By David Cooper, Fund Advisers Europe
Moving away from the continued political infighting in the US (who still have not reached a compromise to bring a resolution to the stalemate over raising the debt ceiling). We will now look at the increasing costs of certain commodities and the effects it could have on all of us. Let's focus on oil.
Is your annual holiday coming up? Are you a frequent air traveller, either for business or leisure? Things may be about to change for you!
Most people in Central Europe have, if not actually used, certainly marvelled at the low cost airlines and the prices they are able to offer to passengers to travel hundreds of kilometres in (relative) comfort.
With the price of oil above $100 a barrel is the day of the cheap flight, and subsequently cheap holidays, coming to an end?
In quarter two of this year Ryanair saw its fuel bill rise by 50% compared to the same period in 2010. Ryanair also missed its forecast profits for the same period and saw higher average fares and the recent grounding of 80 planes.
The airline is following other low cost carriers in chasing higher ancillary sales (scratchcard anyone?) and trialling a return to reserved seating with additional fees for seats with extra legroom.
Remember, Ryanair is the most successful at what it does, what is in store for the other low cost operators with smaller passenger numbers?
We should expect the four largest airline groups to continue to expand and for them to takeover smaller operations and their routes, this will lessen competition with the possible result being an increase in fares.
Oil looks set to remain above $100 a barrel, Goldman Sachs predict that the average cost for oil through 2012 will be $135 a barrel, we should recognise this will cause higher fuel costs in motoring, heating and impact our current love affair with cheap airfares and holidays.
This higher price will affect just about every aspect of modern life both in the developed and developing world. With the most obvious result being higher logistical costs for transportation. Be that holidays as above, or moving basic foodstuffs around the world.
This is not all bad news though, for our investors this presents some exciting opportunities.
Our three standard portfolios have exposure to investment funds trading in companies supplying energy (including Oil companies) and those companies involved in the support of energy production. Our Ethical Portfolio takes a different approach and has holdings that invest into new technologies looking to remove our reliance on oil.
For more information on where Fund Advisers Europe is currently investing and the portfolios that we manage please visit our webpages, or email This email address is being protected from spambots. You need JavaScript enabled to view it.
Fund Advisers Europe
Rue de Contamines 35
1206 Geneva
022 347 00 52
www.fundadvisers.eu
This email address is being protected from spambots. You need JavaScript enabled to view it.
Author Bio
David Cooper is a Director of Fund Advisers Europe, a Financial Services company offering a broad range of Investment and Insurance Services to clients across Europe and Latin America. The majority of David’s early experience was gained by working for Lloyds Bank in the United Kingdom. David now has over 20 years' experience growing wealth management brokerages throughout Europe, the Caribbean and Latin America. The primary objective of his role at Fund Advisers is the creation of growth in Fund Advisers’ Wealth Management & Discretionary Fund Management division. David lives in Geneva with his family.
Check out the Guest Blogs section of knowitall.ch and select David Cooper under Work/Business to view his blog!
