I LO Tripartite Caribbean Conference “Promoting Human Prosperity beyond the Global Financial Crisis Kingston Jamaica 1-2 April 2009 Impact of the Global Economic Impact of the Global Economic Crisis on the Energy Industries Crisis on the Energy Industries and Economy and Economy Gregory McGuire Gregory McGuire Lecturer Lecturer Energy Economics and Strategy Energy Economics and Strategy UWI St. Augustine UWI St. Augustine
Presentation Outline Presentation Outline � Global Overview Global Overview � � Energy and the Economy Energy and the Economy � � Commodity Markets : Status and Commodity Markets : Status and � Outlook Outlook � Economic Impact ;Exporters Economic Impact ;Exporters � � Economic Impact : Importers Economic Impact : Importers � � Conclusions Conclusions � 1 April 2009 1 April 2009 ILO Tripartite Conference ILO Tripartite Conference
The Context The Context
•Financial Crisis • Economic meltdown Stakeholders •Shrinking Demand MYOB •Crash in Commodity Markets Ltd and tourism •State Intervention/ Stimulation •Trade implications/ Protectionism •Best bet : recovery in 24 m. 1 April 2009 1 April 2009 ILO Tripartite Conference ILO Tripartite Conference
I MF: The Outlook is Bleak I MF: The Outlook is Bleak WEO Real GDP Growth Projections WEO Real GDP Growth Projections (In percent change from a year earlier) In percent change from a year earlier) ( U.S. Euro Japan China India World U.S. Euro Japan China India World 2009 (Jan.09) 9 (Jan.09) - -1.6 1.6 - -2.0 2.0 - -2.6 6.7 5.1 0.5 2.6 6.7 5.1 0.5 200 2009 (Nov.08) 9 (Nov.08) - -0.7 0.7 - -0.5 0.5 - -0.2 8.5 6.3 2.2 0.2 8.5 6.3 2.2 200 Change - -0.9 0.9 - -1.5 1.5 - -2.4 2.4 - -1.8 1.8 - -1.2 1.2 - -1.7 1.7 Change 6.5 3.0 6.5 3.0 2010 (Jan.09) 1.6 0.2 0.6 8.0 10 (Jan.09) 1.6 0.2 0.6 8.0 20 1.5 0.9 1.1 9.5 6.8 3.8 1.5 0.9 1.1 9.5 6.8 3.8 2010 (Nov.08) 10 (Nov.08) 20 Change 0.1 - -0.7 0.7 - -0.5 0.5 - -1.5 1.5 - -0.3 0.3 - -0.8 0.8 Change 0.1 Source: IMF, World Economic Outlook. Source: IMF, World Economic Outlook. 1 April 2009 1 April 2009 ILO Tripartite Conference ILO Tripartite Conference
st / 3/ 09) World Bank confirms(31 st / 3/ 09) World Bank confirms(31 THE OUTLOOK I S BLEAK THE OUTLOOK I S BLEAK � Global economy to shrink by Global economy to shrink by - -1.7% 1.7% � – Largest contraction in 80 yrs Largest contraction in 80 yrs – � High Income countries = High Income countries = - -2.9% 2.9% � � Developing countries inc. China and Developing countries inc. China and � India= 2.1% India= 2.1% – Without China and India Without China and India - -1.7% 1.7% – � Latin America Caribbean Latin America Caribbean - -0.6% 0.6% � 1 April 2009 1 April 2009 ILO Tripartite Conference ILO Tripartite Conference
Trinidad and Tobago Trinidad and Tobago Energy Dependence Energy Dependence r p 2006 r 2007 p ITEM ITEM 2002 2002 2003 2003 2004 2004 2005 2005 2006 2007 GDP 26.2 33.9 37.1 42.9 46.8 GDP 26.2 33.9 37.1 42.9 46.8 43.0 43.0 27.8 r r 42.8 r r 42.4 r r 53.6 r r Gov’ ’t Revenues t Revenues 61.9 Gov 27.8 42.8 42.4 53.6 61.9 56.5 56.5 M’ M ’dise Exports dise Exports 75.9 75.9 83.3 83.3 85.8 85.8 85.9 85.9 91.0 91.0 86.7 86.7 Employment 3.4 3.2 3.6 3.4 3.3 Employment 3.4 3.2 3.6 3.4 3.3 3.3 3.3 Notes: p- - provisional , r provisional , r – – revised revised Notes: p Source : Annual Economic Survey, 2007: : Annual Economic Survey, 2007: www.central www.central- -bank.org.tt bank.org.tt Source 1 April 2009 1 April 2009 ILO Tripartite Conference ILO Tripartite Conference
Key Energy Based Commodity Exports Key Energy Based Commodity Exports � Petroleum Petroleum � � Natural Gas Natural Gas � � Methanol Methanol � � Ammonia Ammonia � 1 April 2009 1 April 2009 ILO Tripartite Conference ILO Tripartite Conference
Crude Oil Prices History Crude Oil Prices History 1982- -2007 2007 1982 Rising Demand; Low Spare Capacity ; Weak Dollear; 120 Nigerian Cut-Offs 100 Hurricanes Dennis, Katrina Nominal Dollars per Barrel 80 Hurricane Ivan in Gulf of PdVSA Worker's Strike 60 in Venezuela and Iraq War W i Iraq Invades Kuwait OPEC Cuts Quotas; Rising Demand 40 Inventor y 20 Saudi Arabia Abandons 9/11 Attacks Asian Economic Swing 0 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 Source: EIA Refiner Acquisition Cost of Imported Crude Oil (IRAC) 1 April 2009 1 April 2009 ILO Tripartite Conference ILO Tripartite Conference
Real Oil Prices 1976- -2008 2008 Real Oil Prices 1976 Major Events and Real World Oil Prices, 1970-2008Q1 (Prices adjusted by CPI for all Urban Consumers, 2008) $100 Iran-Iraq War Begins; oil prices peak $90 $80 Saudis abandon "swing Prices spike on supply disruptions, $70 producer" role; oil prices rapid demand increases, Constant $2008 per barrel collapse constrained OPEC capacity, low inventories $60 Imported Refiner Acquisition Cost Prices rise on OPEC $50 cutbacks, increased Gulf War Ends Iraq Invades demand Kuwait $40 Iranian Revolution; Shah Deposed $30 Saudi Light PdVSA workers $20 strike in Venezuela $10 Prices fall sharply on 1973 Arab Oil Asian economic crisis; oil 9/11 attacks; economic Embargo oversupply; prices fall sharply weakness $- 1 April 2009 1 April 2009 ILO Tripartite Conference ILO Tripartite Conference 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 0 0 0 0 0 7 7 7 7 7 8 8 8 8 8 9 9 9 9 9 0 0 0 0 0 0 2 4 6 8 0 2 4 6 8 0 2 4 6 8 0 2 4 6 8 Source: EIA
Oil Prices and World Economic Growth Oil Prices and World Economic Growth (1998- -2008) 2008) (1998 12 120 10 100 8 80 s th n 6 60 o M 4 40 2 20 0 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 years US EU China India Oil Prices 1 April 2009 1 April 2009 ILO Tripartite Conference ILO Tripartite Conference
Crude Oil Prices (WTI ) Crude Oil Prices (WTI ) (1998- -Mar’09) Mar’09) (1998 160 140 120 100 . l b b 80 $ / S U 60 40 20 0 8 9 0 1 2 3 4 5 6 7 8 9 9 9 0 0 0 0 0 0 0 0 0 0 - - - - - - - - - - - - n n n n n n n n n n n n a a a a a a a a a a a a J J J J J J J J J J J J Months 1 April 2009 1 April 2009 ILO Tripartite Conference ILO Tripartite Conference Source: US EIA
Natural Gas Prices 2003- -’08 ’08 Natural Gas Prices 2003 ( Henry Hub) ( Henry Hub) 14 12 10 US $/mmbtu 8 6 4 2 0 3 3 3 3 4 4 4 4 5 5 5 5 6 6 6 6 7 7 7 7 8 8 8 8 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 - - - - - - - - - - - - - - - - - - - - - - - - n r l t n r l t n r l t n r l t n r l t n r l t p u c p u c p u c p u c p u c p u c a a a a a a A J O A J O A J O A J O A J O A J O J J J J J J 1 April 2009 1 April 2009 ILO Tripartite Conference ILO Tripartite Conference
Market I nsights Market I nsights � Prices have remained depressed in Prices have remained depressed in � spite of: spite of: – Extreme cold weather in Europe and Extreme cold weather in Europe and – North America. North America. – OPEC Production cuts amounting to 3.5 OPEC Production cuts amounting to 3.5 – million bbls/d million bbls/d – 2 week cut off in Russian gas supplies to 2 week cut off in Russian gas supplies to – Europe. Europe. – Heightened tensions in the Middle East. – Heightened tensions in the Middle East. 1 April 2009 1 April 2009 ILO Tripartite Conference ILO Tripartite Conference
Market Insights Market Insights � Prices for natural gas have trended Prices for natural gas have trended � downward over last eight months. downward over last eight months. � In 2008 prices averaged $9.13 per Mcf . In 2008 prices averaged $9.13 per Mcf . � � For fiscal yr. to date natural gas spot For fiscal yr. to date natural gas spot � prices have averaged US 5.70/per prices have averaged US 5.70/per mmbtu. mmbtu. 1 April 2009 1 April 2009 ILO Tripartite Conference ILO Tripartite Conference
Today’s Prices Today’s Prices ($/ bbl) PRICE* ($/ bbl) PRICE* Nymex Crude Crude Nymex 48.58 48.58 Future Future WTI Cushing WTI Cushing 49.66 49.66 Spot Spot Natural Gas Natural Gas 3.59 3.59 Henry Hub Spot Henry Hub Spot 1 April 2009 1 April 2009 ILO Tripartite Conference ILO Tripartite Conference
Outlook Outlook � Oil prices are likely to weaken in the Oil prices are likely to weaken in the � summer months. summer months. � Gas prices will also weaken in most Gas prices will also weaken in most � markets markets � Recovery now hinges mainly on Recovery now hinges mainly on � resumption of economic growth in resumption of economic growth in major economies. major economies. 1 April 2009 1 April 2009 ILO Tripartite Conference ILO Tripartite Conference
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