Making sense of buyer's power

In economic theory monopsony is a market structure in which one large buyer controls big portion of the market and thus exercises bargaining power.

After 2017, China has overtaken United States to become the largest oil importer. China in last year imported 239.2 billion $ worth of crude oil from 15 different countries.

India is third largest oil importer after US and China and roughly imports 125 billion US dollars worth of crude oil every year.

The rising purchasing power of private buyers in China and India has positioned both countries close to having monopsonic power in the oil world.

In last week of April a high level delegation from Chinese National Energy Administration visited India, to discuss forming a block of energy importing nations.

This block will also be beneficial to other Asian importers as this will reduce the Asian premium.

Asian premium
Owing to the dependence of Asian nations on Middle Eastern countries to supply oil, these oil exporting nations charge a premium on their exports to Asian countries. West in contrast need not to pay such extra amount.

India and China have repeatedly raised their voice against this so called Asian premium but to no avail.

Efforts are underway to make Japan and South Korea-world’s fourth and fifth largest oil importers- part of this block. The emergence of this energy hungry block could tilt the power away from OPEC.

Secret to buying happiness

Conventional wisdom has always taken the position that money can’t buy you the happiness but a scientific study reveals that there are ways out there which you can use to buy happiness. 

Elizabeth Dunn & Michael Norton during their study for the book ‘Happy money: The science of happier spending’ learnt that you can buy happiness by becoming a little poor. Following are the ways in which you can spend your money to buy happiness.

Buying experience

Though buying goods seems to be a good option as they are there the next day but experience though ends up after a while but remains there in form of happiness. Visiting Northern areas, going for fishing, experiencing gliding and cross country skiing are the options available to spend money on. They would give you stories to tell your friend. 

Buying time
Spending on buying services is another way to well spend your money. Similarly think long and hard before buying a living house so vast that you’ll spend more time cleaning then enjoying. The research suggest that asking a question “ How will this purchase show up on my time budget?” will help you make choices that will produce more serotonin than analyzing your purchases in material term could do.  

Another way to buy happiness is to spend money to buy the service you feel most dreaded to perform yourself. Taking a cab, buying the lawn moving service, paying for doing the laundry etc. are some of the ways in which you can outsource your most dreaded chores.

Pay now, Use later
You often hear the cliché “use now; buy later” but to be happy you should try to pay before actually consuming your purchases. The delayed consumption would trick your brain into thinking that the benefits are for free. Moreover, sometimes you get as much happiness from the anticipation than from the purchase itself. So, buying movie ticket a month before actually watching the movie can make your month.

Giving yourself treat
Appreciation is another way to have an elevated mood. You will be able to appreciate the goodness in your life only if they happen to you less often.

After dry fasting, in Ramdan, when you take first morsel of food or sip of water; you feel happy because you made your everyday meal a treat for yourself. Same is true for many other things in your life. Dine out sparingly, or think this way- will it matter how delicious your favorite restaurant might taste if you starts going there daily.

Giving others
Make other people happy is a way you can add to your own happiness. In the words of Bangladeshi Nobel prize winner Muhammad Yunus.

“Making money is a happiness; making other people happy is a superhappiness”

But trying to make others happy by spending more than you can afford can add to guilt and you may feel unhappy. One way to avoid guilt trips is to find specific causes, research them, think over them and then spend for them. 

According to Harvard scientist Michael Norton, “Giving to a cause that specifies what they’re going to do with your money leads to more happiness than giving to an umbrella cause where you’re not so sure where your money is going.” 

The key is to spend within your means, spend proactively and for causes most closely related to your own core values. Or in the words of Adam Grant, author of Give & Take, it is important to be ‘otherish’ which he defines as givers who are able to sustain their giving by looking for ways that giving can hurt them less or benefit them more.

Why Saudi Arabia matters to Pakistan

As the crown prince Muhammad bin Salman completed his two day Pakistan visit, the debate about Pakistan joining the Riyadh’s camp, against Tehran, for financial largesse dominated the public discussion. Pakistanis are vying cost and benefits of Saudi financial assistance. Both countries are linked by financial assistance, religious ties, energy markets, and defence agreement. Pakistan needs Saudis for various reasons.

Enhancing CPEC image
During the visit the crown prince announced a 10 billion$ refinery and an oil city in Gawadar, Baluchistan under CPEC. The city will have facilities for storing oil for its onward transport to China.

In fact, the prospect of Saudi investment has already helped divert global attention from the controversy regarding Chinese debts incurred by Pakistan, its economic crisis, and the possible connection with ongoing CPEC projects. Saudi investment can project Gwadar as an investment destination, encouraging Arab African and Asian nations to become part of CPEC.

The investment is an effort by crown prince to diversify Saudi economy and reduce its dependence on oil under vision 2030. Saudi Arabia is still largest oil exporter and rules the oil markets with its ability to drill oil at lowest cost in the world i.e. 4 $ per barrel.

Sovereign wealth fundThe public investment fund of Saudi Arabia has planned to increase its size to 2 trillion dollars till 2030. The country is hungry for investment opportunities especially in the field of science and technology, petrochemical and refining, mining, and entertainment.

Overseas Pakistanis
Saudi Arabia hosts 2.6 million workers from Pakistan, who send remittance worth 4.5 billion dollars every year. These remittances prove to be a valuable support for cash starved Pakistani economy.

Balance of payment (BoP) crisis
Pakistan frequently faces balance of payment crisis and therefore needs foreign support. Saudi Arabia has frequently helped Pakistan in dealing with its foreign payment difficulties. Though, critics claim this easy to get support held Pakistan away from taking hard measures to rectify its recurring BoP crisis.

Help deal with international powers
Saudi Arabia with its deep pockets, massive oil reserves, and considerable investment clout has say at international fronts and can help Pakistan sway international opinion in its favour e.g. In the midst of Kargil saga, at the time when New Delhi was blowing hot and cold, Pakistan asked Bandar bin Sultan for arranging US pressure on India. Bandar bin Sultan, erstwhile Saudi Ambassador to USA, was most powerful foreigner in US at that time.

Middle East influence
Millions of Pakistani labourers work in Middle Eastern countries. Saudi Arabia through tribal connection and religious ties hold considerable influence in Middle East and help Pakistan deal with these countries.

Religious clout
Saudi Arabia wields enormous influence on people among religious class through its huge investment religious institutions, mosques and madrassas related to Wahabism doctrine. Moreover, Hajj visas also offer an opportunity to Saudi Arabia to develop a rapport with Pakistani religious class.