China to ban the petrol engine?

China to ban the petrol engine?

Christmas spending might be a little tight this year if oil keeps creeping up.

Brent crude is back flirting with US$80.

There’s little good news about this unless you own oil stocks or happen to be the Crown Prince of Saudi Arabia.

Now there’s a man that might be smiling right now! Back in 2016, the Saudis colluded with their fellow crude oil producers within OPEC to get the oil price to rise.

They got their wish.

This is once again giving the Crown Prince the cash flow to diversify the country away from fossil fuels.

This is a trend you need to be on.

Some of this money might even show up in Australia of all places.

The Australian reports this morning that former high-flying executive Andrew Liveris is now in an advisory role with the men that run the Saudi’s sovereign cash hoard.

It’s called the Public Investment Fund.

It could potentially have US$400 billion under management within two years. That’s some serious moolah!

By way of comparison, Australia’s Future Fund has around $141 billion.

The Saudis are said to be interested in technology, resource and environmental opportunities here.

We don’t have far to look to see why.

Saudi Arabia reveals the future of transport

Bloomberg shocked everyone recently when it reported on the latest sales figures for electric vehicles.

They just had their highest level of sales for one quarter.

Take a look:

Screen Shot 2018-08-24 at 9.39.45 am.png

Source: Bloomberg

The most important component of this bar chart is the black part.

That represents China.

It’s the largest market – for both cars and electric vehicles – in the world.

Argus Media just reported something crucially important around this, and yet few would have noticed.

The Chinese government is considering legislation that will ban the construction of automobile factories that only produce internal combustion engines.

That would mean automakers would HAVE to produce electric vehicles if they want to produce and sell in China.

This shows Beijing wants China’s car fleet electrified, and they’re happy to use every means at their disposal to do so.

We can pick up clues around the push toward renewable energy elsewhere.

In March, the Saudis announced they intended to build the world’s biggest solar plant in conjunction with their investment partner Softbank at an expected cost of US$200 billion.

The Saudis are also believed to be the key backer behind Elon Musk’s short-lived idea to take his car company Tesla private.

The Saudis already own about US$2 billion worth of Tesla stock and are said to be considering an investment in a Tesla rival.

What’s clear is the Saudis have determined that the future has a lot less oil in it, and they better do something about it fast.

The current trends pushing oil higher might be their last big lift to build up a massive cash hoard for the future.

This trend is not new.

The secret to Uber’s long-term strategy

The Saudis put at least US$45 billion into the Softbank Vison Fund back in 2016. That has the mandate to take big, bold bets on the future.

For example, it owns 15% of Uber.

Uber is due to list on the public market next year. It might even be the biggest IPO ever.

Even Uber is a signal of the shift away from gasoline powered cars. It’s now going to use the e-bikes from its subsidiary Jump for shorter trips within the inner-cities of the world.

(Side note: As you’ll see at around 2:45 pm today, this has huge implications for the investment situation I’ve been talking about the last few days. Hold tight, we’re nearly there!).

In July, the Financial Times also reported that Uber’s invested in a new round of funding for electric scooter ride-sharing company, Lime.

Lime also happens to be exploring and developing its own electric vehicles.

You’d better make sure you’re on the right side of this trade.

One company that wasn’t was a New York lender called Melrose Credit Union.

The rise of Uber and ride-hailing firms has pushed it into insolvency.

The reason being is that it lent against the value of New York taxi medallions.

Melrose was in business for almost an entire century.

The New York taxi medallions are now worth a fifth of what they were five years ago. The operators that bought these medallions at the top of their value are going into delinquency as the taxi market share shrinks.

Here’s the rub: the taxi medallion was never anything but a government privilege that restricted competition.

The free market – when it’s allowed to operate – ripped the government’s useless bit of paper to shreds. Good riddance!

Note the previous effect of a government granted monopoly, however: a New York taxi medallion inflated in value to over US$1 million EACH at their peak.

They were $10 when they were first issued decades ago.

Why am I telling you this?

Another form of government monopoly is a patent.

We don’t have time to debate the merits of these here now. Only to say they give the holder increased profits than they’d otherwise earn in a truly free economy.

My researcher and I have come to the conclusion that Uber may be in a position to patent a key idea around the uptake of electric bikes around the world.

If that happens – and we’ll know by the end of October – it may be sitting on a stream of inflated profits for years to come.

It could drive the valuation of the company through the roof along with three key stocks, two of which are listed right here in Australia.

I’ve never seen anything quite like this set-up in my career.

All the details will be released a little later today. Hold tight.


Callum Newman Signature

Callum Newman,
Editor, The Daily Reckoning Australia