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Hello and welcome to the intelligence on Economist Radio. I'm your host, Jason Palmer. Every weekday, we provide a fresh perspective on the events shaping your world. The biggest oil and gas companies were having a hard time even before the pandemic scrambled their fortunes. We take a look at the differing bets being made on both sides of the Atlantic and how the industry is bracing for what's next. And there's a burgeoning techno music scene in China, one that used to be propped up by international stars.
With fewer foreigners flowing in, local deejays are taking center stage and spreading the scene beyond the big cities.
First up, though. This is a pivotal moment in the campaign against coronavirus and in Britain today, the government is congratulating itself on the rollout of a second coronavirus vaccine. Matt Hancock, the health secretary, told the BBC that the Oxford AstraZeneca vaccine was our way out. So it's it's really, really good news because it's it's going to be a tough few weeks ahead of inoculations. Should now speed up. Although Britain was the first country to authorise a vaccine, just one point five percent of the population has had it.
That's better than in America or less than a percent have at current rates. It would take years for the whole population to be vaccinated. And then there's Israel, which has already inoculated 13 percent of its population. As the country passed, a million doses administered, Prime Minister Benjamin Netanyahu said the country was breaking all records million and then had to sell another Washerwomen Coliseum, a venue. But the backdrop to Israel's success is complicated. It imposed a third national lockdown as case numbers have spiked.
And once again, there are preparations for an election after the country's parliament, the Knesset, was dissolved last month. The vote in March will be the fourth in two years. And these aren't separate facets of Israeli life. Mr. Netanyahu is pinning his continued political fortunes on a successful vaccination drive.
So I've visited a number of vaccination centers in Jerusalem over the last few days.
Anshel Pfeffer is our Israel correspondent.
Most of the time, it seems a very orderly, very efficient people coming in, most of them over 60. Most of them already have an appointment. And within minutes, they're ushered into a room where there are a number of cubicles and they get their job. It's over in a couple of minutes. They're asked to wait for a few minutes just to make sure they're OK. And before they leave, they're given an appointment in three weeks time for their second job.
And all the elderly people are quite emotional because they've been sheltering for four months. They haven't been meeting family or friends. There's certainly a feeling of relief and even of joy among some people there. And another interesting phenomena is that towards the end of the day, usually late afternoon, early evening, when the appointments are about to end, you get almost a rush of younger people arriving at the centers in the hope that there are still doses left over from the elderly people's vaccination.
And they usually are a few dozen doses left over at the center, which are then administered to younger people who don't have an appointment.
And how is it that Israel has got so far ahead of other countries in its vaccination program? Well, there are a number of reasons. First of all, Israel is a relatively small country with a small population. So it can carry out such an operation quite quickly. And the logistics are relatively simple. Once the doses have arrived at Ben Gurion Airport near Tel Aviv, they're taken to a Amane logistics hub where there's a subzero temperatures storage facility and then they're shipped out across the country in a matter of hours.
They're already at clinics, at hospitals, at vaccination centers. The other main reason, I think, is that Israel has universal health care. But unlike in Britain, for example, where you have one organization, the NHS, taking care of everyone's health care in Israel is divided between four different HMOs, health maintenance organizations which compete between each other for members and for government funding. And this has been very helpful for the vaccination drive because each of the four HMO is basically competing between themselves to show that they can roll it out very quickly and efficiently, set the appointments and have it all being done in a matter of minutes because everybody is comparing with each other.
We are my HMO gave me this kind of service. My eight year old gave me that kind of service. They know there's a stiff competition here. So there's a very lot of pressure on them to make this as efficient as possible.
And what about the broader global competition for access to vaccines themselves?
How is it that Israel has ended up with so many of them early on during the development process of the vaccinations, Israel signed on with Madonna and AstraZeneca. But when it turned out that Pfizer would probably be the first manufacturer with a tested and authorised vaccine, Binyamin Netanyahu, Israel's prime minister himself got involved in the process and along with other senior officials in the health sector, has quite protracted negotiations with with Pfizer and Israel agreed to pay a premium price, probably twice.
What European countries are paying in American countries are paying Pfizer. But the decision was made that Israel could afford to to pay that the extra price if it would mean that the economy would be free of coronavirus relatively early on.
And then there's also the role that Mr. Netanyahu himself is playing in encouraging Israelis to get vaccinated.
Netanyahu has made himself the face of the vaccination drive. He was on the scene at Ben Gurion Airport two and a half weeks ago when the first shipment arrived the next day. And then two weeks ago, he had in full glare of cameras the first job in Israel himself as anything more than an hour down the side.
And we'll talk about the fact that he called it one small job for an individual and one great step for our public health. They're trying to make him. Neil Armstrong and give himself a moon shot moment, and ever since he's been visiting almost every day, vaccination centers have been photographed with the five hundred thousand vaccinated, the millions vaccinated. It's become very much the Centennial Project, and he's ignoring every other aspect of Israel's less stellar handling of covid.
How do you mean? How badly has Israel been hit by the pandemic?
Everyone's talking about the fact that Israel is the world leader as far as proportion of population to be vaccinated. But people should also remember that Israel, for long periods in recent months, was also the world leader in their daily rate of covid infections. And Israel is currently undergoing its third nationwide lockdown. So in many aspects of handling of covid, Israel hasn't been doing well. And we've seen it in the polls that Daniel's party, Likud, has gone down in the polls.
If the elections were to be held now, he would have lost about a quarter of the seats that he won't just in the last election in March. And this is why he's latching on the vaccinations in the hope that this will revive his electoral hopes. Right.
Because now Israel is heading for yet another election. How is it that that came about?
So Israel had three elections in 2019, 2020 in each of those elections, neither side not to the serving Prime Minister Netanyahu nor the center left, led by Benny Gantz, succeeded in forming a coalition. It was three stalemated elections. Finally, last April, Netanyahu and Gants arrived at a power sharing agreement. But that didn't last very long. And just a few weeks ago, the agreement fell apart and that was heading for yet another election, its fourth in under two years on March twenty third.
And so do you think that Mr. Netanyahu, making himself the very public face of this seemingly successful vaccination campaign, will help him in that coming election?
Well, this election is mainly about Netanyahu. We don't see that many policies or nuances of any kind between most of the parties running. Most of them are talking about whether or not Netanyahu should remain prime minister. There's a whole range of parties, both on the right and on the left, whose raison d'etre almost in running is just to remove Netanyahu from office, which is why for him, it's so important to get to March 23, Election Day as the great vaccinator, as the man who is releasing Israel from covid, releasing the economy from shut down and all the restrictions on it.
If he manages to assume that mantle as the man who saved Israel from covid-19, that will certainly be a big asset for him going into the elections. Netanyahu certainly has a huge motivation here to make himself the face of the vaccine. Angel, thank you very much for your time. Thank you for having me. Jason. Exxon Mobil was once the world's most valuable publicly traded oil company, but like so many firms, it's been hit hard by the pandemic.
Its share price has plunged and in August, it was forced out. The Dow Jones Industrial Average after nearly a century in the index of America's blue chip companies. I think Exxon out of the Dow is a historic day, and it really tells you and it punctuates what's happened in the energy sector, Exxon isn't alone. The big five Western super majors, which also include Shell, Chevron, BP and total lost three hundred and fifty billion dollars in market value last year.
Big oil's big problems predate covid-19, but how they navigate this tricky moment will have huge implications, not only for shareholders but also for the planet. Big energy companies had historically been operating in an environment in which they assumed that oil demand would continue rising and that oil resources were scarce. So they spent a lot on big, expensive new energy projects. Too much. In fact.
Charlotte Howard is The Economist's Energy and Commodities editor.
So you saw their return on capital fall by an average of three quarters from 2008 to two thousand nineteen. That's before the pandemic. And that's quite appalling. Performance in twenty nineteen Energy was the worst performing sector in the S&P. Five hundred of big American companies. It had been the worst performing sector in 2014, 2015 and 2018. And how they've been adapting, though, as this has continually happened to them. Well, it's interesting.
You've seen some shift in strategy between companies that are based on either side of the Atlantic. So ExxonMobil, which remains America's biggest oil company, has typified the approach of really doubling down on its legacy business, saying that it wants to be the biggest and most efficient producer of oil and gas. And the Europeans have started to try to think about how to adapt to a new energy era to make the legacy business more efficient while trying to expand into cleaner forms of energy.
Well, I mean, given the business environment you describe, it sounds as if the European approach is the smarter long term.
But, well, it's interesting to date, Europeans have spent a very small share of their total capital spending on low carbon energies. But the idea there is that they can try to make their own businesses more efficient. Shell is one of the companies that's bet a lot on gas, which, of course, does produce carbon emissions but is less carbon intensive than oil or certainly coal, and that they will try to invest in new areas. So solar farms, offshore wind, hydrogen, electric charging stations, all manner of the new parts of the cleaner energy system that is expected to grow.
And what's the rationale for the other way around for the American companies that are that are doubling down on oil?
In one sense, you can look at their strategy and say, you know, this looks kind of crazy. They're burying their heads in the sand through another lens. It's highly rational, right? I mean, these companies don't have any natural expertise in building enormous solar farms or building wind farms. And there are already big European utilities in particular that have become giant developers. You could argue that what, for instance, Chevron is doing could have big returns for investors, that you'd basically see big oil do what Big Tobacco did.
So with a declining or flat market, you try to be more efficient. You consolidate, you become more profitable, and you deliver a pretty reliable dividends to investors. But from an investor's point of view, given all that, it still looks like a pretty big roll of the dice. That's right.
Historically, investors have continued to hold shares in these giant companies largely because of dividends. But there is now some real concern that the companies will be able to continue covering those dividends going forward. And for the companies that are focusing on traditional oil and gas, you know, there is a risk that they could be caught flat footed if oil demand declines faster than they think it will. The post pandemic picture is very uncertain, in part because the members of OPEC, the really large oil producing countries, don't seem interested any longer in trying to restrain their own production in the way that they did and lose market share, in particular to American shale, where ExxonMobil and Chevron have huge investments.
And so you could see, you know, Russia, the United Arab Emirates, more interested in producing more of their own oil, which, you know, lowers the oil price. So there's some really big risks facing these companies over the next decade. And another big risk that we haven't talked about is how much governments will will start putting the screws to these companies as they try to meet their own climate goals. That's right, and that's the really big unknown, how quickly and how aggressively governments are going to try to mitigate climate change and you see investors increasingly concerned about companies not really taking account of that big risk to legal and general investment management, which is a big asset manager that hold shares in these companies.
They reckon that if you were to keep global warming within two degrees of pre-industrial temperatures, which is the goal of the Paris climate agreement, oil demand could have in the next decade, that is unlikely to happen. But it gives you a sense of the scale of the risk facing these companies. And so you have increasingly investors who are not just fringe investors, but really big asset managers concerned and expressing concern. So in May, BlackRock, which is of course the world's biggest asset manager, supported a motion to separate the roles of chief executive and chairman at ExxonMobil.
So Daryn Woods, Exxon Mobil's boss, would no longer be chairman. And that's really a sign of concern that you need to have some additional oversight over the board. So you see, you know, in Europe and now with the election of Joe Biden, an increasing possibility that there could be legislation and action that does really intensify the pressure on these companies.
I mean, it's uncertainty on both sides of the ledger here. But it does seem to be the case that a kind of diversified, greener approach is the safer one.
Well, it's certainly the one that offers the potential for a bigger payout if companies can do it well. But I definitely wouldn't call it the safer one because it carries big risks. And you've seen investors respond in kind of a mixed way to the pretty ambitious plan that BP laid out earlier this year to try to transition its business away from oil and gas towards cleaner energy. And so for big oil companies, they face a really tough challenge. They have the national oil companies such as Saudi Aramco, which remain far larger with far lower operating costs.
And then they face long term existential questions about what will happen to demand for their core products in the future of the energy system is really unclear. So you see these really giant historic companies at a moment of inflection where they're trying to figure out how to muddle through this era, how to continue creating value for shareholders, how to deal with political risk, how to deal with an investor base that's increasingly restive. And it's not clear that any one company has settled on a winning solution.
Charlotte, thank you very much for your time.
Thanks so much for having me. For more on the world of business and economics, check out money talks. Our sister show. The latest episode looks at Sady Alexander, who a century ago became the first African-American woman to receive a PhD in economics. She was a public intellectual who spoke on economic issues affecting African-Americans. She talked about the effects of macroeconomic policies on African-Americans, and she spent her lifetime challenging systemic racism.
Look for money talks wherever fine podcasts are sold and traded. Normally at this time of year, many people would just be clearing their heads after blow New Year's Eve parties, the coronavirus restrictions around the world have shut traditional end of year party venues such as nightclubs. It's still some weeks until Chinese New Year. And in China, the thumping clubs will be open and the pandemic has rather turned the tables for local deejays. There's been a very tough year for nightclubs in China.
Amy Hoggins is a journalist for The Economist.
But the pandemic might actually be good for the electronic music scene in China because it has allowed club culture to reach beyond its traditional bases in Beijing and Shanghai. And what is the club scene in China like? Well, it's kind of an underground, small, quite scrappy scene of young people who are interested in electronic music or rave culture, often inspired by Western sounds, by things like Chicago house or minimalist techno from Berlin. It's really about embracing like an international music culture and also a kind of subversive youth culture that hasn't always been given a lot of space to breathe in China.
One of their clubs that is popular in Beijing only happened a couple of years ago called Jodhi and a very small basement venue. And inside will be very crowded and smoky and sweaty and a very carefree atmosphere.
And how has that changed since things were shut down and then reopened again in August? Club have had a hard time because they are forced to shut for much of the year. But since they reopened, people have really been flocking back to the clubs, both because people want to forget about their worries and have fun again after a stressful year. And also because unlike many other countries in China, life has largely kind of gone back to normal, like you can have social gatherings.
So, for example, in July at the moment, to get inside, you have to prove that you haven't been anywhere recently for covid. And you do that by showing the bouncer kind of app on your phone that gives you a green house code. But once inside, it's just like normal times, like no one social distancing. No one's wearing masks, everyone just dancing, shouting, all the kind of things that we now think are so dangerous and not safe.
They're going on in a big way. And some people think all the destruction of the theater might actually be good for the scene in China. One day I spoke to you, called Holwell, told me that whereas previously nightclubs that would fly in international headlines. Now, obviously, they can't say local deejays are getting headlines lot right before they would only be the supporting acts in one side's ideas.
It's very clear they have more opportunity to break up to the Dominque.
I think also a lot of very good Chinese artists comes out. I think it's a good sign because we realize we have very good details just out there. The Chinese theatre shows they have the ability to keep the party going on.
And so that's the big change that we will give Chinese talent, the exposure it has been lacking. It's also helped to spread China's club culture beyond its traditional bases in Beijing, Shanghai and Chengdu in the southwest. And one reason for that is because when nightclubs in China are forced to close in January and, you know, many cities went into lockdown some days, such as Heartwell went back to their hometown for the lockdown and ended up staying there. So Hot will have opened a new nightclub in his home city of Sharmin.
And there are new clubs opening in kind of rural places, places that traditionally have a big nightlife scene. The pandemic has kind of accelerated the trend towards other cities.
And so is that the future then for the club scene in China is just basically more widely spread.
And with more Chinese artists at the fore, that's definitely a trend that's happening, but it's not one that everyone is happy about. So another DGM producer I spoke to called Easy in China. He kind of grumbled that lots of the deejays who have gained a new following in recent months like proficient swimmers, but they don't, as he puts it, understand electronic music, culture. And by that, he means they might play popular tunes, but they're more interested in making money than they are and creating new sounds and being genuinely creative.
As for the audience, few people seem to care who is performing so long as they have somewhere to dance and they can go out and have fun. Amy, thank you very much for joining us. Thank you. Thanks for having me.
That's all for this episode of the intelligence, if you'd like us, give us a reading on Apple podcasts and you can subscribe to the economists at Economist Dotcom Intelligence offered the link is in the show. Let's see you back here tomorrow.