several areas where activity based costing can be implemented:

·         Freight traffic

·         Passenger Traffic

These two segments are further divided and in to several part where in order to design a cost model we need to identify the various parts of the cost drivers. A question might come up that what type of cost information is required and which areas to be focused to plugging the gaps. Well cost information and understanding is needed so that our results to could identify the final objective. Cost Optimization is a broader term hence we drill it further and we conclude are as follows:

ü  Identify money makers or money losers

ü  Take resource allocation decisions

ü  plan and control operations and activities

ü  Find economic break-even points

ü  Compare different options

ü  Discover opportunities for cost improvement

ü  Prepare and actualize business plans

ü  Improve strategic decisions making

Now moving ahead we find that Indian railways needs pricing decision of its Freight Tariffs and also about its investments decisions so that movement of goods and services brings more trade and investment opportunities. We are all demanding GST but once it’s come the biggest requirement over the years will be logistics and Indian railways demand will go up. Hence pricing become more important so as neither the customer neither the government burns a hole in its pocket. So my activity based costing should be linked not only with cost optimization but with identification of pricing of its services.

In railways we can derive the Activity based costing either by Top down Approach or By Bottom up approach.

To clarify these terms two examples may be given:

Example I: When using the top-down approach to calculate the staff costs for the traction, they would be calculated by dividing the total costs for driver wages in a railway company by the number of driving hours of all drivers in that company.

A bottom-up approach would be to multiply the number of driver working-hours for a certain activity by the gross salary per driver-hour.

Example II: When using the top-down approach to calculate the energy costs for a certain activity, the total traction-related energy costs in a railway company would be divided by the total train-kilometres (or gross ton-kilometres or whatever unit of measurement is considered suitable) this railway company produces during a given period, giving the energy cost per train-kilometre.

A bottom-up approach would be to calculate the energy consumption for that activity using a suitable formula which takes into account running resistance, air resistance, losses, etc. and then multiplying the calculated energy consumption, suitably expressed in kWh, by the actual working price per kWh.

Which of the approaches is used in the model depends partly on what data are available. Generally a bottom-up approach is preferable for the following reason:

In the top-down approach, there is no longer any direct connection to the factors causing and determining the costs; instead, the total costs are simply distributed over some measurement units (train-kilometres, working hours, tons, etc), although no linear connection necessarily exists at all.

For example, when calculating infrastructure charges for a train, these can of course, easily be calculated by dividing a railway company’s total annual infrastructure charges by the total train-kilometres, although in reality they might be charged per gross-ton-kilometre or vice versa.

A bottom-up approach makes it easier to take into consideration specific characteristics of a  transport, as well as changes in the relevant cost determining factors, as the following examples illustrate:

When calculating energy costs for example, a bottom-up approach makes it possible to take into account the weight of the train and if it is running at high or low speed, while the top-down approach normally only calculates the costs on the basis of the average energy consumption per train-kilometre, irrespective of the speed and weight. Another example would be infrastructure charges.

Please do remember they have common cost and joint cost in many departments hence you need to design the costing models and also the cost drivers accordingly. The below picture will elaborate about the flow chart:

At the same time there is incremental cost of operating which also needs to be taken into account. Hence I have included one format for the incremental costing of the Railways based on the departments and segments. The below flow helps me cut my words and complexity in explanation: 

Now lets come to the model of Activity Base costing where cost drivers are segmented: I have given the format for making its much easier to understand.

Hence In my 1st series i give an idea about the steps and the process to be taken while designing the activity based costing models for railway segment. In my next series I will come up with more valuable insights of other segments raised in the Indian Railway Budget 2016-17 related to cost management profession.

EVERY 100 YEARS PRICE CHANGES...MORE SWF TO REEDEM

If we look into the economic history and economic theories we find that when price of a product changes it correspondingly changes the economy of and industry and on a large scale economy of the country. Price changes leads to product changes which lead to change of an industry monopoly in the long term. Price is the most important factor for deciding the fate of an industry or economy. It leads to creation of unemployment and also creation of employment and other industrial growth.

 From wood to coal conversion lead to an significant change over in the wood cutting industry which lead to unemployment as they lacked skilled mining knowhow. Significant drop in investments in wood cutting industry, which lead to collapse of the ancillary industries like plant and machinery. Now after another 100 years or more we came up with oil which replaced the coal mining industry and its consumption. It true that it did not completely stop the coal mining and coal consumption industries but the golden era period of the coal industry collapsed in due course as the world economy and industries shifted into oil based consumption pattern. Just check that from coal based steam engine the entire railway industry across the globe got converted into Diesel or oil based railway system.

During this change over unemployment in mining industry, plant and machinery industry related to mining went for wild toss. The entire consumption industry significantly shredded off the coal based products and the future of plant and machinery also changed their consumption pattern from coal to oil. This lead to an significant drop of investments in coal industry and lead a stupendous rally of investments in oil production and oil related industries change over.

Now we are currently again after 100 years or more we are going through the phase of change form crude to alternative energy. But there is a difference between the history and the current times.  Currently oil is not being replaced with any immediate industry but it is being found that the current economies have done a blunder in their investments within industries within their economies.

There are two economic thoughts which strike my minds. The current scenario speaks very clearly those countries like Russia, Saudi Arabia, Oman, Bahrain and all those countries in crude production have not well diversified their investments which will keep their economies alive in times of collapse of their prime resources. It’s very practical that one fine morning the entire crude stored under the ground can get vanished with a simple earth quake. My 2nd economic thought is that like the previous economic history of product prices we did not witness massive sell of markets, collapsing like a pack of cards. Since birds of globalization were not flying across many countries like now. We are awaiting to witness massive sell of across various asset classes  in 2016 as these crude exporting countries have the liberty to support their countries fiscal and consumption demand by liquidating $7 trillion dollars of Sovereign Funds which they have built over the last 15 years. Sovereign wealth funds of oil-rich countries like Norway, Saudi Arabia, Russia and Qatar sold more than $213 billion worth of stocks in 2015, this number will grow further in 2016. Debt to GDP ratio and other social burden might increase in the next 20 years if we don’t think from now.

My research says that we will witness QE to come ahead to stop these liquidation since currency across the globe and asset class across the globe from bonds equities will be hammered further. Please don’t mingle this situation by calling Recession. It’s a liquidation phase of investments which have been built over the years, built for these crisis times.

Crude exporting countries needs to focus on alternative to crude export and hence I find more investments to flow into other industries. We don’t know that over the next 50 years the pattern of crude consumption might change like the history of wood and coal. Economic models and probably theory reflects that every 100 years the pattern of natural resource consumption changes. This change will be much faster under the current times as technology is speeding up the process of changes. The reason for saying all these is that under the current circumstances the affect of the low crude prices have impacted the social segment too. Likewise Saudi Arabia is cutting down its students

Hence it’s clear that under the current economic process and policies we will not be able to sustain our social costs in the long term. I find that the biggest debate for this century will be that will governments across the globe will bear the burden of social cost. We are not counting properly on the probabilities of risk and uncertainties and that’s the place where we are feeling the heat. We are all taking into account the economic research based on the short term trigger whereas the large picture is often being ignored by the capitalist minds. Well we are yet to witness massive outflows in sovereign wealth funds investments across asset class and there are more pains in the sidelines.

HYBRID BOND...NEVER EXPLAINED PROPERLY

In 2014 I was sitting in an office with my friend and he was over the phone discussing about Hybrid Bonds and investments in asset class. He was able to sell a good amount of Hybrid bond to an client where he earned a hefty commission. The biggest problem of today’s global economy is that liquidity aspects of these Hybrid Bonds were never properly informed to the tax payers and they took a hit at their end under the current circumstance. High yield and returns forced them to drop other safe assets class investments and bring all savings under Hybrid Bonds and Debt.

The fight over asset class investments have been long history since the inception of every new asset class came in the market.  Investors have become smarter and more risk takers without understanding risk factors. I will come to this smart investors segment later in the article.

Hybrid bonds took birth to attract inflows by offering higher yields and returns. But attracting the investments not form investors but form other investment asset class. Yes that’s the main reason why toxic bonds and debt papers are introduced into the market. Hybrid Bonds and Debt are not taken into account of any index also. For the moment, contingent convertible bonds-Hybrid Bonds are not included in any of the fixed-income reference indices such as those compiled by Bank of America Merrill Lynch and Barclays Capital. The consequence is that investors who use those indices as benchmarks do not invest in contingent debt. The Barclays Capital Index Product Group has made it clear that contingent capital is – similar to other mandatory convertibles – not eligible to be included in the broad-based investment-grade Barclays capital bond indices.

Corporate also came up with bonds. But their theory of Bonds issue was split into two segment 1)Investment category and Low category companies. The investment-grade hybrids are labeled “safe haven hybrids,” whereas their lower-rated equivalents are better known as “high beta hybrids. The gimmick of the English word played its game and made investors to burn out billions under the current scenario. These hybrid debts are mostly under deferral system where principle payment is deferred and only the coupon is extended and compensated by a higher yield.

Well the depth of this type of Hybrid Bond/Debt is that four companies raised a total of $4.7bn through convertible bonds in the first half of January 2014 alone.

ArcelorMittal

Italy’s Eni 

Abengoa, the Spanish renewable energy company

Italian real estate group Beni Stabili 

Total convertible issuance for the first 6 months of 2015 was up to USD 50.8 billion.In 2014 there have been 55 convertible bonds issued in Europe so far this year worth a total of $17.3bn, compared with 38 worth a total of $15.6bn at the same stage last year of 2013. I am not getting into the numbers of 2015. The history is yet to unfolded and that’s what’s scary for the markets.

Today’s financial market is linked with every asset class and surprisingly every asset class is competing with against each other. Hybrid bonds like the convertible bonds were issued not only by banks but also by corporate. Share Buyback spooked the capital markets and major indices across the globe. Now a convertible bond is one where investors can convert the same into shares and can take back his proceedings. Smart investors play their trick as they played this time. Now let me share difference between two Hybrid Bonds or Debts being played in the market since many of my readers might get confused. Conversion of the bond into shares or activating the write-down of the face value takes place when the bank or an organization is still a going concern. Now there is another hybrid bond or debt called bail-in capital, where the loss absorption kicks in when the bank fails. Now I hope you are clear that smart investors exited their position and made many times profit as they took advantages of currency depreciation of cross countries to book high margins of profits.

The surprising part was that many banks were not listed and they also came up with convertible bonds structures and product. Massive incentives have been given by the banks to the employees who were engaged in deal with this issue beforehand and to make sure that its solvency is strong enough to weather a possible financial storm and to fend off the loss absorption by getting strong bond investors. The biggest gainers have been the core clients of the banks who exited the Hybrid Bond positions at the time when the markets and the bank shares were trading at the highest levels. On the other hand banks also got relief from the debt service payment. The coupons and the face value no longer need to be repaid.

Now after the smart investors made their money they non smarter got stuck as they have to accept shares at the low share prices provided they are subscribed under forced conversion or at the discretions of the bank. There are many more stories to unfolded about the depth of this Hybrid Bond Market which is many times bigger than the Global equity Market.

HYBRID BONDS....TO BLOW UP MANY BANKS

European banks are going to make life hell for the global economy. Taxpayers are running away as they are butchered by the European banking regulation where any crisis will be managed through the bond holding and then Taxpayers funds will be deployed to revive the bank’s balance sheet. According to the guidelines which were agreed upon was that 8% of a bank’s liabilities will be wiped out mandatory  before any taxpayer support can be provided, where placing of unsecured senior bondholders and also large corporate depositors  will be forced to go ahead with loses.  The problem is not with the banks across the globe but with hybrid category of debts which have been taken into account where the bond or hybrid debt holder does not know the quality of instruments being held by them. Indian stock market investors might be thinking that Equity is the highest risky asset but unfortunately Debt is the product which is of mass destruction.

Hybrid products of Bonds and debt have come up after 2008 recession where Bonds have been floated with high risk. This might sound surprising but the hard fact is that we are sitting on Island of Highly dangerous quality Hybrid Debt products. For example contingent convertibles, contingent capital, buffer convertible capital securities, enhanced capital notes, etc. are all different names for the same kind of capital instrument issued by a financial institution. Now this bond is having fancy names based on countries but the real thing is that these bonds are designed in such a way that can be used to write off the losses of an bank without even triggering the bank to be default. So it hides the banks financial position as hardly the market comes to know of its crisis and secondly is uses the bonds automatically without informing the holder of the same. The biggest risk here is the one who are the owners of the bond. Further these bonds of Hybrid quality have a tenure beyond a decade. The Lloyds Banking Group launched its $13.7 bn issue of enhanced capital notes which was spread over a number of bonds with maturities ranging from 10 to 22 years.  These bonds have been f in December 2009 right after the financial crisis. This clearly shows the risk being borne by the citizen and by the economy to hide the wrong practices of operation executed at the bank’s end.

 After this the Next in line was Rabobank, which made its first entry in the market for contingent debt with a €1.25 bn issue early 2010. The mockery is in the name of instrument being changed every time whereas the underline remains the same. Now after this Credit Suisse launched its so-called buffer capital notes and they came up with an  this issue size of $2 bn turned out to be quite popular and was more than 12 times oversubscribed. The point here is very clear same product renamed and sold too many same investors based on the theory that they are safe and hybrid quality to provide extra yield over the current treasury papers of the government. This also clearly states that how banks are protected where as bond holders are thrown out of the window. So when a crisis will come in bank bond holders will have to cry which leads to significant fall for the global economy. Santander and UniCredit are also in bandwagon.

 The depth of the pain is going to be very strong since In Europe, during the period 2009–2013, approximately $40 bn was issued of this new category of debt. Time will reveal when they will come out of the bag and create a massive turbulence for the market.

  The risk goes to the pension holders and all those common people and institutional people who have been given the bonds. The problem is with the banks who dealt wrongly with the clients without proper information about what type of bonds is being sold. Well European central bank played the game in 2010 asking not to write down the senior bond holders during the crisis of Ireland. Now the same is being feared to follow across the European banks. In all cases debt will be written off using taxpayer’s funds.

Global Big banks are shedding of their assets  and winding up business division not for cost cutting or for any grim outlook on the economies but due to manage their books and cover their losses and provide enough capital to inject into their system to avoid bankruptcy.

Hybrid Bonds have more stories to go ahead which I will cover in my next part.

GOLD @$1500 /OUNCE...NIFTY MORE PAINS...GLOBAL ECONOMY MORE TO SLOWDOWN

Gold prices have started rising since this is not only the safe heaven assets but also saver of these times. Please don’t forget that Bond Yields Are ZERO and tocks are falling. There is no reason for stocks across the globe to rise as there are hardly any macro factors to support the same. Further we witness that Banks across US and Europe are in trouble similar to subprime crisis where they hold these OIL bonds where they are no buyers. Best place to invest before it melts away is Gold.  Gold will find more limelight as Dividend payouts across the globe have come down significantly and will come down further next to ZERO. If we look at the chart we find that dividend payouts are declining. 

 Hence gold is safe heaven. It might climb $1500/ounce or can create new historic highs. If we look at the demand and consumption pattern of Gold in China we get clear understandings WHERE Gold will be heading.  Gold was silently building ups its market and demand. A quick look at the numbers reveals the story where sales of American Eagle gold bullion coins reached 124,000 ounces in January, up 53 percent from a year ago. And last year at the Austrian Mint, one of Europe’s largest, consumers bought up 1.75 million coins, four times the volume sold in 2008 before the financial crisis

 Stock Markets across the globe will fall dramatically as Investors are more cautious and redemption trigger have been pressed from all angles of investments. Asian Markets remained mostly closed hence their opening up on Monday 15^th will create massive sell off. Toxic trades and asset class exchange did not stop even after 2008 recession. Greed is more powerful than bear and Bull. This is well proved. Nifty will find some more pains as global markets and particularly Asian markets are yet to react properly. Further Indian banks are under pain and we are waiting for more plunge so that when during Budget they inject funds into the banking system through Budget banks will fetch good returns. The strategy is clear and we are all awaiting for the same. Don’t blame SBI it alone books are clear ,the burden which its carry is the merger of all those banks over the last 10 years which have been executed under UPA 1 and 2. Nifty will get more pressure from the winding up of Margin funding story which is yet to be taken into account.

Sovereign Funds are getting liquidated and the recent testimony of US FED CHIEF that she is not in hurry for interest rate hikes has spooked alarms that it’s better to exit sovereign funds and invest in their own economies from where the funds belongs. Rupee is also working according to its destiny during these times. In between European banking new rules are yet to be implemented as they took 1 year time to implement the same which was passed in 2015. Hence again tax payers funds will be used to save the European Banks and that what they wanted. Bank Recovery and Resolution Directive, the legislation is yet to be implemented. Further many banks and industries will be freezing up pay hikes and more job cuts might come up which will decline the consumption pattern of the global economy. This might not be an appropriate time to speak these but truth is just like Sun. The biggest pain will be cut down in global investments to the tune of $300 to 400 billion dollars. This will be have a significant effect on the global economy altogether. It’s a liquidity crisis and it has just began.

Coming to crude there is hardly any chances apart from a war to lift the prices. I don’t know how much trust to be relied on the news that Saudi and Iran and Russia are coming together for crude production cut down to lift up prices but Iran is already stated delivery of its crude to many countries. A tanker chartered by Glencore loaded 80,000 metric tons of fuel oil on Friday and is bound for Singapore, according to Thomson Reuter’s ship tracking data. Iran has aggressive plans of raising more than $40 billion of foreign investments for its oil industry. Well the world is also looking forward for viable projects to invest and that crude looks lucrative as well as negative. Japan is going to receive its crude shipment by the end of this week from Iran. Vitol Group brought crude from Iran. In between as I repeated told in my previous mails that Junk Bond Market of crude will explode its has happened this time with European banks. Wells Fargo CFO John Shrewsberry highlighted the bank's $42 billion in total oil and gas credit in his presentation at the conference; 41 percent ($17.4 billion) is already outstanding.

European banks are defaulting and the crisis is going to be havoc. It might be the begging of another asset class bubble burst which will drag the world economy and market into deep red or recession. I am adding fuel to the fire but I am trying to figure out where the plunge will end.  Bank of America's total energy credit exposure amounts to $43.8 billion, but more than $21 billion of that has already been funded. Morgan Stanley has thus far funded about 30 percent of its $16 billion exposure to energy credit. Banks credits and their exposure is just going to take a toll on the global economy and more on tax payers funds. In between Sweden has moved into negative interest rates to 0.50% from negative 0.35%. Toxic and junk bonds are just getting. If we look at the historical numbers we find that the oil industry had $455bn of bonds outstanding in 2006, which increased to $1.4tn by 2014, according to the Bank for International Settlements (BIS). Oil companies had $1.6tn of syndicated loans in 2014. The point of default is that investors will not get back their funds. For example according to Moody $2tn of bonds had been issued by mining companies since 2010. They are now rated as junk and their market is collapsing. Hence tax payers funds and banks will have to inject liquidity into the system. A company named Glencore, which has $36bn of net debt and a market value of $20bn. Its size might be high as $100bn. 

Only advice STAY AWAY FORM STOCK S.GET ALL IN CASH. Buy large caps and avoid margin trades.

NEGATIVE INTEREST ...PENSION ASSETS ARE AT RISK

  Well also one thing I would discuss later in this article is that Iran is not in discussion with Saudi Arabia its European companies. Now, coming back to the earlier point which I was discussing,that no more QE and no more printing of money would be working now. We have witnessed negative interest rates on government bonds from Switzerland, Denmark, and Germany and now Japan. The best game for any economic policy is the weaken its currency, which leads to cheapening of its exports and let other countries buy more of its goods and services particularly those have higher-yielding currencies. Further the problem will be more with pension and retirement based funds across the globe since restriction of withdrawal as well as no gains on their savings would spook more problems in the long term.   Deflation problems cannot be solved through Negative Interest rates policies. If we look at the history over the last 1 year we find that ECB came up with rate at minus 0.10% in the summer of 2014. It did not work to control deflation and it further lowered its rate at minus 0.30%. In Swiss Central Bank came up with a minus 0.25% interest rates and later on dropped it further to minus 0.75%. The problem did not end here, infact many commercial banks are introducing fees to open and maintain an account

We have already witnessed currency war and now we are going to witness a new paradigm of interest rates where Negative Interest Rates will play replacing Zero Interest rates. After Japan now many countries across the globe would move towards this policy which will spook a bubble burst for the debt market and Sovereign Wealth Funds in the long term.

Negative interest rates mean that in order to park funds in bank one has to pay interest. Ideally it never happens like that but bank doesn’t pay any interest rather they deduct the expenses form the savings of cash. This is what Switzerland’s interest rates have been doing over the last 10 years. On the other hand many will say that negative interest rates might induce more borrowing and consumption, but there is heavy risk of people exiting bonds and debts product into cash. So US will not go for negative interest rates. Coming to other economies we might have to wait and watch what other economies do to keep their export market to alive. The problem is with the Pension fund manager who need generate positive cash flow to the elderly person. Now the worst thing which will happen is they will scout desperately for high-yield bonds, emerging market debt, and high-dividend equities which will create bubble in debt and hybrid product categories.

This is one of the prime reasons why companies like Moragn Stanley, Credit Suisse and other banker have been cutting down their debt wealth management part especially in Asia. They have huge herculean pressure of providing returns on their investments as they getting into lending game whether is real estate debt, structured credit products or high yield loans to fetch returns over. Now with this ongoing problem of debt sovereign wealth funds are now seeking permission to invest in infrastructure, renewable energy etc.  This has two parts 1) Safe assets are at risky point and 2) Investments in other sectors will be like bubbles being created. The largest sovereign wealth funds in the world include Norway at $900 billion; UAE Abu Dhabi at $775 billion; Saudi Arabia at $740 billion; and Kuwait at $410 billion. China has three such funds including Hong Kong that total $1.5 trillion.

Iran is not in recent discussion with Saudi Arabia for crude price negotiation. It’s actually the European companies who are approaching the Middle East for crude negotiation since Euro will come up with bond purchase and in order to get buyers Middle East Sovereign Funds inflow in the bonds are crucial. Hence the trade off is going to begin. Everyone is trying to pull funds from the other asset classes particularly from Debt and invest in equities. Coming to the last part US fed might find its difficult to go for interest rate hike but in order to pool and stop leakages of fund outflow from Sovereign they may go ahead. Further a pull of US economy in term of interest rates coming down might act as political weapon to win but might not be reasonable things since that would create sentiment of weak US economic growth prospects.  The current situation is very crucial. There is no proper road map for the recovery as long as Crude and Commodity prices don’t grow.

US TO EXPORT NATURAL GASES

US has started export of its crude and now by 2017 we will see US will replace the exporting courtiers of gas exporting. Yes US economy is aggressively working on pipelines to transport the natural gas to the developing countries and its going to start exporting of natural gases. The global market of energy consumption is going to change over the next 10 to 15 years or may be faster than that period, since coal consumption is being reduced aligning the Paris summit and also advance technology in production of crude and gases have resulted significant change in energy consumption pattern. Decreasing Canadian imports and increasing exports to Mexico would open the gates for US economy to get into export of natural gases. If we look at numbers we find that  in the first 10 months of 2015, U.S. gas production was up 35% over the same period in 2008. Over that same time, U.S. imports fell 31%, with imports into the  key U.S. north-east market accounting for  the  significant drop. Enbridge, Nexus and Spectra Energy are working hard to develop the pipelines for natural gas transfer.

 The developing or importing countries have understood very clearly about the benefit of low crude prices on their current account and on their fiscal conditions. This is going to be the key factor which will provoke many developing countries to adopt for alternative energy sources like wind or solar and natural gas leading to shift from crude dependency. Its something going to be like In-dependency from Energy Import. At the same time these importing countries have come to know that how much wealth and prosperity these exporting countries enjoy at the cost of developing countries crude import.

This is the space where opportunity for alternative energy sources gets birth and will replace the crude dominance over the next 10 to 15 years. The theory is clear not only save energy but also save money. Saving import bills improves the economic condition of an country is well read by everyone. But coming to India I find high levels of corruption and poor education of minister level candidates leads to slow development of alternative energy sources. Moreover we easily link export with our import which leads to decline of an economy. India might be later starter but it has learned the lesson of saving money through low crude prices.

US economy have learnt very well that crude export is going to create investments, gross capital formation and also employment which keeps the American consumption market alive. Hence Middle East will be replaced from the map of crude dominance and developing countries would find significant growth opportunities in their economic investments as they save funds. Now the question is how long the crude prices will remain low. Well forget about the betting game focus better on long term strategy of making the economy free from import and more dependent on own energy production.  Recessionary phases will continue and developing economies will have to tide over the same. Hence no point of getting into the myth that economic condition of the global economy is healthy and its going to remain in growth path over the next 50 years. Countries need to come with strategy where energy independence is achieved.  The world is really changing its pattern of energy consumption.

Today, air planes fly into For example in Australia gas-derived jet fuel is being used, Germans pump gas-born diesel from Qatar. Shipping firms plan LNG fuelling stations on the Great Lakes, Brazil buys chilled gas from Norway and Tesla auto mobiles purr along American highways charged from power stations that once burned coal. The growing networks of pipelines are going to replace crude and also current Research and Development in engineering is going towards the path of crude independence.  So invest in alternative energy and also invest on pipelines as they will bring in more profits in the long run to reduce the transportation cost which will lead to more money savings for the importing countries.