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1
The views in this presentation reflect those of the author
and not necessarily those of the IMF or its Executive
Board.
Scarcity perspectives on oil, gas, and coal
Energy supply, fossil fuels, and global economic growth
Road Map
A resource scarcity perspective on fossil fuels
2
Global Primary Energy Consumption and Real GDP Global growth is tightly linked with energy consumption. Some economists claim that the cost/consumption
share of energy do not appropriately capture the role of energy in economic growth (e.g., impact of TFP).
Global real GDP
=0.88
Source: IMF, World Economic Outlook; and BP, Statistical Review of World Energy, 2011.
Global Primary Energy Consumption and Real GDP Primary energy consumption has risen faster in emerging and developing economies, reflecting higher and more
energy-intensive growth. these economies accounted for 60 % of global consumption in 2010 (48% in 2000).
Source: IMF, World Economic Outlook; and BP, Statistical Review of World Energy, 2011.
Baseline Scenario: Weak Growth in Advanced Economies and Robust Growth in
Emerging Markets and Developing Economies
5
Real GDP1
(index; 2006 = 100)
2006 08 10 12 14 16
1Precrisis trend obtained by extrapolating 1996-2006 real GDP growth.
Real GDP Growth(percent change from a year earlier)
Primary Energy Consumption and Per Capita IncomeEnergy consumption is much more income-elastic at lower levels of per capita income.
Primary Energy Consumption(In billions of Btu per capita)
Taiwan Province of China
Korea
China
Predicted
relationship
for China
Pe
r ca
pit
a e
ne
rgy
con
sum
pti
on
PPP-weighted per capita real GDP (in thousands of 2005 U.S. dollars)
Turkey
Mexico
Hong Kong SAR
Thailand
Malaysia
Fossil FuelsNonrenewable ResourcesAre the Dominant
Sources of Primary Energy
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Fossil Fuel Prices Suggest Partial Scarcity
8Source: IMF, Primary Commodity Price System.
Resource Scarcity and its Measurement
Resource is scarce if supply is deficient relative to
some specified level of demand.
Resource scarcity is measured by the market price,
which reflects the opportunity cost of bringing an
additional unit to the market.
Focusing on long-term resource price developments
as a measure of scarcity and long implementation
lags (e.g. super cycle).
Long-run real price trends recovered by low-pass
filters.
Fossil Fuel Scarcity
The global oil markets has entered a period of increased scarcity
Oct.
2010
Crude Oil I(0)1
Oct.
2010
Energy Commodities2
Sources: Global Financial Data; IMF Primary Commodity Price System; and IMF staff calculations.
1U.S. dollardenominated commodity prices are deflated by the U.S. consumer price index in log deviations from the sample mean. Deviation between filtered components and price
is accounted for by noise, business cycle frequencies, and random walk drift where I(1).
2First-principal component (standard deviation from mean) normalized to have unit variance.
Oil Scarcity in the Mid-2000sGlobal crude oil production stagnated in 2005-08 when the drag from maturing oil fields in major
producing countries was not offset by new capacity.
World Oil Production1
(million barrels a day)Oil Production by Major Groups2
(million barrels a day)
Stagnation
09
Previous peak
(1979)
Previous peak
(1988)
Sources: BP, Statistical Review of World Energy.1Piecewise linear trend.2FSU = former Soviet Union; OPEC = Organization of Petroleum Exporting Countries.
Oil Supply Capacity AdjustmentThe oil supply side has responded to price signals. Exploration and development have increased
while technological advances have enhanced the range of fields for profitable extraction. But
long time to build lags and obstacles to investment have prevented rapid capacity increases.
International Rotary Rig Count by
Region
(level)
United States PPI for Oil and Gas
Drilling and Price of WTI1
(December 1985 = 100)
11Sources: Bakker Hughes; BP, Statistical Review of World Energy; and Haver Analytics.1PPI = producer price index; WTI = West Texas Intermediate.
PPI
WTI
Oil Demand Supply Balance(annual change, in percent)
Avg. 2011-16
Demand
World 1.3
Advanced economies -0.6
Emerging and developing economies 3.1
Supply
World 1.5
Non-OPEC 0.8
OPEC (incl. NGL) 2.6
Memorandum
Oil demand growth implied by WEO growth forecast1
Short-term income elasticity 3.0
Long-term income elasticity 1.3
Source: IEA, Medium-term Oil Market Report, updated June 2011; and IMF staff
estimates.1Estimates from Chapter 3 in April 2011 World Economic Outlook, (Table 3.1)
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Medium-term Risks in the Oil Demand-Supply
Balance Remain A Concern
Coal and Gas Are Relatively More AbundantReserve conditions are more favorable for coal and gas than for crude oil. Gas and coal are also less traded
internationally, which has made them key sources in domestic primary energy in some countries.
14Source: IMF, World Economic Outlook; and BP, Statistical Review of World Energy, 2011.
Natural gas supply is expected to grow more rapidly than other fossil fuels.
Continued rapid growth in primary energy consumption of emerging Economies.
Conclusions
Adjustment to increased scarcity in the global oil market but speed of adjustment likely to remain slow
through the decade.
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