Just how low will the oil price go? Not low enough to kill the frackers

Global Outlook

How low will it go? That’s the question being asked about the oil price across the world by industrialists, economists and politicians following Thursday’s decision by Opec not to curb output.

The decision means, in essence, that the cartel is stepping back from its near-monopoly role and letting the market decide how much oil should be worth, uninterrupted by the sheikhs.

Yesterday the price of crude plunged ever further as traders realised that the Saudi Arabian-imposed floor under the price no longer exists – or not until the next Opec meeting in June, anyway.

In the US, the news is both good and bad. Good for the 99.9 per cent of people and businesses consuming large amounts of energy. Bad for those of them who are investing in the burgeoning number of companies in the fracking industry.

Shale-related share prices, already in the doldrums due to the low world price of crude this year, tumbled even further in stocks like Noble Energy, Apache, Range Resources and Occidental Petroleum.

The falls were such that many a pundit was comparing the fracking boom with the dotcom companies of the late 1990s.

This was a major oversimplification. While falls of 5 and 6 per cent were pretty common, it was far from the wipeout you might have expected. Because, while Opec is clearly gambling that it can kill off the nascent shale industry, it won’t. Sure, some companies will struggle as the oil price keeps falling. Some will mothball their operations. But many won’t really start sweating until it falls far further than now.

Analysts say US production costs for shale oil range from $40 to $80, depending on geology and geography. Yesterday, the crude price got down to nearly $71 a barrel – low, but not low enough to change the world.

Judging by previous output gluts in the 1980s and 1990s, it’s possible crude will fall to $60, and quickly – but even then, US production will continue to be strong. Expect this glut to last long into next year.

Tax avoidance: Argentina hammers on HSBC’s door

If you thought fighting tax avoidance was an obsession of indebted European governments, think again. Yesterday Argentina joined the queue of countries seeking to clamp down on its wealthy citizens’ games of taxman hide and seek.

No prizes for guessing which bank it’s accusing of helping squirrel away the cash: HSBC – that former home of the whistleblower Hervé Falciani, who famously stole a disk from its Swiss offices that included a long list of tax-avoiding clients from around the world.

France, Belgium, Britain, Greece and Spain have already been sifting through the long list of names, attempting to squeeze unpaid duties from the recalcitrant club.

Now Argentina is claiming that HSBC helped more than 4,000 of its citizens evade $3bn (£1.9bn) of tax through offshore accounts, including some in Switzerland linked to the bank’s Argentinian subsidiary.

Last week France placed the bank under formal investigation over similar claims, while Belgium is also accusing it of helping Antwerp diamond dealers hide their cash – the charge: “fiscal fraud”.

An Argentinian federal court has charged the bank’s branch there, plus a number of its executives, with helping tax avoidance.

HSBC protests its innocence. Its Buenos Aires division issued a statement “emphatically” rejecting the allegation that it took part in anything illegal, “including any organisation that allows capital flight aimed at evading taxes”.

The bank has been here before with Argentina, having been accused of involvement in “tax-evasion manoeuvres” last year, but for much smaller amounts.

Since then, of course, the country has become hungrier, having defaulted on its debts in July due to the legal actions of hedge funds demanding a better deal for their slice of the bonds that crashed in the 2001 financial crisis.

Procter & Gamble had its operations in the country suspended earlier this month amid allegations from the authorities that it too had been conducting tax frauds.

Meanwhile, Argentina’s super rich, so battered by the left-leaning Government, are asking if it was really only April when President Kirchner was offering an extension to her tax amnesty programme for citizens hoarding their cash abroad?

An analogy as hard to read as Rajan Mahtani’s bank

As December rears its gloomy head and we prepare to bid farewell to 2014, there’s no sign yet of Rajan Mahtani’s Finance Bank Zambia arriving on British shores.

This column has occasionally documented the ins and outs of this colourful character’s history, due to his stated plan to float his bank on London’s junior AIM stock market in 2014. However, there doesn’t seem to be much action here yet.

For a quick recap, the bank was taken from him and handed to South Africa’s FirstRand Bank under the previous president, only to be returned to him again within weeks of his ally, Michael Sata, coming to power in the country. The president died recently and Zambia is now tensely gearing up for elections.

But recently, allegations have been swirling around Mr Mahtani to such an extent that he was earlier this month moved to attack what he called an “orchestrated vendetta” against him in a press conference in the Lusaka InterContinental hotel.

It must have been quite a scene as his speech – which began by praising the recently deceased president Sata, “hero of the poor … hero of hard work … hero of justice … hero of the nation” – suddenly veered into an attack on the shadowy forces ranged against him. Their motives were, he declared, “corrupt, selfish and devious to mislead the public with falsehoods”.

He went on: “They are on a crusade to injure my reputation … You may disrespect me, that is your God-given choice, but truth cannot be disrespected. It will always emerge triumphant!”

He then went on to baffle his audience with the following: “Perhaps this quote befits my complaint: a judge asked the prostitute, ‘So when did you realise you were raped?’ The prostitute, wiping away her tears, replied, ‘When the cheque bounced’.”

I’m not entirely sure what that means, but it’s certainly not run-of-the-mill stuff for the chairman of what is now a seriously large business empire, is it?