Global Wholesale Energy Prices Presented by: John Heffernan
Energy in 2012 In 2012, the growth in Energy consumption slowed in 2012 90% of this growth came from China & India Consumption & production of oil, gas and coal reached record levels One of the most notable features in 2012 has been the American Shale Revolution The world s leading fuel at 33% of consumption: oil In consumption terms, the fast growing fossil fuel is: Coal China s share of global coal consumption 50.2% The only fossil fuel to see an acceleration in consumption: gas In 2012, global nuclear power output has the largest decline ever (Japanese output fell 89%) Share of global power generation met by renewable: 4.7%
Long-term Trends Source: The US National Bureau of Economic Research
Super-cycles Source: The US National Bureau of Economic Research
Super-cycles cycles so so where are we? Super-cycles are linked to historical episodes of mass industrialization and urbanisation Oil started to demonstrate above-trend real price movements in 1996. So we are in a super-cycle Typically, these peak between 10 20 years (2006 2016) Any clues in the BP report? -1.3% decline on OECD oil consumption +1 million b/d..growth of US oil production, the largest in the world & oil production growth > oil consumption growth Outside the OECD consumption grew led by China Supported by the World Bank
Growing Oil Supply & Demand in 2012 SUPPLY DEMAND OPEC Iran -.680m Libya +1m Saudi Arabia UAE Qatar Iraq Kuwait +1.1m -.53m OECD 1.42 Million Non-OPEC USA +1m South Sudan -.34m Syria -.16m.5 Million TOTAL 1.92 Million China +.47m Japan +.25m Other +.7m.89 Million Non-OPE EC
The World s Top Oil Producers: 65% in the hands of 10 Countries
Supply - The Middle East One Barrel represents 1 million barrels of oil produced per day 8
US: The Great Reversal ersal Central Banks have injected $12 trillion of cash but with the US recovering is the era of cheap money over? Possible Implications: A stronger $ & reduced Non-OECD Demand Sell off in emerging bonds, equities & weaker currencies ($4 trillion pushed in emerging economies) Affecting those economies that benefited from cheap foreign credit & a dear currency India, Indonesia, Malaysia, Peru, the Philippines & Thailand have faced dramatic currency depreciation versus the US dollar Another Asian financial crisis? Will China s economic growth continue?
Implications for the Shale Oil Boom in the US US oil output up by 40% since 2008 The US is less reliant on imports and OPEC cutbacks or inventory builds The could lead to a rise in OPEC s spare capacity cushion Could the shale oil revolution go global? Benefits beyond supply: Cheaper energy for consumers & industry Lower feedstock costs for the petrochemical and other industries Increase tax take Jobs
Co-movement (Oil & Gas)
Trends in Wholesale Gas Prices
Trends in Wholesale Gas Prices Unit: Bcm 2010 2012 2013 Supply 97.27 74.18 75.52 Indigenous 60.13 62% 40.72 55% 40.74 55% Imports Algeria 1.2 1% 0.13 0% 0 0% Continent 7.89 8% 7.1 10% 6.85 9% Norway 26.06 27% 26.43 36% 25.03 34% Russia 0 0% 0.07 0% 3.61 5% Other LNG 16.31 17% 12.59 17% 9.73 13% Export -14.32-15% -12.88-17% -10.45-14% Future Sources of Supply? Increased Russian production Importing gas from the US Exploiting unconventional gas in the UK
Europe is at a disadvantage Struggling to compete with the rest of the world because of the disparity in energy costs: 2005-2012 US Europe Industrial Gas Prices -66% +35% Industrial Power Prices -4% +38% EU President we have no major game changer on the horizon EU Commission President the landscape is changing, and not in Europe s favour Solutions: Energy efficiency Complete the internal market Tap all resources Europe to become a free-trade-agreement partner
Average Wholesale Electricity Price MWh Elec Price Gas Spark Carbon 2009 43.46 46 24.30 14.12 12 5.04 2010 53.84 34.29 14.14 5.41 2011 61.72 45.20 11.56 4.96 2012 63.38 51.03 9.61 2.74 2013 69.45 58.35 9.48 1.62 May-13 61.85 53.91 6.63 1.31
Wholesale Price per half-hour hour DEMAND Cheapest Power Plant -3 Wholesale Price Cheapest Power Plant -2 Cheapest Power Plant -1 Cheapest Power Plant WIND
Sparks Wholesale price is enough to cover: S t MWh Wh l l P i Gas Carbon The rest = Spark Sept MWh Wholesale Price Irish Spark 7.74 61.82 CCGT Breakeven 54.08 UK - 0.25 53.83 Dutch - 4.73 49.35 German - 17.63 36.45 France - 17.78 78 36.3030