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 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.
What would you do if you won a billion dollars? Would you just buy more hamburgers for lunch or pick up some extra pairs of socks? Probably not. You would think bigger: maybe a boat, a mansion, a fancy car – luxury goods. Or you might try to make your life easier with a housekeeper, a driver, a chef – luxury services. This switch in the shopping list is so common that economists have a nerdy name for it: “non-homothetic” preferences. That is, people buy different things when they get more money.
It turns out that this dynamic is relevant for development, as we (Bill Battaile, Richard Chisik, and Harun Onder) found in “Services, Inequality, and the Dutch Disease,” a World Bank Policy Research Working Paper published this year. In particular, countries that see a rapid influx of income following a natural resource discovery – say oil or diamonds – are vulnerable to this pattern in a way that could hinder their overall chances of economic growth.
An abundance of natural resources is both an opportunity and a challenge for developing countries. A number of resource-rich, low-income countries receive amounts of foreign aid that are similar to or larger than their actual or potential revenues from natural resources. A new policy research working paper by Octave Keutiben and me develops a growth model to look at some ways in which the donors may help governments of such countries to use their resource revenues productively and minimize the magnitude of risks created by resource rents. The paper’s key conclusion is that making aid countercyclical helps to achieve higher economic growth, and so does conditioning disbursements on enhancement of public capital.
It is estimated that 1.3 billion people in 2009 were still without electricity. Many rural households in the developing world continue to cook with wood and biomass (mainly dung), and spend a lot of time collecting and preparing fuel for domestic use. Across the world, these time (and resulting health) burdens are thought to be higher for women and the children under their care.
One popular argument is that by relieving time burdens spent in collecting and preparing fuel, household electricity results in rural women engaging in market-based work — judged to be a good thing since women’s empowerment has been linked to having one’s own income. In fact, a number of studies show that the introduction of household electrical appliances accounts for a large share of the increase in married American women’s labor force participation in the 20th century. For the developing world, a recent paper by Taryn Dinkelman finds similar and large effects on female employment (and not on male employment) for South Africa, which are attributed to the use of electric stoves and other time saving appliances.
The International Energy Agency (IEA) estimates that 1.3 billion people, mainly in Sub-Saharan Africa and in developing Asia, are without access to electricity. According to the IEA, an estimated $48 billion per year is needed to finance the volume of investment required to provide universal access to electricity by the year 2030. And this is a huge challenge, especially for the world's poorest nations.
President Obama on his recent Africa trip has hence announced a 7-billion project to increase electrical infrastructure. This is a much needed move as ,with scarce public resources, little assistance from the private sector, and limited aid, most of the developing these countries attempt to address their investment needs by creating regional power markets. Integrated power pools allow for the better use of existing infrastructures and realization of projects that would otherwise be oversized for an isolated country. For instance, the hydro potential of the Democratic Republic of Congo alone is estimated to be sufficient to provide three times the much power currently consumed in Africa. Large hydroelectric projects, such as the Grand Inga in the region of the Congo River and the projects for the Senegal River basin, could benefit all countries in the region. The challenging question, however, is how to finance and manage these projects.
The following post is a part of a series that discusses 'managing risk for development,' the theme of the World Bank’s upcoming World Development Report 2014.
Crude oil is arguably one of the single most important driving forces of the global economy, and changes in the price of oil have significant effects on economic growth and welfare around the world. Indeed, the level of oil dependency of industrialized economies became particularly clear in the 1970s and 1980s, when a series of political incidents in the Middle East disrupted the security of supply and had severe effects on the global price of oil. Since then, oil price shocks due to such exogenous events have continuously increased in size and frequency (cf. Figure 1). While oil demand tends to be slow moving, mainly driven by economic growth and to some extent climate policies, the prospects of future oil supply are highly uncertain – not least considering persistent political instability in exporting countries and the uncertainty regarding the discovery of new reserves. As a result of such uncertainties, oil prices could undergo further (increasingly) drastic fluctuations in the future.
There is a continuing controversy over what constitutes energy poverty and whether it is synonymous with income poverty or lack of access to electricity. Several approaches are used to define and measure energy poverty, taking into account both demand and supply of alternative energy sources, including biomass, LPG, and electricity. But as yet, no consensus has emerged for measuring and monitoring energy poverty and explaining why and how it differs from income poverty.
Like income poverty, energy poverty may be defined by the minimum energy consumption needed to sustain lives. But unlike income poverty—based on the concept of a poverty line defined by the minimum consumption of food and non-food items necessary to sustain a livelihood—energy poverty lacks a well-established energy poverty line to determine the minimum amount of energy needed for living. Current indicators used by such organizations as the World Bank and the International Energy Agency (IEA) measure energy poverty indicators as outputs (e.g., lack of electricity connections) rather than outcomes (e.g., electricity consumption and associated welfare gains).