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Matt Smith

Matt Smith

Taking a voyage across the world of energy with ClipperData’s Director of Commodity Research. Follow on Twitter @ClipperData, @mattvsmith01

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Flip Flopping Across the Energy and Economic Landscape

There have been some splendid examples of flip-flopping across the energy and economic landscape of late, and this post takes a look at three such examples – well, three pairs actually – which have walked onto the radar recently.

Manufacturing In Developed vs. Developing Nations

The first flip-flop occurs betwixt developed and developing nations in relation to the manufacturing industry. While most are in expansionary territory (good news), we have seen the baton of manufacturing momentum passing from emerging markets (BRICs) to developed nations.

This flip-flop is all well and good, except for the fact that – as highlighted in the Wall Street Journal today– emerging markets are potentially more of a leading indicator than a lagging one.

But just as weaker economic performance in Europe and the US in recent years has caused emerging markets to slow, hopefully they can repay the favor and drag the BRICs higher as they rebound.

Related Article: One of the Biggest Stories the Energy World’s Never Heard About

Manufacturing PMIs

Net Oil Imports: China vs. US

The next flip-flop is courtesy of China and the US. For China is set to surpass the US next month as the world’s largest net oil importer. This is not only due to a combination of strong oil demand growth and slow oil production growth from China, but due to a flip-flop of this scenario in the US.

For the US is expected to see strong oil production growth and slow (well, no) oil demand growth going forward. Hark, impending flip-flop:

Net Oil Imports US & China

US Oil and Natural Gas Production

Finally we look at a flip-flopping pair of commodities: the ultimate tag-team in energyland™ of US domestic oil and natural gas production. After peaking in the early 1970′s, combined production of the two dwindled lower (in terms of BTUs) to the end of the century.

Related Article: US Refineries Respond to Latin American Shortfall

That said, we have seen a sudden and sharp flip-flop in the direction of production in the mid-noughties due to the ramp up in non-conventional production (read: the shale revolution) of natural gas, swiftly followed by oil.

Given the rapid growth seen in US oil production (hark, the highest since October 1989), and ongoing gradual ascent of natural gas production (in the face of lowly prices), this upward trend should remain in place going forward.

US Natural Gas and Crude Oil

As we fast approach the end of summer, I hope you have appreciated this late-season use of flip-flops. As always, thanks for playing!

By. Matt Smith




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