Tag Archives: OECD

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.

Oil Control: April 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: This month’s podcast is free. Listen here at SoundCloud.

Model Portfolio: The TerraJoule.us model portfolio is down -7.23% since inception and is up +7.52% in 2015. There are no changes to the model portfolio this month.

From this month’s issue:

Last year, for the first time in history, over 50% of the world’s oil supply was consumed outside of the OECD. It’s ironic, and yet understandable, that 2014 was the year this structural change—in process for over a decade—finally completed itself. With global oil supply steady—and slightly increasing, even, in the second half of the year—a faltering of demand clearly hit oil prices, sending them on a 6 month tumble. But with OECD oil demand steady,  it’s not that Non-OECD demand fell but rather that demand growth in the Non-OECD was clearly not strong enough to handle the constant inching up of global supply. Data from the broader energy system in China, the top Non-OECD economy, bears out this theme. Demand growth for electricity in China has actually been slow enough the past 24 months that it’s allowed renewables—hydropower, wind, and solar—to storm into the gap, thus depressing coal consumption. Were the Chinese economy growing more strongly, renewables would not be taking such a large share of marginal growth. Meanwhile, the growth phase slated to come in India is just getting started. Thus, suppliers of global commodities continue to face the now familiar interregnum where China’s growth is slower, but no single or collection of economies is ready to take the baton. Early data suggests both Chinese and Indian oil demand last year rose by roughly 2-3%. That’s positive, but it’s not enough demand at the margin to kick the oil futures market into higher gear. Oil prices now are completely at the whim of demand changes in the Non-OECD. Is that good or bad news?  |  see: Share of Global Petroleum Consumption: OECD vs Non-OECD 2005-2014.

“TerraJoule.us eBook – Oil Control – April 2015” by Gregor Macdonald – Editor on Ganxy

Oil’s Ultimate Fate: May Issue of TerraJoule.us

TerraJoule Cover Image May 2013Each issue of TerraJoule.us contains: a Main Essay, a Model Portfolio, a 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: Annual Subscription.

This month’s publication, Oil’s Ultimate Fate, covers the structural shift as oil consumption continues to migrate from the West to the developing world. As this trend nears completion, oil will finally be ready for its next, major repricing: 

Oil’s quiet period has been composed of declining OECD demand, a hardening of the floor of oil prices, increased supplies of high-cost, marginal oil, and the almost silent shift of demand from West to East. Non-OECD economic growth, however, has not quite been strong enough to cause oil prices to breakout to the upside. Indeed, weak OECD economies and oil demand have provided just enough counterweight to keep oil prices from taking off. Oil’s quiet period, therefore, has seen oil trapped in a very tight range, unable to move lower because of marginal costs—and—unable to move higher because of continuing affordability issues in the OECD.

The May issue also includes an analysis of Japan’s worsening energy-balances, as the country’s currency debasement strategy meets up with soaring volumes of imported LNG:

While hedge fund managers focus on Japan’s debt dynamics, they should monitor instead these fragile energy-balance dynamics for the trigger to Japan’s next crisis.

To purchase, please follow the link below:

“TerraJoule.us eBook – May 2013” by Gregor Macdonald – Editor on Ganxy