Showing posts with label Economic. Show all posts
Showing posts with label Economic. Show all posts

14 December 2019

The U.S. Dominates New Oil And Gas Production

Jude Clemente

The American fracking for oil and natural gas boom will continue on through the 2020s. And why not? Since fracking took off in 2008, we have more than doubled our proven oil reserves to ~65 billion barrels. Natural gas reserves have surged over 80% to ~430 trillion cubic feet. Already the largest oil and gas producer, the U.S. is set to increase its share of ~17% of global oil production and ~23% of gas. In the 2020s, the U.S. is set to supply over 60% of new oil and gas (see Figure below).

This is according to experts at Rystad Energy, “an independent energy consulting services and business intelligence data firm” based in Norway. Rystad says the U.S. shale industry will continue to mount production even if prices drop. The reality is that oil and gas companies already have. Oil prices have been sliced in half since the triple-digits seen in mid-2014, yet U.S. crude oil production has still jumped over 50% to nearly 13 million b/d. For 2019 alone, the weekly oil rig count has plummeted 25% to 663 rigs as of Friday, yet weekly output has risen another 1.2 million b/d. Natural gas prices have fallen 17% this year and gas rigs are down 34%, yet gas U.S. output has still risen over 10%.

Pearl Harbor and the Strategy of Economic Sanctions

By George Friedman

There have been many lessons drawn from the Japanese attack on Pearl Harbor. One was that wars need not begin according to international law. Another was that attacks can be unexpected and that constant vigilance is necessary. Still another was that underestimating an enemy can be catastrophic. And yet another was that failure to understand how new technology changes the nature of war can be disastrous.

The list of lessons learned is of course longer than the list of lessons remembered, one of which is particularly germane at this moment: When imposing economic sanctions, the more powerful the sanctions, the greater the pressure on your adversary to strike back. At a time when the U.S. is shifting from the use of military force to the use of economic power, the lesson of why Pearl Harbor was attacked needs to be considered carefully.

War Plans

13 December 2019

How William Gibson Keeps His Science Fiction Real

By Joshua Rothman

Suppose you’ve been asked to write a science-fiction story. You might start by contemplating the future. You could research anticipated developments in science, technology, and society and ask how they will play out. Telepresence, mind-uploading, an aging population: an elderly couple live far from their daughter and grandchildren; one day, the pair knock on her door as robots. They’ve uploaded their minds to a cloud-based data bank and can now visit telepresently, forever. A philosophical question arises: What is a family when it never ends? A story flowers where prospective trends meet.

This method is quite common in science fiction. It’s not the one employed by William Gibson, the writer who, for four decades, has imagined the near future more convincingly than anyone else. Gibson doesn’t have a name for his method; he knows only that it isn’t about prediction. It proceeds, instead, from a deep engagement with the present. When Gibson was starting to write, in the late nineteen-seventies, he watched kids playing games in video arcades and noticed how they ducked and twisted, as though they were on the other side of the screen. The Sony Walkman had just been introduced, so he bought one; he lived in Vancouver, and when he explored the city at night, listening to Joy Division, he felt as though the music were being transmitted directly into his brain, where it could merge with his perceptions of skyscrapers and slums. His wife, Deborah, was a graduate student in linguistics who taught E.S.L. He listened to her young Japanese students talk about Vancouver as though it were a backwater; Tokyo must really be something, he thought. He remembered a weeping ambulance driver in a bar, saying, “She flatlined.” On a legal pad, Gibson tried inventing words to describe the space behind the screen; he crossed out “infospace” and “dataspace” before coming up with “cyberspace.” He didn’t know what it might be, but it sounded cool, like something a person might explore even though it was dangerous.

How the Energy World of Tomorrow Reshapes Geopolitics

By Antonia Colibasanu

To understand geopolitics we need to understand power, which in turn derives from the perception of national wealth. The way nation-states use their wealth to defend their interests helps to shape our perception of their place and their role in the world. Soil resources are among the most important elements of wealth. But it is the human being who evaluates those elements -- as such, the human resource is superior to them.

Hydrocarbons played a vital role in World War II, and the use of energy has evolved in the decades since. In order to understand the way the energy sector is perceived today, as well as the geopolitical consequences of this perception, we must understand how World War II redefined the world itself. The strategies developed by the two opposing world powers during the Cold War, inspired by the lessons of the Second World War, were based on access to energy resources and the use thereof. This is no longer the case today, although energy security remains an important part of shaping a national strategy. What has changed is the way we perceive reality today. We’re increasingly individualistic, which grows our importance as human beings and communities in defining the role of the nation-state in an increasingly “not-so-global” world. 

Energy nodes: redefining the world

How Poverty Ends

By Abhijit V. Banerjee and Esther Duflo 

For all the worries today about the explosion of inequality in rich countries, the last few decades have been remarkably good for the world’s poor. Between 1980 and 2016, the average income of the bottom 50 percent of earners nearly doubled, as this group captured 12 percent of the growth in global GDP. The number of those living on less than $1.90 a day—the World Bank’s threshold for “extreme poverty”—has dropped by more than half since 1990, from nearly two billion to around 700 million. Never before in human history have so many people been lifted out of poverty so quickly. 

There have also been massive improvements in quality of life, even for those who remain poor. Since 1990, the global maternal mortality rate has been cut in half. So has the infant mortality rate, saving the lives of more than 100 million children. Today, except in those places experiencing major social disruption, nearly all children, boys and girls alike, have access to primary education. Even deaths from HIV/AIDS, an epidemic that once seemed hopeless, peaked soon after the turn of the millennium and have been declining ever since. 

12 December 2019

Should Military Force Be Used For Ill-Defined Economic Goals?

by Donald L. Losman
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The role of economics in America’s National Security Strategy (a document mandated by Congress upon the Executive branch in the 1980s) has undergone a remarkable, yet wholly unnoticed metamorphosis. An examination is long overdue to unmask this evolution and question its validity, and particularly so with U.S. troops now maintaining oil fields in Syria.

President Trump’s strategy document has four pillars. The first is a rather traditional ‘protecting the homeland,’ with border security being a new, added point. Pillar III, ‘advancing peace through strength,’ is hardly new. And Pillar IV, ‘advancing American influence,’ is similarly traditional. Pillar II, however, ‘promoting prosperity,’ is a purely economic goal, the likes of which has not been seen in years. Further, its subtitle, “Economic Security is National Security,” is a highly dubious claim. 

Clearly, supply availabilities have always been a concern to military planners. A strong economy, however, was traditionally deemed an enabling mechanism to finance a war rather than a war goal. The concept of a defense industrial base, another enabling mechanism (and one noted in the Trump strategy), became more prominent in the U.S. in the post-World War I period and demonstrably clear after World War II because it was America’s ‘arsenal of democracy’ which had propelled the Allies to victory. But it was the Arab oil embargo of October 1973 – deemed the cause of oil shortages, inflation, and recession – that launched the economic component toward morphing into a desired goal in itself. When oil prices spiked again after the 1979 Iranian revolution, Jimmy Carter subsequently announced that any attempt to control the Persian Gulf would be addressed by all means necessary. In March 1980, the Rapid Deployment Joint Task Force, the precursor to the U.S. Central Command, was activated. 

11 December 2019

Mapping the Digital Economy in 2020


HANGZHOU – From mobile Internet to artificial intelligence, blockchain to big data, digital technologies have the potential to bring about dramatic improvements in human wellbeing. But they also pose serious risks to communities and individuals in their roles as consumers, workers, and citizens. Reaping the digital revolution’s benefits, and avoiding its pitfalls, will require us to manage an unprecedented structural transformation for which the world is woefully unprepared. 

Given the transformational effects of digitization, it may seem prudent to think through the risks before allowing new technologies to take hold. But, with digital technologies proliferating at an unprecedented rate, that may not be an option. Automobiles existed for 62 years before reaching 50 million users, and electricity took 46 years to reach that level of penetration. But mobile phones took just 12 years, and the Internet seven. The augmented-reality mobile game Pokémon GO had 50 million users after 19 days.

This is partly because, unlike industrialization, digitization is sweeping across the planet practically simultaneously; more than 60% of people in low-income countries already own a mobile phone. And, unlike the advanced economies, developing countries are adopting mobile Internet at the same time as they acquire smartphones, computers, and even electricity.

In a Season of Discontent, Are Latin American Democracies at Risk?

Eric Farnsworth
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A season of discontent has descended across Latin America, where economies have stalled, politics have become more polarized and poisonous, and millions of newly middle-class citizens have begun to wonder whether they will be able to hold on to their hard-won gains. Sparked by a stolen election here, an increase in the price of gasoline or subway fares there, people from Ecuador to Chile to Bolivia and now Colombia have spilled into the streets angry with their leaders. Where mass protests haven’t erupted—in Argentina, Brazil and Mexico—voters have instead registered their mounting frustrations against incumbents at the ballot box.

It all represents a sharp rebuke of the cozy political and economic arrangements from both the left and the right that continue to hold back the full promises of democracy in the region. Latin Americans en masse seem to be rejecting the self-dealing of their elites and demanding a better quality of life. Regrettably, this popular outcry is also an invitation for outsiders to meddle for their own purposes. ...

10 December 2019

OPEC Pricing Power Will Return Soon

by Andrew Butter

Over the past year the penny that shale-oil output growth was going down, not up, finally dropped for most commentators (1-to-7). Although EIA, IEA, OPEC and Rystad Energy are all sticking with their predictions for a 900,000 bpd or so build in shale production in 2020 (8-to-10). They say the slump in growth which started in June 2018, was because of pipeline constraints in Permian (11). But those were fixed in December 2018, yet output-growth kept going down.


Some shale operators now say they can’t make money at $55; so they are cutting-back. But in 2017 when WTI averaged $50; output-growth was 60% higher than today. How come?
In 2015, five-hundred frac-spreads, bought and paid for; some from profits, many at fire-sale; were idle; so day-rates plunged; and so, helped by multi-pads and cheap sand, shale re-booted.

In June 2019 all those spreads were working. But now, for shale to continue to grow, more are needed. Except at $55 operators can’t pay the pumpers the day-rates they need to buy new.

Killing The Golden Goose

by Minhaz Merchant

The Supreme Court’s verdict on Adjusted Gross Revenue (AGR) could potentially cripple two of the country’s three private mobile telecom operators: Vodafone India and Bharti Airtel. That would leave Indian mobile phone consumers at the mercy of Reliance Jio and the likely BSNL-MTNL merged entity. The government’s own revenues from stressed telecom operators could meanwhile plummet.

Recognising the peril, the government has announced a two-year moratorium (for 2020-21 and 2021-22) on spectrum dues. That will give Vodafone Idea and Bharti Airtel a cash flow breather of Rs. 23,920 crore and Rs. 11,746 crore respectively. With both carriers declaring humongous losses for the quarter ending September 30, 2019, to provide for the Supreme Court’s AGR order, these benefits, however, will serve only as a band-aid. 

The decision by the three principal private mobile operators to increase tariffs on December 1, 2019, is a more sustainable strategy. Every rise of Rs.10 in ARPU (average revenue per user) could increase the three operators’ cash flow from their combined base of over 900 million (90 crore) subscribers by Rs. 900 crore per month or nearly Rs. 11,000 crore annually. An Rs.20 increase in monthly ARPU will raise an additional Rs. 22,000 crore a year. Regular but modest tariff hikes in a country with the world’s lowest mobile phone tariffs could return the struggling Indian telecom industry -- sagging under a debt burden of Rs. 7,00,000 crore -- to health. 

9 December 2019

Restoring Central Banks’ Credibility


ZURICH – Recent jumps in equity prices and bond yields suggest that recession fears are receding. But the global economic expansion cannot last forever, and when the next recession comes, central banks may not be adequately prepared to respond. Enhancing central-bank credibility to bolster the effectiveness of monetary policy is thus an urgent priority.

Before the 2008 financial crisis, central bankers could rely on slashing interest rates to spur consumption, investment, and employment. But that playbook no longer works as well as it once did. One reason is elevated uncertainty, owing to globalization, societal aging, changing consumer preferences, growing income and wealth inequality, rising health-care costs, rapid technological change, and other factors. Even in the absence of recession, for many households and businesses, the future seems daunting and unpredictable.

This uncertainty will exacerbate the downturn when it comes. When uncertainty spikes, low or even negative real (inflation-adjusted) interest rates may not induce higher spending. Rather, savings may rise and investment may falter even as interest rates plunge. If governments are unwilling or unable to boost demand with fiscal policy, the result will be a prolonged and deep economic slump.

8 December 2019

Davos 1973 to Davos 2020: How the world economy has changed

As planning got underway in 1970 for the inaugural European Management Symposium in Davos, an obscure ski town in the Swiss Alps, the idea that companies should be mindful of far more than the bottom line was still fairly novel. That first version of what would become the World Economic Forum Annual Meeting helped establish the idea that businesses should serve society as a whole, and not just shareholders—a “stakeholder” concept memorialized in 1973’s Davos Manifesto.

Fast forward nearly 50 years, and the mainstreaming of stakeholder capitalism is in full swing. One example: the Business Roundtable, an organization that includes the CEOs of the biggest US companies and once defined a company’s purpose as serving shareholders, recently re-defined that purpose to include a commitment to all stakeholders. Other major shifts to occur in the past five decades include the rising influence of technology firms, the growing prominence of multinationals from the developing world, an expansion of the global talent pool, and a troubling increase in income inequality.

A social bent

The World's Top Remittance Recipients

by Niall McCarthy

According to World Bank data published earlier this year, global remittances totalled $689 billion in 2018, up from $633 billion in 2017. Of that total, $529 billion flowed into low and middle-income countries. The upsurge in remittances was driven by increasing oil prices and stronger economic conditions in the United States and it was particularly evident in South Asia where growth came to 12 percent. India has seen a steady increase in remittances in recent years and they climbed from $62.7 billion in 2016 to $65.3 billion in 2017.

Its huge diaspora helped it maintain its position last year with migrants sending a whopping $79 billion back home to India. The World Bank attributed some of that 14 percent growth to flooding in Kerala which likely prompted migrants to send more financial aid to their families. China also boasts a massive diaspora and it comes second on the list with $67 billion. The top three was rounded off by Mexico with $36 billion.

7 December 2019

Ten steps to $5 trillion: Lesson from RCEP fiasco is that India must execute bold reforms to become competitive

Gurcharan Das 

November 4, 2019 was a sad day. Prime Minister Narendra Modi decided to walk out of the Regional Comprehensive Economic Partnership (RCEP) negotiations at the eleventh-hour, admitting that India couldn’t compete with Asia, especially China. It was a big and painful decision as this is no ordinary trade agreement. Had India joined, RCEP would have become the world’s largest free trade area comprising 16 countries, half the world’s population, 40% of global trade and 35% of world’s wealth in the fastest growing area of the world.

India should have joined RCEP. The deal on offer was a reasonably good one and many of our fears had been allayed. Our farmers had been given protection from imports of agricultural products and milk (say from New Zealand). A quarter of Chinese products had been excluded, and for the rest a long period of tariffs was allowed from 5 to 25 years. The deal offered a unique safeguard from a sudden surge of imports from China to India for 60 of the most sensitive products.

If much smaller countries in Asia – Vietnam, Thailand, the Philippines, Laos, Myanmar – can compete and have joined RCEP, why can’t India? Why does it need tariff protection, normally meant for infant industries? Why are India’s companies still infants after 72 years of Independence? No nation has become prosperous without exports; open economies have consistently outperformed closed ones. The $5 trillion target cannot be achieved without exports. The lesson from this fiasco is that India must act single-mindedly and execute bold reforms to become competitive. We can still join RCEP by March 2020. Consider this period a pause to get our house in order. It’s never too late to do the right thing. Here are ten ways to make the nation competitive.

The US H-1B Visa: A Boon for High-Skilled Immigrants from India

Jacob Funk Kirkegaard 

The Trump administration’s preference for a “merit-based” immigration system over one that welcomes migrants fleeing poverty and persecution became clear in May 2019. It was then that the administration unveiled an immigration reform proposal favoring English-speaking professionals with skills to fill jobs in such fields as medicine and computer programming.

An outcry erupted after these preferences were disclosed, many critics citing the famous poem at the base of the Statue of Liberty declaring: “Give me your tired, your poor, your huddled masses, yearning to breathe free.” But the most recent US data available suggest that the policy has already been implemented for H-1B visas, a category that allows US employers to hire foreign nationals in certain job categories when it can be demonstrated that their skills cannot be found among US citizens. In an even more striking trend, the dominance of this important visa category by nationals from India has become pronounced.

Tracking this trend is complicated by an administration cutback in the available data. The annual Characteristics of H-1B Specialty Occupation Workers, which is prepared by the US Citizenship and Immigration Services (USCIS) of the US Department of Homeland Security, has not been published for the fiscal year of 2018. Instead a much less detailed USCIS Statistical Annual Report was published in early 2019, which indicates that the number of H-1B petitions processed in FY2018 fell by 2 percent from FY2017. Data on H-1B visa issuance from the US State Department support the trend. The USCIS data suggest a tightening of H-1B administrative processing procedures by the Trump administration, as the rejection rate of H-1B petitions rose to 15 percent in FY2018 from around 6 percent in 2014–17. Due to this tightening, the total number of H-1B petitions approved in FY2018 declined to 335,000, which is roughly 10 percent lower than the number of H-1B petitions approved in 2016–17 but more than the number approved in 2014–15.[1] So even if sustained, this higher level of H-1B rejections would imply only a relatively limited tightening of H-1B administrative processing procedures during the Trump administration in FY2018.

Top emitters must commit to a U-turn at COP25

Vinod Thomas

Epitomizing the disconnect between scientific warnings and human action, global temperatures are now on track to rise by an unacceptable 3.2 degrees Celsius from pre-industrial levels by 2030 while greenhouse gas emissions hit all-time highs. As the 25th session of the Conference of the Parties to the United Nations Framework Convention on Climate Change (COP25) meets in Madrid December 2-13, the big emitters need to commit to a U-turn in their emission trajectory to avert the extreme impacts that scientists project.

Leaders in the top emitting nations need to drive climate action in view of their high share in carbon emissions (Figure 1). The top 10 percent of countries (20 of them) make up 81 percent of global carbon discharges, starting with China, the United States, India, Russia, and Japan. Given the dominance of these large economies, their national policies make all the difference to whether we can expect a reversal in the carbon intensity of global economic growth. A recent U.N. report calls for a 7.6 percent a year emission decline for the next 10 years to limit temperature rise to 1.5 degrees Celsius from pre-industrial levels. Contrastingly, emissions have increased 3 percent over the past three years, led by the United States, China, and India.

To motivate far stronger steps, it would help to be convinced that the payoffs from switching to a low-carbon growth path far outweigh the costs of making the transition. The benefits of climate action include avoided damages from climate change. And there is growing evidence on the damages that can be averted by timely climate action. India, according to a World Bank estimate, could incur damages of 2.8 percent of GDP by 2050 in the current climate trajectory. A recent estimate places the loss from climate change from extreme weather events for 82 countries at 3 percent of GDP by 2050.

6 December 2019

Breaking the impasse on strategic disinvestment and privatisation

Suyash Rai

The Cabinet Committee on Economic Affairs (CCEA) has given an in-principle approval for strategic disinvestment of Bharat Petroleum Corporation Limited (BPCL), Shipping Corporation of India (SCI), and Container Corporation of India (CCI), and for sale of two power sector enterprises to National Thermal Power Corporation.

In early 2016, the government announced that it would start strategic disinvestment of central public sector enterprises (CPSEs). The CCEA had approved 28 CPSEs for this purpose. Five transactions were completed, but all these were sales of CPSEs to other CPSEs.

As Minister Anurag Thakur said in the Parliament on November 18th, strategic disinvestment is about government not continuing in business in a sector. While the outcome of the recent decision on BPCL, SCI and CCI is still to be seen, the sale of stakes of one to another CPSE cannot be called real strategic disinvestment, for it is essentially taking money from one pocket and putting it in another. Why has the government not managed even one real strategic disinvestment almost four years after the announcement?

Ties that Bind: Family, Tribe, Nation, and the Rise of Arab Individualism

Social changes around the world are having a disproportionate im­pact on Arab societies. Loyalty and obligation have played a particu­larly strong role in how Arabs relate to each other and to their rulers, and a rising individualism in the region poses challenges for family patriarchs, tribal elders, and government leaders.

NETWORKS OF TRUST are a universal phenomenon. They have been partic­ularly influential in the Arab world in part because of cultural and religious affinity but also for practical reasons: sustained security challenges, limit­ed government capacity, and limited mobility. Arabs have committed time and money—and sometimes blood— to sustain ties with family and tribe.

Arabs increasingly report that these networks no longer serve their inter­ests and are too time consuming. They live farther from extended families and work longer hours, and they seek to de­vote more time to friends and immedi­ate family. Communications and social media have also given them alternative sources of information and alternative entertainment options. Technology also gives people privacy, and individ­uals seek it much more than in the past. As Arabs feel more economically strapped, and as a sense of individual­ism grows, families and tribes become less consequential. Some people are more willing to put their faith in gov­ernment; more simply feel a need to become more self-reliant.

5 December 2019

What Kind of Capitalism Do We Want?


GENEVA – What kind of capitalism do we want? That may be the defining question of our era. If we want to sustain our economic system for future generations, we must answer it correctly.

Generally speaking, we have three models to choose from. The first is “shareholder capitalism,” embraced by most Western corporations, which holds that a corporation’s primary goal should be to maximize its profits. The second model is “state capitalism,” which entrusts the government with setting the direction of the economy, and has risen to prominence in many emerging markets, not least China.

But, compared to these two options, the third has the most to recommend it. “Stakeholder capitalism,” a model I first proposed a half-century ago, positions private corporations as trustees of society, and is clearly the best response to today’s social and environmental challenges.1

Shareholder capitalism, currently the dominant model, first gained ground in the United States in the 1970s, and expanded its influence globally in the following decades. Its rise was not without merit. During its heyday, hundreds of millions of people around the world prospered, as profit-seeking companies unlocked new markets and created new jobs.

4 December 2019

New Oil Finds Could Mean a Tripling of Guyana’s GDP

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This year, ExxonMobil announced its 11th and 12th oil finds in the small South American country of Guyana. The estimates of recoverable crude in the country now stand at roughly 5 billion barrels. On a per capita basis, this would put Guyana among the top 10 oil producers in the world. Whether the people of Guyana see much benefit from the windfall could have much to say about the fate of the oil industry, which is facing an uncertain future during an ongoing energy transition.

The response to the discoveries in Guyana has varied. Amy Myers Jaffe, the director of the energy security and climate change program at the Council on Foreign Relations, captured the view of those concerned about the much-studied resource curse. “There is no way the explosion of money will be managed properly,” she said. Responsible stewardship is indeed hard to imagine. Guyana is a country of about 780,000, and it could produce the same number of barrels of oil per day. At a price of $50 per barrel, that means a total revenue of close to $15 billion per year within the next decade—a staggering sum that other nascent oil nations have struggled to absorb effectively.