Mountains & Minds The Economics of the Energy Market Dr. Myles Watts Department of Ag. Econ. & Econ....
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Transcript of Mountains & Minds The Economics of the Energy Market Dr. Myles Watts Department of Ag. Econ. & Econ....
Mountains & Minds
The Economics of the Energy Market
Dr. Myles WattsDepartment of Ag. Econ. & Econ.
Montana State Universityand
April 20121
Energy Market Discussion
• Energy Facts Quiz
• Domestic Energy Flow and Use
• Oil and Gasoline Prices
2
Energy Facts Quiz
• List in order of magnitude:1. The U.S. energy sources
Coal, Natural Gas, Nuclear, Petroleum, Renewable
2. France’s energy sourcesCoal, Natural Gas, Nuclear, Petroleum, Renewable
3. The U.S. energy usesCommercial, Industrial, Residential, Transportation
3
Energy Facts Quiz
• List in order of magnitude (cont.):
4. The top three oil producing nations5. The top six nations that produce oil
consumed in the United States
4
Energy Facts Answers
1. The U.S. energy sources(Coal, Natural Gas, Nuclear, Petroleum, Renewable).
•Petroleum (includes Crude Oil) – 41.5%•Natural Gas – 22.1%•Coal – 22.08%•Nuclear – 8.4%•Renewable – 8.0%
U.S. Energy Information Administration (www.eia.gov), Energy Statistics5
Energy Facts Answers
2. France’s energy sources (2008) (Coal, Natural Gas, Nuclear, Petroleum, Renewable)
•Nuclear – 39%•Petroleum – 36%•Natural Gas – 17%•Renewable – 7%•Coal – 4%
U.S. Energy Information Administration (www.eia.gov), International Energy Statistics6
Energy Facts Answers
3. The U.S. energy uses (Commercial, Industrial, Residential, Transportation)
• Industrial – 30.14%• Transportation – 27.51%• Residential – 22.51%• Commercial – 18.21%
U.S. Energy Information Administration (www.eia.gov), Energy and International Energy Statistics7
Energy Facts Answers
4. The top three oil producing nations
(in order of magnitude)
•Saudi Arabia•Russia•United States
U.S. Energy Information Administration (www.eia.gov), Energy and International Energy Statistics8
Energy Facts Answers5. The top six nations that produce oil
consumed in the United States
Source 1 M Barrels (2010) Percentage
Total Imports & Domestic 5,361 100
Domestic Crude Production 1,998 37
Total Crude Imports 3,363 63
Canada 719 13
Mexico 421 8
Saudi Arabia 395 7
Nigeria 359 7
Venezuela 333 6
U.S. Energy Information Administration (www.eia.gov) Energy and International Energy Statistics9
Energy Flow 2010
U.S. EIA Annual Energy Report 2010 Figure 1 (see report for footnotes)
10
Oil and Gasoline Prices
• Historical Energy Prices
• Montana Oil Production
• Exchange Rates
• World Income
• U.S. Refinery Capacity
11
U.S. Energy Consumptionby Source and Sector 2011 (quadrillion Btu)
U.S. EIA Annual Energy Report 2010 Figure 2 (See report for footnotes)12
Crude Oil Prices Since 1861
U.S. EIA: BPCrudeOilPrices.xls, Cushing OK WTI Spot Price FOB, Inflation Data BLS and Minneapolis Federal Reserve
Russianoil exports began
Fears of shortage in US Yom Kippur
warDiscovery of Spindletop,Texas
Growth of Venezuelan production
Suez crisis
Loss of Iranian suppliesPost-war
reconstruction
Netback pricing introduced
Asian financial crisis
Invasion of Iraq
Sumatraproduction
began
PennsylvanianOil Boom
Iraq invaded Kuwait
Iranian revolution
East Texas field discovered
CRUDE OIL PRICES 1861 – 2011 (US dollars/barrel)1861-1944 US Average1945-1985 Arabian Light posted at Ras Tanura1986-2011 OK WTI Spot Price FOB
Proven Oil Reserves (%)
1028Billion Barrels
U.S. Energy Information Administration (www.eia.gov), International Energy Statistics
997Billion Barrels
1469Billion Barrels
14
Reserves at End 2011Total 1469 Billion Barrels
U.S. Energy Information Administration (www.eia.gov), International Energy Statistics and Annual Energy Outlook 2011
Oil Reserves-to-Production (R/P) Ratios
U.S. Energy Information Administration (www.eia.gov), International Energy Statistics and Annual Energy Outlook 2011
16
Capitol Commodity Services: www.ccstrade.com17
Gasoline Prices Since 1919Dollars per Gallon
U.S. EIA Motor Gasoline Regular Grade Retail Prices (Annual)
18
Recent Gas & Diesel Prices
U.S. EIA Petroleum and Other Liquids Pricing19
Montana Crude First Purchase Price
U.S. EIA Petroleum and Other Liquids Pricing BLS CPI
$0
$20
$40
$60
$80
$100
$120
$140
Do
llars
pe
r B
arr
el
Nominal Dollars 2011 Dollars
20
Exchange Rates
Barrels-Millions (2010)
Percentage
Total Crude Imports 3,363 100
Canada 719 21
Mexico 421 13
Saudi Arabia 395 12
Nigeria 359 11
Venezuela 333 10
• Most crude oil purchased elsewhere:
U.S. Energy Information Administration (www.eia.gov) Energy and International Energy Statistics
21
Financial Influences(Inflation and Exchange Rates)
DateU.S. Gasoline
Price ($)Inflation
(CPI)Exchange
Rate (Euro)
Annual Avg 1999 1.14 166 1.06
Annual Avg 2000 1.49 172 0.92
Annual Avg 2002 1.34 179 0.94
Annual Avg 2008 3.26 215 1.47
Annual Avg 2009 2.35 214 1.39
Annual Avg 2011 3.53 225 1.39U.S. EIA Petroleum and Other Liquids Pricing, BLS CPI, Federal Reserve Exchange Rates
22
Intervals1/31/99-1/31/00
1/31/00- 1/31/02
1/31/02- 1/31/08
1/31/08-1/31/09
1/31/09-1/31/11
Total Price Change 30.7% -10.1% 143.3% -27.9% 50.2%
Financial Influences
Inflation 3.6% 4.1% 20.1% -0.5% 5.1%
Exchange Rate -13.2% 2.2% 56.4% -5.4% 0%
Total -9.6% 6.3% 76.5% -5.9% 5.1%
Price Change Net of Financial Influences
40.3% 16.4% 66.8% 22.0% 45.1%
23NOTE: Subject to “Fallacy of Composition” criticism.
Financial Influences(Inflation and Exchange Rates)
U.S. EIA Petroleum and Other Liquids Pricing, BLS CPI, Federal Reserve Exchange Rates
World Income
• China’s personal income has been increasing at about 10% per year (real) for nearly two decades.
• U.S. personal income has also increased substantially.
• Personal income and GDP worldwide continues to increase.
24
U.S. Personal Real Income
Bureau of Economic Analysis National Income and Accounts Tables BLS CPI All Urban Consumers
25
World GDP: Historical Trend
World Bank National Accounts Data
26
U.S. Refinery Capacity
• No new refineries built in the United States since 1978
• Some expansion in U.S. refinery capacity
U.S. Refinery Capacity
(1000 barrels/day)
Utilization (%)
U.S. Personal Income
(Billions 2012$)
Refine Capacityto Income Ratio
1990 15,623 87.1 8,341 1.87
2000 16,525 92.6 11,181 1.48
2010 17,575 86.4 12,764 1.38U.S. Energy Information Administration U.S. Refinery Utilization and Capacity
27
Montana Oil Production1981 - 2011
U.S. Energy Information Administration Montana Crude Oils First Purchase Price and Field Production28
Montana Oil Production Forecast
Qt = Oil Production (1000 barrels) in year tP = Price of Oil (2011$/barrel)
Qt = 1.9P.087Qt-11.48Qt-2
-.704
R2 = .96 Price Elasticity = 9%
(Estimated in Logs)
Data: EIA Annual MT Crude First Purchase Price, 1983 to 2011Estimated by Doug Young
29
Mountains & Minds
QUESTIONS
30