Financial Issues Affecting Energy Security
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Financial Issues Affecting Energy Security
Gail E. Tverberg – Oct. 26, 2012 – AES 2012
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World GDP, Oil Consumption, and Energy Consumption move in tandem, downward
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Oil supply recently growing slowly, price high
Based on data from BP’s 2012 Statistical Review of World Energy.
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Issue is one of slowing growth in oil supply
Based on BP’s 2012 Statistical Review of World Energy data
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Impact on consumption is very different, for different parts of the world
Based on BP’s 2012 Statistical Review of World Energy data
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Basic Issues – Countries without subsidies1. High oil prices -> reduced discretionary
spending-> layoffs and recession2. Government tax revenue lower +
Government entitlement payments higher = Government in trouble
3. Interest rates rise -> Past debt unaffordable
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Countries with declining oil consumption at risk for recession Most at risk
Oil importing countries
High oil consumption/ total energy
Can’t regulate own currency
Debt from previous high growth
Eventually hits lower risk countries, too
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Energy security risk example: Greece Tourism biggest industry – oil dependent Lots of previous debt-based growth
Now: Rising unemployment; multinational companies leaving; taxes not sufficient to pay for entitlements
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Other European countries with bailouts have similar pattern
Based on data of EIA and BP’s 2012 Statistical Review of World Energy
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Egypt: Oil exporter becoming importer Food prices rise with oil prices Funds for food subsidies dries up Political instability
Based on BP’s 2012 Statistical Review of World Energy
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India: Rapid growth, energy supply not able to keep up Oil supply barely rising since 2005 Amount used keeps growing
Very difficult to keep up diesel subsidies Growing gap puts pressure on rupee
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India: Coal supply also a problem Coal used in electricity production Supply not keeping up with demand; imports
expensive
Imbalance looks likely to get worse At some point, cuts back on electricity
availability
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Basic issue is that people and governments become poorer More unemployed Economic growth slows down Governments have big gap between income
and outgo Harder to pay subsidies Harder to pay “entitlements” (unemployment
insurance, etc.) More prone to big changes
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Particulars of today’s problems Greece
Financial problems in electricity and natural gas sectors High solar feed in costs a problem Customers applied for low rates, or can’t pay rates Sell off assets to outsiders (Portugal – Chinese)
Fuel changes Slashed feed-in tariffs on solar, not approving new
permits Moving toward lignite for electricity production
General problems More electricity theft More copper wire theft Petroleum fuel smuggling, adulteration, and cheating
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Particulars of today’s problems (cont.) Civil unrest
Egypt, Greece, etc. Could lead to damage to energy structures Nuclear a particular concern
Dissolution of alliances Euro breakup under discussion Catalonia wants independence from Spain
Declining world trade