Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
For the integrated oil and gas company of yore, downstream operations were something of a hedge. When oil supply gushed and prices fell, relatively stable refining and marketing divisions provided a countercyclical — and cash-generative — cushion. But the current refining slump, highlighted by TotalEnergies on Tuesday, alongside BP and Shell last week, comes at a time of softer oil prices, a double whammy for beleaguered oil majors.
In part, lower refining margins reflect normalising conditions in the market after Russia’s full-scale invasion of Ukraine caused them to rise. Indeed, while refining margins have fallen about 50 per cent over the past year according to LSEG, they are back within historical ranges.
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But this also highlights the fact that there is more than one sort of oil price slump. Refining margins are largely uncorrelated to oil prices when these fall because of excess crude supply. When the problem is wilting demand, that reduces the utilisation of refining capacity and hits downstream margins too.
That is a reasonable description of where we stand today. Oil demand growth has been underwhelming, likely to average less than 2mn barrels a day over 2024 and 2025. Meanwhile, new refineries are being built, mainly in the Middle East and Asia. These will add 3.9mn b/d of refining capacity by the end of 2025, according to Christopher Kuplent at Bank of America.
The net result is that about 2mn b/d of capacity globally will probably come under pressure to halt production. It is a fair bet that these facilities will be concentrated in Europe, which has the oldest plants and the highest energy costs. The process has already started, with BP and Shell planning capacity closures in Germany. Grangemouth, in Scotland, is also slated for the chop.
Should refining spew out more bad news, European majors will not be equally affected. Many have reduced their footprints over time. Indeed, refining was only just over 10 per cent of group ebitda last year for BP, Total and Shell. Others remain more exposed. At Repsol, for instance, refining contributed more than 30 per cent of ebitda, according to BofA’s calculations. That points to a potential pain point.
The downturn in European downstream is a long-term trend, which will not be helped by the green transition. The continent’s oil and gas companies may be hoping that an — as yet unseen — pick-up in demand delays the day of reckoning. Should that come courtesy of ever-lower oil prices, however, the impact on group revenues would be greater still. They should be careful what they wish for.
I read Kevin Carr’s latest opinion piece on his recent underwriting experience with interest and immediately messaged him for two reasons.
First, to remind him he remains significantly older than me but also to point out that, much as I agreed with the premise of his writing, I found it a bit heavy on problem and light on solution.
That said, I had to concede I couldn’t really think where the next leap in underwriting evolution was likely to come from either.
People Kev and my age saying “it’s probably AI” must sound like middle-aged people back in the 1990s suggesting “the internet” as the panacea to all life’s ills. Without context or insight, it’s meaningless rhetoric.
My roughly two decades in the life market have coincided with the digitisation of underwriting. When I was selling policies around the turn of the century, the paper application form was my only option.
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Even the biggest and most controversial disruptors, such as UnderwriteMe, haven’t sought to change the game so much as make the game slightly easier to play
We carried bundles of these chunky documents around with us (at least one for each insurer we might recommend) and, while each had additional pages designed to capture information on any diagnosed conditions, immediate acceptance rates were low and GP reports common due to the limitations of the data capture available.
The magic of the internet allowed insurers to turn these paper monstrosities into digital processes, which, as well as alleviating the strain on brokers’ arms, allowed underwriters to include unlimited reflexive questions in order to capture point of sale data on disclosures.
This innovation has led to an all-time high in terms of immediate decision making and a reduction in the need for GP reports but has necessitated ever more complex and expensive rules technology which underwriters must integrate, manage and update.
Arguably, change is just as hard now as it was in the pre-digital age, it’s just that IT change stacks have replaced printer ink costs as the major blocker.
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If real-time data sharing becomes a viable reality, insurers will be able to see far more about a customer than is currently available through a traditional application
When thinking about real innovation in the last 20 years, it’s hard to pinpoint anything which hasn’t, in reality, been an improvement or iteration of an existing process. Even the biggest and most controversial disruptors, such as UnderwriteMe, haven’t sought to change the game so much as make the game slightly easier to play.
I hear often about true personalisation being the key to revolution in underwriting. This means accessing the consumer data which exists in the ether through our NHS records, banking history and other financial activities, socioeconomic markers, television viewing habits, grocery purchases and exercise and health uploads. You name it, somewhere a company or organisation has consumer data on it.
By somehow pooling all this information, insurers could give accurate premiums with little or no further questions – a truly personalised and efficient underwriting process, which would mean no forms, digital or otherwise, and certainly no nurses popping round to Kev’s house to measure his particulars.
There are, however, significant hurdles to be cleared in order to reach this utopia, including: customer willingness to allow their data to be shared beyond the purpose for which they intended it (I don’t mind Netflix knowing what I watched on Saturday but I might not want to share it with the world), data protection laws and differing jurisdictions, and the infrastructure needed to integrate the myriad systems and software used by each data owner.
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In a market which has seen prices falling in real terms over recent years, perhaps this wouldn’t be a bad thing
There is also a wider, philosophical consideration. Currently insurers ask for a limited amount of information on which to make an underwriting decision. This means that, in the true spirit of pooled risk, they are taking the chance there is information about a customer to which they are not privy. Indeed, it may be information to which the customer themselves is oblivious.
If real-time data sharing becomes a viable reality, insurers will be able to see far more about a customer than is currently available through a traditional application. Can they remain “blind” to some aspects in order to continue to offer cover to as wide a cohort as possible?
Of course, underwriting could be less intrusive and quicker right now, it’s just that gathering less data would mean increased premiums commensurate with the higher risk taken by the insurer. In a market which has seen prices falling in real terms over recent years, perhaps this wouldn’t be a bad thing.
Phil Jeynes is director of corporate strategy at Reassured
DEX Squared Hospitality, a leading hospitality management company in the UAE, has won a history-making contract to develop and operate Baghdad’s first-ever five-star luxury hotel: the World Heart Hotel, a 320-key property with views of the Tigris River
HUNDREDS of Tesco Bank customers are currently locked out of their credit card accounts and unable to make payments due to a system outage.
Customers report being unable to log into the Tesco mobile banking app and online banking platform.
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Hundreds have been complaining that Tesco Bank’s services are downCredit: PA:Press Association
According to DownDetector reports, over 590 users have encountered issues with the bank’s online services this morning.
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More than 50% of the reported problems related to difficulties with mobile banking, while 35% of users experienced trouble accessing Internet banking.
Others claim they’ve been unable to use their credit card for online payments.
Frustrated customers have taken to social media to express their concerns.
One person posted on X (formerly Twitter): “I cannot log on to mobile app or internet banking.
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“When trying to get on to internet banking, I get a message saying that Tesco is having difficulty sending a one-time code to my phone.”
Another said: “Are they down? I’ve been trying to pay Tesco bank bill online for the past two days with no luck.”
One customer who says their card payments have been declined said: “I’m constantly getting ‘This service is not available’ when trying to make a credit card payment online.”
However, another added: “I’ve made card payments online since the website and app went down but even telephone banking can’t access accounts.”
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The Sun has contacted Tesco Bank for comment.
Switch bank accounts for free perks
Tesco Bank provides a variety of personal banking and insurance products, including personal loans, credit cards, car insurance, and pet insurance, to over five million customers.
Tesco Bank also offered current accounts, which were closed to all customers in November 2021.
How can I check if my bank is down?
THERE are a few different ways to find out if your bank is experiencing an outage.
Senior consumer reporter Olivia Marshall explains how you can check.
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If you’re trying to send money to someone, or you just want to check if you have enough cash for a coffee, finding your online banking is down can be a real pain.
Most banks have a dedicated news page on their website to show service problems, including internet banking, mobile apps, ATMs, debit cards and credit cards.
You can also check on any future work they have planned and what it might mean for you.
Plus, you can check websites such as Down Detector, which will tell you whether other people are experiencing problems with a particular company online.
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Can I claim compensation for the outage?
Banks don’t have to pay out compensation to customers if there has been a drop in service, unlike how telecoms companies have to.
But if you have incurred costs as a result of service issues, it’s likely you could get your money back.
For example, if a bill payment didn’t go through as a result of an outage and you’ve been charged a fee for missing it, you should be able to claim that money back.
If your credit rating has been affected by a service outage, because you got a late payment fee after being unable to make a transaction, for example, you should also keep a record of this.
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If you spoke to anyone to try and resolve the problem, make a note of their name and when you spoke to them, as well as roughly what you discussed and what they advised you to do.
You can find out more details about how to complain on the bank’s website.
It is worth gathering evidence of your problems so you can make a formal complaint to the bank directly.
It is an independent body that will consider the evidence you present and make a fair decision about the action a bank should take.
The FOS can usually get involved 15 days after you’ve raised concerns with the bank.
In the case of an IT system outage at a bank, the FOS says any compensation depends on your circumstances and whether you lost out as a result.
If it thinks you did, it has the power to tell the bank to reimburse any fees, charges, or fines you were hit with, for example, if you were unable to make a payment on a credit card bill or to your mortgage provider.
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It could also tell a bank to pay you for any money you didn’t receive, such as interest, if you weren’t able to pay money in.
If your credit score was affected, it may tell the bank to correct your credit file.
The FOS might also tell the bank to reimburse you for any extra costs you had to make, such as phone calls or trips to your local branch, as well as a payment for any inconvenience it caused.
Do you have a money problem that needs sorting? Get in touch by emailing money-sm@news.co.uk.
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