The OPEC Bulletin is the Organization's monthly flagship magazine, featuring news from Member Countries, incisive forum articles, a review of the oil market, topical issues and much more.

A quick guide to some common expressions

Every industry has its own unique terminology. Air traffic controllers refer to ‘pushing tin’; television producers speak of a series ‘jumping the shark’; securities traders work on the ‘demand-side’ or ‘buyside’; and, of course, in the oil industry there is a plethora of terms.

Understanding this specialized language, and knowing how to use its colourful buzzwords, can be quite useful. In some businesses, mastering specific terminology is seen as a rite of initiation; to use it properly, a sign of belonging. But many specialized words also serve as short-hand to communicate abstract concepts and complex information to people.

In this article, the OPEC Bulletin’s Alvino-Mario Fantini has prepared an informal guide to 30 frequently used financial expressions and economic terms.

Markets
Asian flu — The Asian financial (or currency) crisis of 1997 gave us this expression. The crisis began in Thailand in July, but then rapidly spread to the currencies and equity markets of the region, especially hitting Indonesia, South Korea and Thailand (though all East Asian economies were affected). The situation was characterized by sharp currency devaluations, falling asset prices and capital flight.

Bears / bear market — Although the precise origins of this expression are debated, one plausible explanation points to the mid-18th century when London [bear] fur traders would anticipate a price decline and borrow furs, sell them immediately and then buy them back at reduced prices. Thus, bears came to be seen as those who sell assets because of an expected drop in value. A bear market then is characterized by a lack of confidence in an asset, industry or market, resulting in falling trading volume and declining prices. It may last months or even years.

Bulls / bull market — A late 18th century publication described both bulls and bears trading on London’s Exchange Alley. But bulls in those days, much like today, used significant amounts of margin to buy certain stocks in anticipation of a price increase. A bull thus thinks an asset should be bought aggressively because of an expected increase in value. Although its precise origins remain obscure, the first recorded use of the phrase bull market is the 1891 edition of the Oxford English Dictionary. A bull market is characterized by confidence in a particular equity, sector or market, resulting in rising trading volume, sustained buying and increasing prices over a period of several months (or years).

Creative destruction — Coined by the economist, Joseph Schumpeter (1942), creative destruction describes the process by which businesses and industries rise and fall, with entrepreneurship and innovation continuously giving rise to new economic processes and structures, which supersede or destroy older ones. This dynamic is considered by Schumpeter and many later economists as a core feature of capitalism.

Demand destruction — The term refers to a sustained downward shift in a demand curve caused by a prolonged period of high prices. In the context of the oil industry, it is used sometimes to speak of a dramatic decline in consumption levels.

Hot money — As the name implies, this refers to money that is gotten rid of quickly — as if it were burning one’s hands. It refers to short-term capital flows that move rapidly from one asset class to another, constantly on the search for higher yields or more favourable exchange rates. The volatile portfolio investments that often pour into developing countries in search of quick and higher returns — but which are rapidly withdrawn (eg, capital flight) when economic conditions deteriorate — are hot money.

Tequila effect — Named after Mexico’s national drink, the Tequila effect refers to the impact of the 1994 Mexican peso devaluation on other regional economies. The Mexican currency’s woes spread to other South American economies, resulting in dramatic currency devaluations and stock market declines, and pointing to a ‘contagion’ effect which foreshadowed the later Asian currency crisis. ...

Cover: Consumers urged to be more transparent (see interview with Abdalla Salem El-Badri, OPEC Secretary General, on p4). Design: Elfi Plakolm

Download OPEC Bulletin, September 2008

PDF format, 2.7MB, 51Pages.

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Membership and aims:

OPEC is a permanent, intergovernmental Organization, established in Baghdad, September 10–14, 1960, by IR Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. Its objective is to coordinate and unify petroleum policies among Member Countries, in order to secure fair and stable prices for petroleum producers; an efficient, economic and regular supply of petroleum to consuming nations; and a fair return on capital to those investing in the industry. The Organization now comprises 13 Members: Qatar joined in 1961; Indonesia and SP Libyan AJ (1962); United Arab Emirates (Abu Dhabi, 1967); Algeria (1969); Nigeria (1971); Angola (2007); and Ecuador (joined the Organization in 1973, suspended its Membership in 1992, and rejoined in 2007); Gabon joined in 1975 and left in 1995.

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