Thought for the day
"Success is dangerous. One begins to copy oneself, and to copy oneself is
more dangerous than to copy others. It leads to sterility."
-
Pablo Picasso (Spanish, 1881-1973)
Word for the day
Gauche (adj)
Lacking social grace,
sensitivity, or acuteness; awkward; crude; tactless:
(Source: Dictionary.com)
Malice towards none
First chaiwala and now suitwala!
Can't wait to hear next speech
of PM Modi - when he tears into the fabric of Congress party.
US economic growth trend to remain weak through 2040
Annual Energy
Outlook 2015 (AEO2015) released recently by the United States Energy
Information Administration (EIA), highlights a number of interesting trends in
global growth and consequent impact on energy consumption and pricing.
The report presents a base case for the energy outlook over a
period till 2040 (the AEO2015 Reference case) and compares it with five
alternative cases, viz., (1) Low oil prices; (2) High oil price; (3) Low
economic growth; (4) High economic growth, and (5) High oil and gas resource.
The key highlights of the AEO2015 are as follows:
Ø
Growth in U.S. energy production—led by crude
oil and natural gas—and only modest growth in demand reduces U.S. reliance on
imported energy supplies. Energy imports and exports come into balance in the
United States starting in 2028 in the AEO2015 Reference case and in 2019 in the
High oil price and High oil and gas resource cases. Natural gas is the dominant
U.S. energy export, while liquid fuels continue to be imported.
Ø
Through 2020, strong growth in domestic crude
oil production from tight formations (Shale) leads to a decline in net
petroleum imports and growth in net petroleum product exports in all AEO2015
cases.
Ø
The United States transitions from being a
modest net importer of natural gas to a net exporter by 2017. U.S. export
growth continues after 2017, with net exports in 2040 ranging from 3.0 trillion
cubic feet (Tcf) in the Low Oil Price case to 13.1 Tcf in the High Oil and Gas
Resource case.
Ø
U.S. energy consumption grows at a modest rate
over the AEO2015 projection period, averaging 0.3%/year from 2013 through 2040
in the base case.
Ø Rising
long-term natural gas prices, the high capital costs of new coal and nuclear
generation capacity, state-level policies, and cost reductions for renewable
generation in a market characterized by relatively slow electricity demand
growth favor increased use of renewables.
Brent prices to stay below US$100/bbl till 2028
In the base case, continued growth in U.S. crude oil production
contributes to a 43% decrease in the Brent crude oil price, to $56/bbl in 2015
(Figure ES1). Prices rise steadily after 2015 in response to growth in demand
from countries outside the OECD; however, downward price pressure from
continued increases in U.S. crude oil production keeps the Brent price below
$80/bbl through 2020. U.S. crude oil production starts to decline after 2020,
but increased production from non-OECD countries and from countries in the
Organization of the Petroleum Exporting Countries (OPEC) contributes to the
Brent price remaining below $100/bbl through 2028 and limits the Brent price
increase through 2040, when it reaches $141/bbl.
There is significant price variation in the alternative cases
using different assumptions. In the Low Oil Price case, the Brent price drops
to $52/bbl in 2015, 7% lower than in the Reference case, and reaches $76/bbl in
2040, 47% lower than in the Reference case, largely as a result of lower
non-OECD demand and higher upstream investment by OPEC. In the High Oil Price
case, the Brent price increases to $122/bbl in 2015 and to $252/bbl in 2040,
largely in response to significantly lower OPEC production and higher non-OECD
demand. In the High Oil and Gas Resource case, assumptions about overseas
demand and supply decisions do not vary from those in the Reference case, but
U.S. crude oil production growth is significantly greater, resulting in lower
U.S. net imports of crude oil, and causing the Brent spot price to average
$129/bbl in 2040, which is 8% lower than in the Reference case.
In the base case, the Henry Hub natural gas spot price (in 2013
dollars) rises from $3.69/million British thermal units (Btu) in 2015 to
$4.88/million Btu in 2020 and to $7.85/million Btu in 2040, as increased demand
in domestic and international markets leads to the production of increasingly
expensive resources.
US economic growth trend to remain weak through 2040
In the base case the U.S. population is projected to grow at an
average annual rate of 0.7%, real GDP at 2.4%, labor force at 0.6%, and nonfarm
labor productivity at 2.0% from 2013 to 2040.
In the base case U.S. real GDP is projected to grow at an
average annual rate of 2.4% from 2013 to 2040—a rate that is 0.4 percentage
points slower than the average over the past 30 years. GDP expands in the
Reference case by 3.1% in 2015, 2.5% in 2016, 2.6% from 2015 to 2025, and 2.4%
from 2015 to 2040.
Interest rates to stabilize at little higher level post 2015
The nominal interest rates over the 2013-40 period are generally
expected to be lower than those observed for the preceding 30 years. At
present, the term structure of interest rates is still at the lowest level seen
over the past 40 years. In 2012, the federal funds rate averaged 0.1%.
Longer-term nominal interest rates are projected to average
around 6.0%, which is lower than the previous 30-year average of 7.8%. After
2015, interest rates in ensuing five-year periods through 2040 are expected to
stabilize at a slightly higher level than the five-year averages through 2013,
2014, and 2015, as the result of a modest inflation rate.
Use of gas and renewables to grow at expense of liquid fuels, coal
steady
In the base case total primary energy consumption is projected
to grow in by 8.6 quadrillion Btu (8.9%), from 97.1 quadrillion Btu in 2013 to
105.7 quadrillion Btu in 2040.
Most of the growth may come from consumption of natural gas and
renewable energy. Consumption of petroleum products across all sectors in 2040
may be unchanged from 2013 levels, as motor gasoline consumption in the
transportation sector declines as a result of a 70% increase in the average
efficiency of on-road light-duty vehicles (LDVs), which more than offsets
projected growth in vehicle miles traveled (VMT).
Total motor gasoline consumption in the transportation sector is
projected to be about 3.4 quadrillion Btu (1.8 million barrels per day (bbl/d))
lower in 2040 than in 2013, and total petroleum consumption in the
transportation sector about 1.6 quadrillion Btu (0.9 million bbl/d) lower in
2040 than in 2013.
In the transportation sector, which continues to dominate demand
for petroleum and other liquids, there could be a shift from motor gasoline to
distillate. Increased use of compressed natural gas and LNG in vehicles could
replace about 3% of petroleum and other liquids consumption in the transportation
sector in 2040.
Consumption of marketed renewable energy may increase by about
3.6 quadrillion Btu in the base case, from 9.0 quadrillion Btu in 2013 to 12.5
quadrillion Btu in 2040, with most of the growth in the electric power sector.
Hydropower, the largest category of renewable electricity generation in 2013,
contributes little to the increase in renewable fuel consumption. Wind-powered
generation, the second-largest category of renewable electricity generation in
2013, may become the largest contributor in 2038 (including wind generation by
utilities and end-users onsite). However, solar photovoltaics (6.8%/year),
geothermal (5.5%/ year), and biomass (3.1%/year) all increase at faster average
annual rates than wind (2.4%/year), including all sectors.
Interesting reads
In the past two decades, careful financial management and export
booms helped repair Asia’s balance sheets. Many policy makers don’t want to
undo that good work. In Indonesia, for instance, public debt-to-gross domestic
product ratio went from nearly 90% in 2000 to 25% in 2014, according to the
International Monetary Fund. (WSJ)
In what seems like a coincidental retaliation for Greece's pivot to Russia
(and following Greece's initiation of capital controls), the supposedly
independent European Central Bank has decided suddenly that - after dishing out
€74 billion of emergency liquidity to the Greek National Bank to fund its banks
- as The NY Times reports, the value of the collateral that Greek
banks post at their own central bank to secure these loans be reduced by as
much as 50%, and the haircuts could increase if negotiations with Europe remain
at an impasse. As we detailed earlier, this is about as
worst-case-scenario for Greece as is 'diplomatically' possible currently, and
highlights an increasingly hard line by The ECB toward The Greeks as the
move will leave banks hard-pressed to survive. (Zero
Hedge)
Trivia
Facts
Kharif 2014 - Crop lower due to sub-normal monsoon.
Rabi 2015 - Crop lower due to abnormal rains and hail storms.
Kharif 2015 - Crop may be impacted due to sub-normal monsoon.
Doubts
Will farmer distress reflect in forthcoming Bihar election?
Will foreign investors pause for a minute to have a rethink on
India story?
Will fiscal maths of the government fail - lower tax collection,
higher borrowing, and higher yields?
Will the stress on financial system continue to rise?
Is PM Modi's luck deserting him after 15yrs?
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