Presentation is loading. Please wait.

Presentation is loading. Please wait.

Mountains & Minds The Economics of the Energy Market Dr. Myles Watts Department of Ag. Econ. & Econ. Montana State University and April 2012 1.

Similar presentations


Presentation on theme: "Mountains & Minds The Economics of the Energy Market Dr. Myles Watts Department of Ag. Econ. & Econ. Montana State University and April 2012 1."— Presentation transcript:

1 Mountains & Minds The Economics of the Energy Market Dr. Myles Watts Department of Ag. Econ. & Econ. Montana State University and April

2 Energy Market Discussion Energy Facts Quiz Domestic Energy Flow and Use Oil and Gasoline Prices 2

3 Energy Facts Quiz List in order of magnitude: 1.The U.S. energy sources Coal, Natural Gas, Nuclear, Petroleum, Renewable 2.France’s energy sources Coal, Natural Gas, Nuclear, Petroleum, Renewable 3.The U.S. energy uses Commercial, Industrial, Residential, Transportation 3

4 Energy Facts Quiz List in order of magnitude (cont.): 4.The top three oil producing nations 5.The top six nations that produce oil consumed in the United States 4

5 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 Statistics 5

6 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 Statistics 6

7 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 Statistics 7

8 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 Statistics 8

9 Energy Facts Answers 5.The top six nations that produce oil consumed in the United States Source1 M Barrels (2010)Percentage Total Imports & Domestic5, Domestic Crude Production1,99837 Total Crude Imports3,36363 Canada71913 Mexico4218 Saudi Arabia3957 Nigeria3597 Venezuela3336 U.S. Energy Information Administration (www.eia.gov) Energy and International Energy Statisticswww.eia.gov 9

10 Energy Flow 2010 U.S. EIA Annual Energy Report 2010 Figure 1 (see report for footnotes) 10

11 Oil and Gasoline Prices Historical Energy Prices Montana Oil Production Exchange Rates World Income U.S. Refinery Capacity 11

12 U.S. Energy Consumption by Source and Sector 2011 (quadrillion Btu) U.S. EIA Annual Energy Report 2010 Figure 2 (See report for footnotes) 12

13 Crude Oil Prices Since 1861 U.S. EIA: BPCrudeOilPrices.xls, Cushing OK WTI Spot Price FOB, Inflation Data BLS and Minneapolis Federal Reserve Russian oil exports began Fears of shortage in US Yom Kippur war Discovery of Spindletop, Texas Growth of Venezuelan production Suez crisis Loss of Iranian supplies Post-war reconstructio n Netback pricing introduced Asian financial crisis Invasio n of Iraq Sumatra production began Pennsylvanian Oil Boom Iraq invaded Kuwait Iranian revolution East Texas field discovered CRUDE OIL PRICES 1861 – 2011 (US dollars/barrel) US Average Arabian Light posted at Ras Tanura OK WTI Spot Price FOB

14 Proven Oil Reserves (%) 1028 Billion Barrels U.S. Energy Information Administration (www.eia.gov), International Energy Statistics 997 Billion Barrels 1469 Billion Barrels 14

15 Reserves at End 2011 Total 1469 Billion Barrels U.S. Energy Information Administration (www.eia.gov), International Energy Statistics and Annual Energy Outlook 2011

16 Oil Reserves-to-Production (R/P) Ratios U.S. Energy Information Administration (www.eia.gov), International Energy Statistics and Annual Energy Outlook

17 Capitol Commodity Services: 17

18 Gasoline Prices Since 1919 Dollars per Gallon U.S. EIA Motor Gasoline Regular Grade Retail Prices (Annual) 18

19 Recent Gas & Diesel Prices U.S. EIA Petroleum and Other Liquids Pricing 19

20 Montana Crude First Purchase Price U.S. EIA Petroleum and Other Liquids Pricing BLS CPI 20

21 Exchange Rates Barrels-Millions (2010) Percentage Total Crude Imports3, Canada71921 Mexico42113 Saudi Arabia39512 Nigeria35911 Venezuela33310 Most crude oil purchased elsewhere: U.S. Energy Information Administration (www.eia.gov) Energy and International Energy Statisticswww.eia.gov 21

22 Financial Influences (Inflation and Exchange Rates) Date U.S. Gasoline Price ($) Inflation (CPI) Exchange Rate (Euro) Annual Avg Annual Avg Annual Avg Annual Avg Annual Avg Annual Avg U.S. EIA Petroleum and Other Liquids Pricing, BLS CPI, Federal Reserve Exchange Rates 22

23 Intervals 1/31/99- 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 Change30.7%-10.1%143.3%-27.9%50.2% Financial Influences Inflation3.6%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% 23 NOTE: 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

24 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

25 U.S. Personal Real Income Bureau of Economic Analysis National Income and Accounts Tables BLS CPI All Urban Consumers 25

26 World GDP: Historical Trend World Bank National Accounts Data 26

27 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 Capacity to Income Ratio , , , , , , U.S. Energy Information Administration U.S. Refinery Utilization and Capacity 27

28 Montana Oil Production U.S. Energy Information Administration Montana Crude Oils First Purchase Price and Field Production 28

29 Montana Oil Production Forecast Q t = Oil Production (1000 barrels) in year t P = Price of Oil (2011$/barrel) Q t = 1.9P.087 Q t Q t R 2 =.96Price Elasticity = 9% (Estimated in Logs) Data: EIA Annual MT Crude First Purchase Price, 1983 to 2011 Estimated by Doug Young 29

30 Mountains & Minds QUESTIONS 30


Download ppt "Mountains & Minds The Economics of the Energy Market Dr. Myles Watts Department of Ag. Econ. & Econ. Montana State University and April 2012 1."

Similar presentations


Ads by Google