UNCTAD
Multi-Year Expert Meeting on Commodities
and Development 2013
Recent developments and new challenges in commodity markets, and policy
options for commodity-based inclusive growth and sustainable development
Room XXVI
Palais des Nations
Geneva, Switzerland
Developments and Challenges in Commodity Markets,
Policy Options for Commodity-based
Inclusive Growth and Sustainable Development
by
Scott Foster
Director
UNECE Sustainable Energy Division
20 MARCH 2013
This material has been reproduced in the language and form as it was provided. The views expressed are those of
the author and do not necessarily reflect the views of UNCTAD.
Developments and Challenges in Commodity Markets,
Policy Options for Commodity-based
Inclusive Growth and Sustainable Development
Multi-Year Expert Meeting On Commodities and Development
Scott Foster
Director, UNECE Sustainable Energy Division
Geneva, 20 March 2013
‘Forecasting is not a respectable human activity.’
- Peter Drucker
“Prediction is difficult - especially of the future”
- Storm Petersen, Danish humorist
2
• Heavier-than-air flying machines are impossible.
Lord Kelvin 1895
• A severe depression like that of 1920-1921 is outside the range of probability.
The Harvard Economic Society, November 16, 1929
• I think there is a world market for about 5 computers.
Thomas Watson, Chairman of IBM, 1943
• There is no reason for any individual to have a computer in their home.
Ken Olsen, President of Digital Equipment Corporation, 1977
• Gas is a premium, noble fuel that should not be wasted for power generation.
US and European legislation, mid ’80s
3
Oil price forecasts made in 2002
4
Decision Inertia:
Supercycle or Bubble?
Near-term
Medium-term
Long-term
Fundamental Shift in
Energy Carrier
End-use Adaptation
Behavioral Adaptation
Increased Resource Efforts
Modest Fuel-switching
Accommodate
NonShifters
Utilities Adapt
Merit Orders
Industrial capacity closure
because of high energy prices and
a strong euro.
Hydrogen
Economy?
5
Fuels Markets
Key Questions
Upstream/Midstream investments to de-bottleneck
Demand destruction by pricing and macro-economic policy
Demand construction by development policy
Technology choices and technology obligations
6
Carbon Dilemmas/
Choices
Starting Point
Trade to Manage Carbon
Exposure Risk of Higher
Cost of Late Adoption
Minimalist
€40/t
?
€30/t
?
€20/t
?
€10/t
?
Invest to Shift Portfolio
Risk of Over-response
Paradigm
Shift
7
Energy policy triangle –
shifting from markets
Drivers
• Geopolitics of energy
• Power blackouts
• High energy prices
• Very hard to regulate
competition in gas
and power markets
Economic
Efficiency
Security
of
supply
Implications
• Energy a question of
national security and
strategic infrastructure
• National champions
• Support domestic
sources of energy
• Diversify supplies and
fuel choice
Environment
8
Interconnectivity: Ripples
across the global economy
Consumer
Debt
Commodity
Imports
Economic
Competitiveness
Market
Reforms
Chinese
wealth
Chinese
Production
Energy
Imports
Indian
Production
European
Production
Cost of
Inputs
Government
Deficits
Housing
Prices
Exchange
Rates
Stock
Markets
Wealth
Effect
Trade
Balances
Consumer
Behavior
Indian
Wealth
Upstream
Politics
Energy
Trade
Energy
Consumption
Interest
Rates
European
Wealth
Environment
9
Social
Environment
Technology
Political
Economics
10
THANK YOU!
Henry Hub Gas Prices
European Gas Prices
Natural Gas (Europe),
average import border price
excluding UK
Source: Archer Daniel Midland Investor Services, as reported on www.mongabay.com.