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Lifting of Iran sanctions could have major impact on energy markets

John Baffes's picture
With a lifting of sanctions in 2016, Iran could play a key role in energy markets but boosting capacity will require foreign investment, according to the World Bank’s latest edition of Commodity Markets Outlook.

Commodity prices come tumbling down

John Baffes's picture
Most commodity prices fell in the third quarter of 2015 as a result of abundant supplies and weak demand, leading to a further downward revision in price forecasts for 2015 and 2016.

Our quarterly Commodities Markets Outlook report analyzes markets for major commodities groups and forecasts prices for 46 commodities from bananas to zinc. The price declines are part of a five-year-long commodities slump.

India’s chaotic and messy use of energy

Ejaz Ghani's picture

Globally, India ranks fourth in energy consumption, but it is not well endowed with energy resources. Being the second most populous country in the world, how India manages its industrialization and urbanization process will matter for national and global concerns about energy efficiency, pollution, and climate change. In a recent paper, we use enterprise data to look at the relationship between structural transformation, geography, and energy efficiency in India.

Despite low commodity prices, growth prospects in low-income countries remain robust

Gerard Kambou's picture
Large agricultural sectors, remittances, and public investment have cushioned the impact of sharply weaker terms of trade in commodity-exporting low-income countries (LICs). Growth in LICs was flat in 2014, but is expected to pick up in 2015 and remain robust during 2016–17.  Declining commodity prices, however, are likely to increasingly put pressure on fiscal and current account balances of LICs that rely heavily on exports of energy and metals. Many commodity-exporting LICs have limited buffers to absorb this deterioration.

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.

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. 

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.

Dutch disease: It’s not just the oil; it’s the oil barons

Harun Onder's picture

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.

Foreign aid and volatility of natural resource revenues in low-income countries

Anton Dobronogov's picture

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.

Long term impacts of household electrification in rural India

Dominique Van De Walle's picture

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.