5:48 PM
Reporter:
Baris Sanli
According the Wall Street Journal,
- 4.4% electricity demand drop in the largest US power market (consisting of13 states east of Mississippi)
- Average spot price in the same region drops by 40%. ($61.72/ MWh from $129.48/Mwh)
"Generally, the declines in demand and prices are the most precipitous and most sustained seen in the United States since the 1950s."
Ref:
IEEE Spectrum, 12 August 2009
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7:57 PM
Reporter:
Baris Sanli
I found the following website and report quite useful for understanding oil shocks followed by recessions. Here is a list of my key points:
1. "the drops in overall spending that were caused by higher oil prices proved to be the knockout punch for an economy that was already wobbly"
2."The fact that the biggest drop in output didn't occur until well after the oil price went up, and resulted not from the oil price itself but instead from the interaction with other factors and the dynamic forces unleashed when the overall level of economic activity began to decline, is also exactly the same pattern we saw in each of the previous recessions."
3."Was the oil shock of 2007-08 the sole cause of the recession? Certainly not. But did it make a material contribution? In my opinion, the answer unquestionably is yes."
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8:41 PM
Reporter:
Baris Sanli
The relation between crude oil vs gold and euro is the question I am looking for some time. From my initial studies, following graphs give an idea.
In this graph, log of crude oil is vertical axis and log of crude oil is the horizontal axis
Then check this one:
My conclusions:
1 - Crude and square of euro/dollar parity is in harmony
2 - Recession started hitting by the end of september 2008
3 - Crude and gold relation is broken for sometime
4 - Observe the euro's appreciation against dollar and rise in crude prices
All this means is crude prices will rise, since dollar will lose some of its value. By the end of May 2009, there is a great possibility that we may see 65-70 $ if dollar continues its slow depreciation. May is the start of driving season.
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11:09 AM
Reporter:
Baris Sanli
One of my friends has shared the
following article from New York Times which I enjoyed reading.
The article tries to find out whether we reached the "bottom of recession", using several indicators. It looks to three indicators:
1. Stocks: "Price to earning ratio. History shows that the stock market usually hits bottom before the economy does.The price-to-earnings ratio — which investors use to gauge how much they are paying for each dollar of corporate profit — is around 13, about 20 percent lower than the average of the last 130 years."
2. Home prices: "Barry Ritholtz, a professional investor who writes the popular economics blog The Big Picture, has a simpler, more subjective, approach: Assume a young couple earning two modest incomes is looking to buy a two- or three-bedroom starter home in a middle-income neighborhood in your city. Can they qualify for a mortgage and afford to buy it?“If the answer is no, then you are not at a bottom in housing,” said Mr. Ritholtz, who estimates that the decline in national home prices is only half-complete. "
3. Consumer spending:" The savings rate — the amount of money consumers did not spend — jumped to about 3 percent late last year, from practically zero, still far below its postwar average of 7 percent. ... In a study of economic cycles, Edward E. Leamer, an economist at the Anderson School of Management at the University of California at Los Angeles, found that auto sales and home building tended to lead recoveries."
Also, mentioned in the article is the 12% shrinkage of imports and exports of US in January.
Take that and compare with the news about Chinese exports appeared in
EconBrowser.com.
According to Wang Qian, a Hong Kong-based economist at JPMorgan Chase & Co. :
"There's no hope for export demand to recover any time soon. ... How fast imports recover depends on how soon the government's stimulus package kicks in and creates real demand in major industries." (
Bloomberg)
I think the most amusing part of the story is also from New York Times : "Tobias Levkovich, chief United States equity strategist at Citigroup, has another indicator for spotting when we have hit bottom: When we stop behaving like children in the backseat of the car asking their parents, “Are we there yet?” "
Sources:
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4:05 PM
Reporter:
Baris Sanli
One of my favourite sites on the net is Graphoilogy. Although they do not post that frequently, the site is quite useful for anyone interested in graphs and their relations to oil. Last month they have posted a graph from
Traffic Volume Trends:
Compared with the previous years, the effect of recession looks deeper than 80s.
But comparison may not be accurate, so becareful about the following points:
1. Comparing 80s and 2009 may not yield accurate results, since cars are slightly more efficient (for the US, in Europe they are more efficient). This dampens the effect of oil prices.
2. As commented in the website, the oil price increase was gradual for sometime, so the decrease in traffic volume was shrinking slowly.
Also check this graph, for general driver behaviour:
1. The traffic volume is lowest during winter. And due to cold (and recession), people either stay at home more or save more of their income for heating bills.
2. Since 91, this is the first time YoY change is negative.
Data from :
http://www.fhwa.dot.gov/ohim/tvtw/tvtpage.cfmSources:
http://graphoilogy.blogspot.com/2009/02/vehicle-miles-driven-at-record-low.htmlhttp://www.calculatedriskblog.com/2009/02/us-vehicle-miles-driven-off-36-in-2008.html
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11:22 AM
Reporter:
Baris Sanli
One of the implications of the recession is the big drops in electricity demands. In the developing countries, we see electricity demand drops followed by drops at industrial activity statistics. Here we see a basic example of economic activity(export rate is an indicator of Chinese economy) and electricity demand.
This news (China hit by massive drop in exports) from Financial Times says :
"Chinese exports plunged 25.7 per cent in February compared with a year ago, much higher than analysts had expected, as the global economic crisis began to take its full toll on the country’s export sector."You should also check the following line:
"China’s exports have decreased for four months in a row, but until February the rate of decline had been much slower than seen in other Asian countries with large export sectors. .... The trade surplus, which has been at record levels for the last four months, also shrank sharply from $39.1bn to $4.84bn."This reminded me the news from last month about a drop in Chinese electricity demand. Last month(Jan 2008), we have seen a 13% drop in Chinese electricity demand:
"Major power producers generated only 250.3 million megawatt hours of electricity last month, falling 13 percent from a year earlier, the China Daily reported. This is the fourth consecutive month that electricity generation in the country declined".Source: China PostAlso read this one from
Xinhua:
"However, the decline was smaller than in November and December, when power use fell 8.6 percent and 8.93 percent, respectively. According to CEC, the slowing pace of decline was a sign of economic recovery, as industrial use accounts for about 75 percent of total consumption. "If you check Chinese state grid web site (
http://www.sgcc.com.cn/) , you will see that the graphs (English / Statistics) are not updated for a long time
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