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Energy

On booms and super-cycles: China and India's central role in global commodity markets

John Baffes's picture
Global commodity prices underwent an exceptionally strong and sustained boom beginning in 2000. Unlike a typical price cycle, this boom has been characterized as a “super cycle”, i.e., a demand-driven surge in commodity prices lasting possibly decades rather than years. Many researchers say this is the fourth “super cycle” of the past 150 years. The price super cycle has been attributed to strong growth in emerging markets.

What you need to know about energy and poverty

Sri Mulyani Indrawati's picture
Portable solar systems in rural Mongolia © Dave Lawrence/World Bank


First, we need to address “energy poverty” if we want to end poverty.

We find that energy poverty means two things: Poor people are the least likely to have access to power. And they are more likely to remain poor if they stay unconnected.

Around one in seven, or 1.1 billion people, don’t have access to electricity, and almost 3 billion still cook with polluting fuels like kerosene, wood, charcoal, and dung.

What developing countries can learn from Alaska

Ted Chu's picture
The White Pass & Yukon summit train. © Ted Chu


I recently returned from vacation in Alaska, America’s final frontier. This place is massive, twice as big as Texas. It’s so remote that many of the conveniences Americans take for granted simply aren’t available. Prices are high, cell-phone coverage is sparse, and the state capital, Juneau, isn’t even accessible by road. It’s wonderful in summer, but during winter there are only six hours of dim sun.

For the 737,000 people who call Alaska home, life can be a challenge most of the year. The economy relies heavily on energy extraction (80% of state revenue is from petroleum) and the federal government (subsidies and military spending), plus fishing and tourism.

Commodities (mostly) continue to tumble

John Baffes's picture

We just published our Commodity Market Outlook for the third quarter of 2015, and report that most prices declined in the second quarter of 2015 due to ample supplies and weak demand, especially in industrial commodities (see figure below).
 

 
Energy prices rose 12 percent in the quarter, with the surge in oil offset by declines in natural gas (down 13 percent) and coal prices (down 4 percent). However, energy prices fell on average to 39 percent below 2014 levels. Natural gas prices are projected to decline across all three main markets—U.S., Europe, and Asia—and coal prices to fall 17 percent. Excluding energy, our report notes a 2 percent decline in prices for the quarter, and forecasts that non-energy prices will average 12 percent below 2014 levels this year. Iran’s new nuclear agreement with the US and other leading governments, if ratified, will ease sanctions, including restrictions on oil exports from the Islamic Republic of Iran. Downside risks to the forecast include higher-than-expected non-OPEC production (supported by falling production costs) and continuing gains in OPEC output. Possible (less likely) upside pressures may come from closure of high-cost operations—the number of operational oil rigs in the US is down 60 percent since its November high, for example—and geopolitical tensions. 

The case for inclusive green growth

Sri Mulyani Indrawati's picture
Women fishers in Ghana. (Andrea Borgarello/World Bank - TerrAfrica)



Over the last 20 years, economic growth has helped to lift almost a billion people out of extreme poverty. But 1 billion people are still extremely poor. 1.1 billion live without electricity and 2.5 billion people without access to sanitation. For them, growth has not been inclusive enough.

In addition, growth has come at the expense of the environment. While environmental degradation affects everyone, the poor are more vulnerable to violent weather, floods, and a changing climate.

Development experts, policymakers, and institutions like the World Bank have learned a major lesson: If we want to succeed in ending poverty, growth needs to be inclusive and sustainable.

Lighting up the future in Bangladesh

Yann Doignon's picture

Children using a computer powered by solar energy

Night falls in Dhaka. Commercial streets glow with lights and the neon-lit stores and restaurants are abuzz with shoppers enjoying a break from Ramadan. This is a great visual spectacle punctuated by the incessant honking of colorful rickshaws.

But the reality is different right outside the capital. Sunset brings life to a halt in rural areas as about 60 percent of rural households do not have access to grid electricity. Kerosene lamps and battery-powered torches are widespread yet limited alternatives, their dim light offering limited options for cooking, reading or doing homework.  

It is a sweltering hot day when our team sets out to visit a household of 14 in the village of Pachua, a two-hour drive from Dhaka. Around 80% of the villagers have benefited from the solar panel systems to access electricity. The Rural Electrification and Renewable Energy Development Project (RERED), supports installation of solar home systems and aims to increase access to clean energy in rural Bangladesh.
 
We’re accompanied by Nazmul Haque Faisal from IDCOL, a government-owned financing institution, which implements the program. “This is the fastest-growing solar home system in the world,” Faisal says enthusiastically, “and with 40,000-50,000 new installations per month, the project is in high demand.”

We’ve now reached our destination and Monjil Mian welcomes us to his house, which he shares with 13 other members of his family, including his brothers, two of them currently away for extended work stints in Saudi Arabia.

​Is infrastructure in emerging markets a good investment?

Laurence Carter's picture
There’s a lot of discussion about attracting more investors to invest in infrastructure in emerging markets. This will be one of the themes of the Financing for Development Conference next week. Last month the PPI Database’s 2014 full year update showed that total investment in infrastructure commitments in emerging markets for projects with private participation in the energy, transport and water and sanitation sectors increased six percent to US$107.5 billion in 2014, compared to 2013.  
 
But what does the evidence tell us about how good those investments might be for investors?
 
One interesting source comes from a Moody’s study based on the performance of over 5,300 projects. This data represents more than 60 percent of all project finance transactions worldwide over 1983-2013. It is broadly representative of worldwide project finance activity by year, industry sector and regional concentration. The data shows that:

PPPs in the Caribbean: Filling the gap

Brian Samuel's picture
Prior to about 2005, for many tourists their Jamaican vacation was ruined at the last minute, by the hot and overcrowded conditions inside Montego Bay’s Sangster International Airport. Fast forward 10 years, and waiting for a flight at Sangster is an altogether more pleasant experience. The air conditioning actually works, and the whole environment is infinitely less stress-inducing than before.
 
A new waiting area at Montego Bay's
Sangster International Airport.
Photo: Milton Correa/flickr

What’s the difference? The private sector.

In 2003, the Government of Jamaica finally succeeded in doing what it had been trying to do for a decade: privatize Montego Bay Airport. A private sector consortium, led by Vancouver International Airport, quickly invested millions of dollars in expanding the terminal building, doubling the airport’s capacity and opening dozens of new retail spaces. Since then, the consortium has invested more than US$200 million on expansions and improvements to the airport, all of which has been entirely off the government’s balance sheet.

Jamaica has gone on to implement several more public-private partnerships (PPPs), with mixed results. The second phase of its ambitious highway construction program — the Mount Rosser Bypass — was recently opened, cutting a swath through miles of virgin territory. However, early indications are that traffic levels are not living up to expectations, probably due to the Bypass’ steep eight percent gradient, which is beyond the means of most Jamaican trucks and buses.

In the energy sector, Jamaica is completing three PPPs with a total of 115 megawatts of renewable energy (RE) capacity, putting the country on track to meet its RE target of 12.5 percent of generating capacity by the end of 2015. Lastly, the government is currently completing formalities for the sale of Kingston Container Terminal (KCT) to a consortium of CMA/CGM and China Merchant Marine, a transaction that is expected to result in a US$600 million capital expenditure program by the port’s new owners.

Public-private partnerships: Promise and hype

Michael Klein's picture
Here is a new paper I wrote that provides perspectives on patterns of public-private partnerships (PPPs) in infrastructure across time and space.  
 
PPPs are a new term for old concepts. Much infrastructure started under private auspices. Then many governments nationalized the ventures.

Governments often push infrastructure providers to keep prices low. In emerging markets, the price of water covers maybe 30 percent of costs on average, that of electricity some 80 percent of costs. This renders public infrastructure ventures dependent on subsidies. When governments run into fiscal troubles, they often look again for PPPs, and price increases. As a result, PPPs keep making a comeback in most countries, but are not always loved.

Large scale mining in Africa is a mixed blessing for women

Anja Tolonen's picture

The African continent is rich in natural resources, like oil, gas and minerals that contribute to a large share of exports, and are now a major source of foreign direct investment. In our paper African Mining, Gender and Local Employment, we investigate how this recent, rapid expansion in large-scale mining affects women’s job prospects.

According to previous research and policy documents, it is ambiguous whether industrial mining increases or decreases female employment. The “African Mining Vision” spells out the risk that extractive industries might make gender disparities in economic opportunities larger. The sector is generally known for weak local multipliers, i.e., for each job created in the sector, too few jobs are created in auxiliary sectors, such as services, manufacturing or construction. This is known as the ‘enclave’ hypothesis: that a large-scale mine generates few economic opportunities for local community members. On the other hand, mining activities may generate jobs in services and sales, which are relatively female dominated in the region and which are locally traded.


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