April 23, 2013,
18:05 |
Tags: biofuels, China, ethanol, Germany, Japan, renewables, solar, USA, wind
The latest survey of global renewable-energy investment by the Pew Charitable Trusts, a non-profit organisation, paints a relatively sorry picture. Last year, funds devoted to solar plants, wind farms and the like in G-20 industrialised countries fell by 11%. Subsidy cuts in places like Spain and Germany contributed to the decline in investment in wind and solar projects (by 15% and 13%, respectively). Biofuels saw the most dramatic decline, attracting 46% less investment than in 2011 (see our article on the troubles of US maize-ethanol makers).
Renewables have been weaned on government-provided goodies. But clean-tech firms are speeding towards the day when they must flourish on their own—or run out of luck, like China’s once-supreme solar firm, Suntech. China nonetheless offers clean-tech investors more than a splash of consolation. Despite the lull in investment, global renewable-energy capacity still managed to grow by a record 88 gigawatts (GW) in 2012—thanks more than anything to Beijing’s supportive policies. China both topped the 2012 investment charts and added a world-beating 23GW in renewable capacity during the year. Its firms also brighten the global scene by making cheap clean-tech gear, helping investors’ scarcer resources spread further.
China’s methods inspire gripes about unfair competition and punitive trade tariffs. But remove China from the global renewables picture and the industry scene starts to look like a stodgy old European oil painting rather than an upbeat piece of Chinese modern art.
The EIU's Energy Briefing provides forecasts to 2020 and daily news analysis for the world's most important energy markets, along with a database developed in association with the International Energy Agency.
A data release from the US Energy Information Administration (EIA) prompted headlines this week declaring that China had displaced the US as the world’s top oil importer. The background: US imports are tumbling as, on the supply side, it produces more (shale) oil of its own while, on the demand side, the economy runs at half throttle. Meanwhile, Chinese growth is spurring domestic oil demand. The resulting switch in import positions is “a generational shift that will shake up the geopolitics of natural resources”, reports the Financial Times. But the small print reveals some big caveats.
To begin with, the imports in question are net (total imports minus total exports), and not just of crude oil: petroleum products (kerosene, naptha and the like) are also included. Confusingly, though, much of the reporting speaks simply of “oil imports”. Moreover, China’s anointment as the biggest oil importer is based on only one month’s data (December, the month when Chinese refined-product imports tend to peak). Over the whole of 2012 the US bought 7.1m barrels/day of crude and products—net—whereas China purchased 5.7m b/d. When it comes to absolute imports of crude oil alone, the US (8.5m b/d) leads China (5.4m b/d) by an even greater distance, although the gap is closing (see chart).
None of this is to argue that the day—or rather year—when China truly overtakes the US as a net importer of oil and related products will not come. Unless the US shale-oil boom fizzles, for instance, or China replicates it, the “generational shift” is only a matter of time. It just hasn’t happened quite yet.
The EIU's Energy Briefing provides forecasts to 2020 and daily news analysis for the world's most important energy markets, along with a database developed in association with the International Energy Agency.
The American auto industry owes a lot to the Baby Boom generation. Born between 1946 and 1964, this group’s penchant for driving more—and more often—than other groups fuelled a long boom in car sales.
However, a new report by the American Association of Retired Persons (AARP), using data collated by the US Department of Transportation and the Bureau of Transportation Statistics, suggests that the historic pattern of year-on-year growth in vehicle miles driven by Baby Boomers is shifting. The study suggests a decline in overall travel rates and an increase in public transit trips per person. In fact, the AARP’s analysis suggests that vehicle use has been falling since 1995, well before a decline due simply to ageing should be expected.
Some of this is attributed to high petrol prices and unemployment. Technological changes, like online shopping and the increase in home-office use, are also factors. The rapid growth of cities in relation to rural areas provides yet another explanation. Together, this supports the increasingly popular theory of “peak car”, which suggests that car ownership and driving distances are reaching saturation point in developed countries.
Not only are car-mad Baby Boomers showing a waning appetite for car use; younger generations appear ambivalent at best about vehicle ownership. Although recent results have given US carmakers reason to cheer, daunting demographic challenges still loom over their longer-term fortunes.
The EIU's Automotive Briefing offers insights on the world’s biggest automotive markets, combining five-year forecasts with analysis of market demand, market share, market segmentation and environmental issues.
Things change quickly in the retail sector, especially in China. Over the next five years, the Chinese market will roughly double in size, overtaking the US—the current market leader—for the first time. By 2022, China’s retail market will grow to twice the size of the US. These and other retail forecasts are featured in a new report from the Economist Intelligence Unit, Retail 2022 (free registration required).
China already overtook the US as the world’s largest food and grocery market this year. Future expansion will be fuelled by the country’s swift GDP growth. In 2002 China’s nominal GDP was less than 15% of the US; it now stands at 52% of American GDP. We expect the nominal size of China’s economy (in dollar terms) to surpass the US by 2022.
The combination of economic growth and urbanisation is fuelling China’s rapid retail expansion, and not just in first-tier cities such as Shanghai and Beijing. Rising wages and government-driven efforts to boost consumer spending will see the share of inland urbanites earning over Rmb30,000 (US$4,805) per year in places such as Xi’an and the Chang-Zhu-Tan city cluster roughly double between 2012 and 2022. Given this outlook for China’s burgeoning urban middle-class shoppers, it’s easy to see why many retailers are redoubling efforts to build a presence in the country.
The EIU's Consumer Goods Briefing assesses the consumer goods and retail industry in the world's biggest markets. It leverages the expertise of EIU analysts and data from Planet Retail to offer five-year forecasts for a range of sub-sectors.
Shale gas, you might think, is old hat. As a topic of conversation, the “revolution” in US natural gas production—in which innovative techniques including hydraulic fracturing (“fracking”) have opened up hundreds of trillions of cubic feet of reserves—is being overtaken by developments surrounding shale oil. With US gas prices languishing, investment is flooding away from “dry”, gas-dominated shale plays into “wet”, oil-rich ones. Burgeoning oil output from the Bakken shale in particular, as well as new supplies of natural-gas liquids (NGLs), hold out the promise of US oil self-sufficiency. At least, so some people appear to think.
In a new report on North America’s oil and gas boom, we argue that dreams of US oil self-sufficiency, let alone energy independence, are overblown. Oil is a global good. The availability and price of American oil is determined by the interplay of far-flung factors—from Nigeria’s supply to Norway’s demand. Even the miracles of fracking cannot obscure economic reality.
This is not to deny, however, that shale oil is having a big impact. US oil output is growing quickly, and will continue to make large strides. Despite gluts and transport bottlenecks, Canadian tar-sands output is also flowing fast. Somewhat puzzlingly, given low gas prices, the shale-gas bonanza rolls on. This is fuelling a new race, in both the US and Canada, to launch shale-gas exports in the form of liquefied natural gas (LNG).
Our report, Independence Day: A special report on North America’s oil and gas boom, is available for download (free registration required) at www.eiu.com/oilgasnorthamerica.
The EIU's Energy Briefing provides forecasts to 2020 and daily news analysis for the world's most important energy markets, along with a database developed in association with the International Energy Agency.
The US oil market has been changing quietly over the last half-decade or so. In 2005, US oil consumption peaked at 20.8m barrels/day (b/d), with the use of motor gasoline contributing nearly half of the total. Since then, each new year saw demand drop. According to the US Energy Information Administration, oil consumption dropped to 18.87m b/d in 2011 (a fall of 9% since 2005), and is forecast to only rise slightly to 19.01m b/d by 2013. Gasoline demand is now in the doldrums at just below 9m b/d, having peaked in 2007 at 9.29m b/d.
Why is this the case? Fuel prices have risen, sales of light trucks have slowed, and tighter fuel economy standards have been introduced. The recent recession also led Americans to drive and fly less than they were previously accustomed to. Demand for residual fuel oil, used for power generation and by heavy industry, is also slipping. Now, refineries are exporting oil products, especially gasoline and distillates (heating oil and diesel), to Latin America, where demand for oil products is growing.
Meanwhile, the Obama administration is discouraging a revival in transport fuel demand as part of its strategy to reduce oil consumption, and thus imports. Last year, the president announced an agreement with automakers to boost fuel economy to 54.5 miles per gallon (mpg) for cars and light-duty trucks by the 2025 model year, building on a previous agreement to increase fuel economy to 35.5 mpg, from 27.5 mpg, by 2016.
Until a few years ago, it seemed that the US’s love affair with petroleum would lead it down an irreversible path of increased dependency on oil imports. Now, signs suggest that Americans may be falling out of love with petroleum.
The EIU's Energy Briefing provides forecasts to 2020 and daily news analysis for the world's most important energy markets, along with a database developed in association with the International Energy Agency.
Business loans in the US are growing at their fastest rate for three years. Although encouraging, recent data needs to be considered in context.
After nearly two years of decline, November marked the ninth consecutive year-on-year rise in commercial and industrial loans. Lending growth in the third quarter, at a seasonally adjusted annual rate of almost 10%, registered the highest rate since the same quarter in 2008.
Still, the absolute level of business loans is 18% lower than its high in late 2008. And the ratio of banks’ cash holdings to loans remains well above pre-crisis levels. The last time we looked at this ratio, in January, American banks appeared to be opening the taps; the cash-to-loans ratio only briefly tipped above 100% before falling back.
Since then, as the euro debt crisis worsened and volatility reigned, lenders hoarded cash more enthusiastically than ever before. Although credit conditions may be easing, banks are hardly lending freely; lenders are setting aside US$1.16 in cash for every US$1 in business loans. This is down from an all-time high of more than US$1.50 in the summer, but hardly a sign of generosity on the part of loan officers.
The EIU's Financial Services Briefing delivers a complete picture of the finance industry in markets around the world, combined with five-year forecasts of key sub-sectors.
In 2009 and 2010, US crude oil production registered two consecutive years of growth for the first time since 1984 and 1985. Output from deepwater Gulf of Mexico fields remains important, but more recently the rapid growth in oil-bearing shale plays is what’s really moving the dial. High oil prices, new shale discoveries and enhanced recovery techniques will contribute to further rises in US oil production over the next 25 years, according to the US Energy Information Administration.
The so-called shale gas revolution garners most of the headlines, but liquids-rich shale plays are also contributing to the boost in US oil production. Take the Bakken shale. North Dakota, where most of the horizontal drilling and hydraulic fracturing activity in the Bakken takes place, now produces more than 400,000 barrels per day (b/d), more than four times the state’s output at the start of the century.
North Dakota is now the fourth-largest oil-producing state in the US, behind Texas, Alaska and California. In its optimistic case, North Dakota’s department of mineral resources reckons that production of some 800,000 b/d, or around 80% of what the US currently imports from Saudi Arabia, is achievable. Although not nearly enough for the US to declare energy independence, it is yet another example of the ongoing transformation of America’s energy supplies.
The EIU's Energy Briefing provides forecasts to 2020 and daily news analysis for the world's most important energy markets, along with a database developed in association with the International Energy Agency.
In a day of extraordinary action in the markets, perhaps the most noteworthy move yesterday was a 20% plunge in the share price of Bank of America. Despite rallying today, the bank, America’s largest by assets, has seen its shares lose around 30% of their value so far this month (and nearly 50% so far this year).
Bank of America now trades at a wince-inducing 32% of its book value. This puts it at the bottom of the price-to-book league table for domestic banks. But there are banks in Europe that trade at similar discounts; many of these remain part-nationalised (RBS, Dexia) or face severe sovereign-related stress (UniCredit, Alpha Bank). For Bank of America, a major mortgage lender, this is is not the best neighbourhood to be in.
The EIU's Financial Services Briefing delivers a complete picture of the finance industry in markets around the world, combined with five-year forecasts of key sub-sectors.
After a brief growth spurt, bank lending in the US shrank in April and May, according to the latest data from the Federal Reserve. As Bloomberg points out, banks’ appetite for government bonds has remained relatively robust since the onset of the financial crisis. American banks now hold almost US$1.7trn in treasuries and related government debt, with holdings growing by an 11-12% annual clip so far this year, despite miserly yields.
The situation at Japanese banks looks eerily similar. Funds are being recycled into government bonds instead of loans, with year-on-year credit in a seemingly permanent state of contraction. The Economist Intelligence Unit does not expect America to experience a protracted slump like the one that has dogged Japan since its spectacular asset-price bubble burst in early 1990s. Still, there are enough similarities in some metrics to cause discomfort.
Encouragingly, deposits at American and Japanese banks are at or near record highs. This will please regulators, who are urging banks to avoid flightier wholesale sources of funding. But until these funds are put to more productive use than stockpiling low-yielding government bonds, nobody will be truly happy.
The EIU's Financial Services Briefing delivers a complete picture of the finance industry in markets around the world, combined with five-year forecasts of key sub-sectors.
