Economy Watch: Oil Production, Consumption Patterns Seeing Radical Shifts
- Nov 13, 2013
Improved extraction technology and higher prices are opening up new oil resources, but that doesn’t mean the world is on the verge of an era of oil abundance, according to the International Energy Agency’s 2013 edition of World Energy Outlook, which was released on Tuesday. The annual report predicts that rising oil output from North America and Brazil will reduce the role of OPEC countries in satisfying the world’s demand for oil over the next decade or so, but the Middle East—the only large source of low-cost oil—will take back its role as a key source of oil supply growth from the mid-2020s.
The report also predicts some basic changes in energy consumption patterns worldwide. The shift in global energy demand to Asia will gather speed in the coming decade, although China will take a back seat in the 2020s as India and countries in Southeast Asia take the lead in driving consumption higher. The Middle East will also emerge as an important energy user, becoming the world’s second-largest gas consumer by 2020 and third-largest oil consumer by 2030, redefining its role in global energy markets.
Relatively low energy prices in the United States will be a benefit to the country’s export economy, according to the IEA. It predicts that the American share of global exports of energy-intensive goods will increase slightly during the years running up to 2035, providing the clearest indication of the link between relatively low energy prices and the industrial outlook. By contrast, the EU and Japan see their share of global exports decline.
“Lower energy prices in the United States mean that it is well-placed to reap an economic advantage, while higher costs for energy-intensive industries in Europe and Japan are set to be a heavy burden,” IEA chief economist Fatih Birol noted.
Small businesses more grumpy in October
Small-business optimism, as measured by the National Federation of Independent Businesses’ index, dropped from 93.9 to 91.6, largely due to a precipitous decline in hiring plans and expectations for future small-business conditions, according to the organization on Tuesday. The index has been bumping around the mid- to low 90s since the technical end of the recession, compared with indexes of around 100 for most of the 1980s, ’90s, and until the mid-2000s.
Of the 10 index components, seven turned negative in October. The stalemate in over funding the federal government left 68 percent of owners feeling that the current period is a bad time to expand, the NFIB said. Some 37 percent of those owners identified the political climate in Washington as the culprit—a record high level.
Even so, NFIB owners increased employment by an average of 0.11 workers per firm in October after September’s decline. Not only that, 21 percent of small businesses owners say the single most important problems they face is government regulations, and 20 percent say taxes—while 17 percent said poor sales are the worst problem. Business owners tend to gripe about regulations and taxes when times are better, and poor sales when they are worse.
Chicago Fed reports small economic activity uptick
The Chicago Federal Reserve released its latest Chicago Fed National Activity Index on Tuesday, which increased to +0.14 in September from +0.13 in August, reflecting a slight uptick in economic activity nationwide during the month. The index’s three-month moving average, CFNAI-MA3, increased to –0.03 in September from –0.15 in August, marking its seventh consecutive reading below zero. September’s CFNAI-MA3 suggests that growth in national economic activity was slightly below its historical trend.
Wall Street, reacting to weak earnings reports, mostly edged down on Tuesday. The Dow Jones Industrial Average lost 32.43 points, or 0.21 percent, while the S&P 500 dropped 0.24 percent. The Nasdaq gained 0.13 percent for the day.