Energy and the Macroeconomy: the role of natural gas and the U.S. - - PowerPoint PPT Presentation

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Energy and the Macroeconomy: the role of natural gas and the U.S. - - PowerPoint PPT Presentation

Dec 16, 2022 366 likes •640 views

Energy and the Macroeconomy: the role of natural gas and the U.S. energy boom Presentation by Prakash Loungani Advisor, Research Department, IMF Head of Commodities Team The views expressed are those of the presenter and should not be

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SLIDE 1

Energy and the Macroeconomy:

the role of natural gas and the U.S. energy boom

Presentation by Prakash Loungani Advisor, Research Department, IMF Head of Commodities Team

The views expressed are those of the presenter and should not be attributed to the IMF.

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SLIDE 2

Outline Takeaways

A.

Oil & the Macroeconomy:

New Developments since Blanchard-Gali

B.

Measuring Diversification

C.

Impact of U.S. Energy Boom

A.

No longer about just oil:

Diversification in sources (natural gas; US energy boom)

B.

Depend, but Diversify

C.

Don’t Get Carried Away by the Shale Gale

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SLIDE 3
  • A. Oil & the Macroeconomy:

Some New Developments

  • Diversification from increasing role of natural gas
  • Boom in ‘unconventional energy’
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SLIDE 4

Oil & the Macroeconomy: A Slippery Relationship

“The macroeconomic impacts of oil shocks are ignored [in the book]; this neglect is sensible given the wide varieties of prevailing views and the uncertainties about which results, if any, are valid.”

  • - Richard L. Gordon

(in a book review in The Energy Journal)

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SLIDE 5

Two dominant views

  • Exogenous oil price shocks have played a key role in

nearly every post-WWII U.S. recession and remain an important force even today

  • The importance of oil price shocks in causing the

1970s stagflation has been overstated.

  • Oil price increases today are driven by demand

increases in emerging markets and are different from the oil shocks of the 1970s

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SLIDE 6

A two-handed approach

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SLIDE 7

Some new developments

  • Adding two elements to Blanchard-Gali view
  • More sources of energy
  • Role of natural gas
  • More sources of supply
  • Unconventional energy boom
  • Not discussed in this presentation but always lurking:
  • short-run effects—including through ‘uncertainty’

channel—from large supply disruptions

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SLIDE 8
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SLIDE 9

U.S. Energy Boom

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SLIDE 10
  • B. Measuring Diversification
  • Takeaway Message: “Depend, but Diversify”

(meant to remind old-timers of “Trust, but Verify”)

Based on Cohen, Joutz and Loungani, Energy Policy, 2011 (with some updates)

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SLIDE 11

Calls for energy ‘independence’

See Loungani (2009), “The Elusive Quest for Energy Independence,” International Finance, for a review of these books

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SLIDE 12

Indices of diversification in net imports

2

( ) *100

i i

NPI CSI C =

max{0, }

i ij ij

NPI M X = −

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SLIDE 13

Global Oil Diversification

  • 1.0

2.0 3.0 4.0 5.0 6.0 7.0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Oil Supply DI

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SLIDE 14

Global Gas Diversification

5.0 7.0 9.0 11.0 13.0 15.0 17.0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Natural Gas Supply DI

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SLIDE 15

Diversification index for oil

0.00 5.00 10.00 15.00 20.00 25.00 D e n m a r k C a n a d a A u s t r a l i a U n i t e d K i n g d

  • m

U n i t e d S t a t e s F r a n c e N e w Z e a l a n d S p a i n P

  • r

t u g a l I t a l y N e t h e r l a n d s G e r m a n y K

  • r

e a A u s t r i a I r e l a n d J a p a n S w e d e n B e l g i u m T u r k e y G r e e c e S w i t z e r l a n d C z e c h R e p u b l i c F i n l a n d P

  • l

a n d H u n g a r y S l

  • v

a k R e p u b l i c

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SLIDE 16

Diversification index for natural gas

0.00 5.00 10.00 15.00 20.00 25.00 D e n m a r k N e t h e r l a n d s U n i t e d S t a t e s U n i t e d K i n g d

  • m

F r a n c e B e l g i u m I t a l y P

  • l

a n d G e r m a n y S p a i n S w i t z e r l a n d H u n g a r y A u s t r i a S w e d e n C z e c h R e p u b l i c G r e e c e I r e l a n d P

  • r

t u g a l J a p a n F i n l a n d S l

  • v

a k i a

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SLIDE 17

Diversification: the bottom-line

  • Natural Gas

Crude Oil 1 to 6 7 to 13 14 to 19 Ranking Vulnerability Low Medium High Low France, US, UK Spain, Portugal 1 to 8 Medium Italy Austria, Germany, Japan, Ireland Sweden 9 to 18 High Belgium, Poland Switzerland, Hungary Czech Republic, Finland, Greece, Slovak Republic 19 to 26 Source: Cohen, Joutz and Loungani

i, Energy Policy

.

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SLIDE 18

C.

Impact of U.S. Energy Boom

  • Takeaway Message:

“Don’t Get Carried Away by the Shale Gale”

  • Loungani and Matsumoto (forthcoming), Decoupling of Oil and Natural Gas Prices: Long Separation or

Permanent Split?

  • - Celasun, Oya, Gabriel di Bella, Tim Mahedy, and Chris Papageorgiou (2014), “The US

Manufacturing Recovery: Uptick or Renaissance?”, IMF Working Paper 14/28.

  • - U.S. 2012 Article IV consultation (July 2013),

http://www.imf.org/external/pubs/ft/scr/2013/cr13237.pdf

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SLIDE 19

Co-movement of Oil & Gas Prices …

(index; 2005 = 100, January 1993 to December 2005)

20 40 60 80 100 120 140 160 93 94 95 96 97 98 99 00 01 02 03 04 05 Gas Oil

  • 1a. United States: Gas,

Oil

20 40 60 80 100 120 140 160 93 94 95 96 97 98 99 00 01 02 03 04 05 Gas Oil

  • 1b. Germany: Gas,

Oil

20 40 60 80 100 120 140 160 93 94 95 96 97 98 99 00 01 02 03 04 05 United States Germany

  • 1c. Gas: United States,

Germany

20 40 60 80 100 120 140 160 93 94 95 96 97 98 99 00 01 02 03 04 05 United States Germany

  • 1d. Oil: United States,

Germany

Source: Loungani and Matsumoto, 2014

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SLIDE 20

… but a decoupling since 2005

(index; 2005 = 100, January 2006 to February 2013) 50 100 150 200 250 300 06 07 08 09 10 11 12 13 Gas Oil

  • 2a. United States: Gas,

Oil 50 100 150 200 250 300 06 07 08 09 10 11 12 13 Gas Oil

  • 2b. Germany: Gas,

Oil 50 100 150 200 250 300 06 07 08 09 10 11 12 13 United States Germany

  • 2c. Gas: United States,

Germany 50 100 150 200 250 300 06 07 08 09 10 11 12 13 United States Germany

  • 2d. Oil: United States,

Germany Sources: U.S. Bureau

  • f Labor Statistics; Federal Statistic Office (Germany).
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SLIDE 21

The U.S. Manufacturing Rebound …

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SLIDE 22

…is not due solely to lower U.S. natural gas prices

Two other factors:

The US real effective exchange rate has

depreciated over the last decade, in particular against emerging-market currencies.

Unit labor costs in the US have decreased

relative to emerging markets.

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SLIDE 23
  • Impact on the United States

(percent)

23

Source: IMF staff calculations. Medium-term impact refers to impact after 13 years.

Global Economic Model (GEM) simulations: increase in U.S. energy production over the next 12 years by 1.8% of GDP, cumulatively

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SLIDE 24
  • 24

Source: IMF staff calculations. Medium-term impact refers to impact after 13 years.

Global Economic Model (GEM) simulations: increase in U.S. energy production over the next 12 years by 1.8% of GDP, cumulatively Impact on the Rest-of-World GDP

(percent)

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SLIDE 25

Thank you & shameless self-promotion

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  • IMF Commodities Team: Prakash Loungani, Rabah Arezki, Akito Matsumoto,

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