Confusion of forecasts (and) forecasts of confusion in energy sector
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Confusion of forecasts (and) forecasts ofconfusion in energy sector Z. Hill PRELIMINARY COMMUNICATION By analyzing forecasts of total energy consumption, and particularly oil consumption, in the present crises time the auth or cameto conc lusio n, partlybased on previ ous anal ysesof move ment s in ener gy cons umpti on, that there is an evident discrepancy between current trends and previous forecasts. The discrepancy is stemming from slow down in energy consu mption on one side, partly resulting from more effic ient energ y use,instigate d for differ ent reasons whic h are not specifi callyanalyzedhere, and econ omic reaso ns on the other side , which are very hetero gene ous: “overh eate d demand” led to high energy cons umpti on in previou s period, but even tuall y it paved the way to econom ic crises, the cause roots of which have not been eliminate d and the crises persists , so we cann ot expe ct fast recove ry and retur n of consumption on pre-crises level in the near future. The author substantiates his thesis with the data in the scope sufficient to prove his statements. Key words:GDP, energy, oil, correlation 1. INTRODUCTION In the science of economics, GDP indicator (denoting to- tal value of goods produced and services rendered by acountr y dur ing the year), or a sli ght ly dif fer ent GNP (gross national product), is generally used not only to in- dicate overall economic strength of a country but also as a reference for other economic trends. However, the universal value of GDP indicator can be misleading, particularly in ’static’ analyses, while in ‘dy- namic ’ anal yses, at const ant prices, it is an unavoida ble tool. Possible differences in interpretations usually stem from incomplete or ambiguous data. Namely, GDP does not specify the availability of the generated value indi- cated by GDP. Consequently, the indicator should be ad- justed – decreased for the value of obtained loans (which enabled creation of new values) and also, it should be in- creased for the value of loan repayment (provisions for repayment of loa ns but not funds ear mar ked for cre ati on of new value), if we want to get a more realistic view ofeconomic strength of an observed object of analysis (acountry, region...). If such approach is not followed, acountr y wit h ris ing GDP (ac cor din g to fir st def ini tion) buthigh indebtedness, could be proclaimed successful. GDP movement is usually taken as a reference indica- tor in energy demand forecasts and particularly in vari- ous forecasts in oil industry. As a pattern, total primaryenergy demand growth is slower than GDP growth (with variations: world as a whole, group of countries accord- ing to their development, etc.). Similar pattern appears also in forecasts on oil and gas demand, particularly in the last decade: oil demand is growing slower than total prima ry energy demand, whil e natu ral gas deman d is growing slightly faster . F or the purpose of this analysis itis not necessary to give more precise ponder of the term “slightly”. 2. THE AGE OF UNCERTAINTYThe so called “oil shocks” of the past showed that global economy was not immune to various external influences (the lesson from the past has not been learned: the GreatDepression in 1929 has been forgotten ). Speculations with oil prices, but other commodities too, with the sup- port of the so called ‘free capital’ and commodity ex- changes (including NYMEX), pointed to the fact that the forme r rule of the game according to which all phenom- ena can be explained with balance or imbalance of de- mand and suppl y, became unsu stain able, because in modern time s (we coul d say from the time whe n ex- changes started to play their current role) such assump- tion has limited value. Reason: demand and supply are not independent, primary measures, they are a resultantof heterogeneous impacts, among which speculations on exc han ges hav e had sig nif ica nt impact , (bu t aga in, spe cu- la t io ns re pr es en t a b un ch of di ff er e nt i nt e re s ts , frequently even hidden political games). Following the break down of the value system which takes for granted the perfection of capitalist (conserva- tive) liberalism of the US type, (again I repeat, the lesson from 1929 has not been learned) and state intervention (the USA in the first pla ce) with prin ting money for th e state its elf , the que stion wha t GDP rea lly rep res ents seems more than justified (injection of paper money into economic flows of indebted country – the US state deficitaccounts for 87% of GDP 13 – new billions of dollars were injected into the economy). On one side it leads to cre- ation of false values and on the other side it leads to sub- jugation of other countries unable to parry with similar measures. The most adequate economic term for such measure is protectionism, more precisely, state protec- tionism. In such a context, all forecasts of an economic activity, even sho rt-term for ecasts , bec ome qui te uncer tai n, changing from month to month as indicated in Table 1 – the compil ation of data by a reli able sour ce – IMF. In such NAFTA 61 (7-8 ) 357- 362(2010) 357
Confusion of forecasts (and) forecasts of confusion in energy sector
