Complacency won't control impact of oil
'The Sub-Committee noted an analysis which concluded that the oil intensity of the Hong Kong economy had remained stable at a relatively low level in the past decade. The analysis suggested that the direct impact of rising oil process [sic] on Hong Kong's output and inflation, although not negligible, was relatively small.'
Record of discussion of the meeting of the Exchange Fund Advisory Committee Currency Board Sub-Committee held on June 20, 2008
It is all done in proper central bank style. Only a month after this sub-committee holds its meetings do its members deign to bestow their thoughts on the public.
But do they bother over that month to check the written record of their remarks as transcribed from the tape? I ask you, do they?
Picture it. Much impressed by the solemnity of the occasion and the standard of the decor (when central bankers set out to do good, they do very well indeed), our man decides that his standing requires a touch of the Bertie Wooster: 'I do say, rilly, impahct and prahces we rilly must consider the impahct of rising oil prahces, don't you know.'
Later that day, and a few floors lower down, someone's secretary scratches her head, leans over the desk divider and says: 'Ah, Winnie-ahh, listen to this tape. What is this word...laaa?
And Winnie says, 'Oh, that's easy - he was talking about rising oil process. You know - p-r-o-c-e-s-s.'
I also like the phrase, 'although not negligible, was relatively small'. What a fine way of covering your ... ahem ... art ...while saying absolutely nothing. It's right up there, in fact, with 'we're cautiously optimistic' and 'the future lies ahead of us'.
Just how small (although not negligible, I hasten to add) is the impact of rising oil prices? And is it true that 'the oil intensity of the Hong Kong economy had remained stable at a relatively low level'?
The first chart shows you a 12-month rolling average of the cost of all retained fuel imports relative to gross domestic product. The figure has risen more than fivefold over the past 10 years to almost 6 per cent of GDP, and this, remember, is an annualized figure. For the second quarter this year the figure was more than 7 per cent.
I'll definitely go with the 'not negligible' on this one but I think I would also use the words 'not small' to describe it.
And lest you think that this trend reflects only rising oil prices, the second chart shows you our record of oil consumption relative to GDP. We now consume 10.7 tonnes of oil for every HK$1 million of GDP in 2006 prices terms. In 1987 the equivalent figure was 7.4 tonnes.
If you want to know why the trend has gone this way, you might start with the clue that in mid-1987 there were 140,000 private cars on our roads. The figure at present is 380,000.
Hong Kong does indeed have a relatively energy efficient economy, probably the second most energy efficient in Asia next to Japan, although still well below the efficiency ratings of western European countries. It is also true that our overall energy intensity is 'stable at a relatively low level', as the sub-committee puts it.
But this has mostly to do with the energy efficiency of our power plants and the fact that we have one of the world's best public transport systems.
We can, however, waste energy with the best of them when we choose and the figures suggest that we tend to do this with the one form of energy that is rising most rapidly in price, oil.
Methinks the sub-committee was a touch too complacent.
Just back from a short trip to Singapore, which has only two weeks to go before the big National Day celebrations, and I must tell you that the balcony of almost every private sector flat in the place remains defiantly unflagged. Only in public housing are balconies draped with the flag of Singapore and, even there, only a minority of them.
Ten years ago anyone with a naked balcony only two weeks before National Day would have been burned alive, shot dead, jailed for life and then flogged to death and given a sharp lecture.
You know the saying - like father, like son. Well, it's my belief that the Sing-a-la-las like father just fine but don't like son quite as much.