plunging crude prices: impact on u.s. and state economies · 2018-01-26 · • the u.s. benefits...
TRANSCRIPT
Federal Reserve Bank of Dallas
Plunging Crude Prices: Impact on U.S. and State Economies
Mine YücelFederal Reserve Bank of Dallas
March 25, 2015
Federal Reserve Bank of Dallas
Oil and gas prices plunge
0
20
40
60
80
100
120
140
160
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Nominal price, $, weekly
Oil Price
Natural Gas Price * $47.69
$2.75
* Henry Hub Price x10Source: Energy Information Administration; Wall Street Journal.
Federal Reserve Bank of Dallas
World Oil Consumption Growth(year-over-year)
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
2013 2014
OECDNon-OECD AsiaFSU and Eastern EuropeOther
Source: Energy Information Administration.
Million barrels per day
Federal Reserve Bank of Dallas
World Oil Consumption Growth(Year-over-year)
0
1
2
3
4
Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014
World oil consumption growth
Source: Energy Information Administration.
Million barrels per day
Federal Reserve Bank of Dallas
World Consumption and Non-OPEC Production Growth
(Year-over-year)
0
1
2
3
4
Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014
World oil consumption growth
Non-OPEC production growth
Source: Energy Information Administration.
Million barrels per day
Federal Reserve Bank of Dallas
World Oil Consumption and Production Growth(Year-over-year)
-2
-1
0
1
2
3
4
Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014
World oil consumption growth
Non-OPEC production growth
OPEC production growth
Source: Energy Information Administration.
Million barrels per day
Federal Reserve Bank of Dallas
Iraq and Libya Production Up Since June
Source: International Energy Agency.
-0.2
-0.1
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14
Libya
Iraq
Million barrels per day change since June
Federal Reserve Bank of Dallas
Demand/Supply Balance and Oil Prices
-30
-25
-20
-15
-10
-5
0
5
10
15
20
-2
-1
0
1
2
3
4
Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014
World oil consumption growthNon-OPEC production growthOPEC production growthChange in WTI price (right axis)
Source: Energy Information Administration.
Million barrels per day Dollars per barrel
Federal Reserve Bank of Dallas
Energy prices fall more than other commodities
40
50
60
70
80
90
100
110
Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15
All Non-Energy
Industrial Metals
Energy
Sources: S&P; Bloomberg.
GSCI Index, Sept 2, 2014 = 100
Federal Reserve Bank of Dallas
IMPACT ON U.S. AND STATES
Federal Reserve Bank of Dallas
Importance of oil and gas to U.S. economy
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
1972 1977 1982 1987 1992 1997 2002 2007 2012
Source: Bureau of Economic Analysis; Bureau of Labor Statistics.
Percent of GDP
Percent of Employment
US GDPUS Employment
Federal Reserve Bank of Dallas
U.S. Crude Oil Production From Shale
0
500
1000
1500
2000
2500
3000
3500
4000
Jan 2010 Dec 2014 Jan 2010 Dec 2014 Jan 2010 Dec 2014
Source: Energy Information Administration
1,513
Thousand barrels per day
1,227
3,447
Texas
North Dakota
UtahColoradoWyoming
New Mexico
Oklahoma
MontanaKansas
786
236
1,098
Federal Reserve Bank of Dallas
Despite rig count declines, oil production holding up
0
500
1000
1500
2000
2500
6.5
7.0
7.5
8.0
8.5
9.0
9.5
Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15
Source: Oil and Gas Journal; Baker Hughes.
Million barrels per day
Oil Production
Rig Count
Rig Count
Federal Reserve Bank of Dallas
New rigs and wells very productive(New well oil production per rig)
0
100
200
300
400
500
600
700
Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15
Bakken
Eagle Ford
Permian
Source: Energy Information Administration.
Barrels per day
Federal Reserve Bank of Dallas
Impact on U.S. Economy
• The U.S. benefits from lower oil prices• Boosts consumer disposable income
– The decline in gasoline prices adds $710 to household budgets in 2015
• Reduces the cost of energy to firms• Reduces profitability of producing oil
– Layoffs and Capex declines in energy firms• A 50% fall in oil prices may lead to a 0.3% to 1.0%
increase in GDP (depending on the model)• Headline inflation falls
Federal Reserve Bank of Dallas
Regional Effects
• Increased energy activity brings oil and gas extraction and oil-field support jobs
• Local areas: – lease and royalty payments,– infrastructure construction and – increased spending on retail, leisure and hospitality, and
health services. • Local governments: greater sales taxes • State governments: increased severance tax
revenues
Federal Reserve Bank of Dallas
-2.0
-4.3
-2.3-0.7
-1.2 -1.6
-1.7
-0.7
Low oil prices benefit most states(Effect of a 50% decline in oil prices on employment)
Federal Reserve Bank of Dallas
Energy Related Employment
0
2
4
6
8
10
12
14
2000 2013 2000 2013 2000 2013 2000 2013 2000 2013 2000 2013 2000 2013 2000 2013Oil & gas operations Petrochemicals Oil field equipment Coal mining Refining
Percentage of nonagricultural employment
Alaska Louisiana North Dakota
New Mexico
Oklahoma Texas West Virginia
Wyoming
Federal Reserve Bank of Dallas
Some states rely heavily on oil and gas severance taxes
(Share of state tax revenues)
89.2
46.6
19.1
11.0 9.4 9.45.5
1.4 1.2 0.00
10
20
30
40
50
60
70
80
90
100
AK ND WY LA TX NM OK KS CO CA
Oil and Gas % of Total Taxes Collected
Percent
Sources: States' revenue reports for fiscal year 2013.
Federal Reserve Bank of Dallas
Oil and Gas Share of Revenues
0
2
4
6
8
10
12
14
16
18
20
1978 1983 1988 1993 1998 2003 2008 2013
Natural Gas TaxesOil Taxes
Source: Texas Comptroller.
Percent
Federal Reserve Bank of Dallas
WHERE DO WE GO FROM HERE?
Federal Reserve Bank of Dallas
World Consumption Growth Forecast
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
2013 2014 2015
OECDNon-OECD AsiaFSU and Eastern EuropeOther
Source: Energy Information Administration.
Million barrels per day
Forecast
Federal Reserve Bank of Dallas
Crude Price Forecast
0
20
40
60
80
100
120
Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16
Historical Spot Price
STEO Price Forecast
NYMEX Futures Price
95% NYMEX Futures Confidence Interval
Dollars per barrel
Source: Energy Information Administration.
Federal Reserve Bank of Dallas
Dollar and oil weigh on Texas Leading Index
-0.08
0.40
0.36
-0.29
-0.87
-1.11
0.47
-0.87
-1.98
-2.50 -2.00 -1.50 -1.00 -0.50 0.00 0.50 1.00
Average Weekly Hours
Help Wanted Index
Texas Stock Index
New Unemployment Claims
Well Permits
Real Oil Price
U.S. Leading Index
Texas Value of the Dollar
Net Change in Texas Leading Index
Texas Leading Index Components, 3 month changeOctober -December
Federal Reserve Bank of Dallas
Texas still expected to add jobs
95
100
105
110
115
120
125
130
135
9.0
9.5
10.0
10.5
11.0
11.5
12.0
12.5
Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Jan-16
Millions of JobsIndex
(1987=100)
Leading Index
Texas Nonfarm Employmentand TLI Forecast (with 80%
confidence band)
Source: Bureau of Labor Statistics, Federal Reserve Bank of Dallas, author's calculations
Federal Reserve Bank of Dallas
Outlook
• Market will adjust– Lower prices will lead to a contraction of supply and
increase in demand
• Global GDP growth is expected to rise over time• Oil prices expected rise• U.S. supply response will be swifter than in the past• Uncertainties abound
Federal Reserve Bank of Dallas
Plunging Crude Prices: Impact on U.S. and State Economies
Mine YücelFederal Reserve Bank of Dallas