Tag Archives: GDP

Cheap Energy Works its Magic

Cheap Energy Works its Magic, the October issue of TerraJoule.us, suggests that after a dismal year for global growth, Non-OECD economies are finally ready to pick up speed and that cheap energy, from all sources, stands ready to fund better global growth:

Largely due to aging populations, future growth in developed markets (DM) will be mostly constrained well into the future. Japan of course is the central factor in this constraint, and Europe is close behind. The main uncertainty in the future of any DM growth outlook centers exclusively, therefore, on the US. If the US undertakes a long overdue infrastructure buildout program, and innovation spreads to second tier US cities, then the US economy could effectively counter the structural weakness in Japan and the EU, and lift DM growth higher overall.

However, we don’t need to fret quite so much about the near term-direction of DM growth, because EM growth is already picking up. The IMF now expects EM growth in 2016 to average 4.2%, up from 4.1% in their prior forecast. The IMF also sees EM growth rising to 4.6% in 2017. Despite a concurrent downgrade of DM growth, the higher EM growth forecast bodes well for global growth. In fact, it bodes very well. The next unit of energy consumption, infrastructure expansion, and technology deployment is far likelier to take place in EM, regardless. Moreover, the 5 billion people in the developing economies contain tremendous, pent-up development potential. It is why, as one example, TerraJoule.us has paid particular attention to India as that country undertakes a revolutionary effort to bring 350 million citizens into the electricity system.

In the continuously updating TerraJoule.us Global Grid Decarb Monitor, the forecast for power generation growth from wind and solar is revised upward this month. We now expect that in 2017, a full 35% of the marginal growth in global power generation will come exclusively from these two sources..

Finally, The TerraJoule.us Transition Index, composed of 70% ETFs and 30% individual equities, rose to 103.51 to finish the month of August, having started the new year at a notional value of 100.

–Gregor Macdonald, Editor of TerraJoule.us – A Journal of Energy Transition.

Investing for Energy Transition: November Issue of TerraJoule.us

Each issue of TerraJoule.us contains: a Main Essay, the Model Portfolio, the Data Brief, and a link to a Downloadable Podcast. Gregor Macdonald, Editor.

Readers may purchase each issue individually, through Ganxy.com: Purchase.

Or, readers may also take a 12 month subscription through Gumroad.com: TerraJoule.us Monthly eBook  Annual Subscription.

Podcast: Please enjoy this month’s podcast for free, at SoundCloud: TerraJoule.us November podcast.

From this month’s issue:

No country better illustrates the three phases of energy transition than the United States, which was damaged initially by the energy shock, then struggled and stagnated for five years, and is now starting recover. An excellent way to measure this story has been to follow energy expenditures, which rose sharply on oil’s initial repricing, crashed during the crisis, rose again during the early part of the recovery, and are now falling.  | see: US Annual Energy Expenditures as a Percent of GDP 2004-2014. The United States has been busily constructing new wind and solar capacity, and taking advantage of its very cheap and plentiful supply of natural gas. All the while, Americans have been dumping their demand for oil—which remains expensive despite the recent seasonal decline from $100 to $80. Accordingly, energy expenditures as a percent of GDP are in a four year downtrend, and at 8% are back to levels last seen in 2005. A reminder: upfront costs for the deployment of wind and solar can be high, but the ROI starts immediately and actually increases as time moves forward. The US is now vying with China to be the biggest world mover in the buildout of wind+solar. This pathway will pay increasing dividends as time progresses. We should expect the downtrend in energy expenditures to continue, with gains distributed to the US economy in the form of wealth and GDP.

US Annual Energy Expenditures as a Percent of GDP 2004-2014

Also in this month’s issue:

The model portfolio as of 31 October 2014 is down – 4.26% since the inception date,  April 1, 2013. The portfolio remains fully invested. There are no changes this month to the portfolio’s composition. 

“TerraJoule.us eBook – Investing for Energy Transition – November 2014” by Gregor Macdonald – Editor on Ganxy