The Unassuming Economist

“The unconventional energy boom has had significant positive effects on Canada’s economic activity and has the potential to contribute even more in the future with the appropriate extension of infrastructure capacity,” according to a new IMF study. 

The study “(…) suggest that while limited exports capacity would result in output losses over the medium term, the potential output gains from a full market access of Canada’s energy products could reach about 2 percent of GDP over a ten year horizon. Actions can be taken on a number of fronts to resolve transportation constraints and address domestic market segmentation. These include diversifying international export markets for Canadian energy products, which would require building pipeline and export infrastructure to facilitate access to non-U.S. markets. Energy integration between Canada’s western and eastern provinces can be strengthened further, and recent initiatives in this direction are welcome. More generally, there appears to be an important scope to increase inter-industry linkages across Canada that would lead to wider sharing of benefits from the energy sector.”

• The Peterson Institute released a study today that concludes that “while substantial, the forecasted long-term economic benefits [of the unconventional energy boom] are more modest than in many other analyses.” The boom is expected “to transform a handful of specific industries and regional economies, but there is unlikely to be an energy-caused broad-based economic renaissance. The US economy … is too large and diverse to be driven by the energy supply changes alone.” 

• At the recent American Economic Association meetings in Philadelphia, IHS/CERA presented their estimates of the economic impacts of the energy boom, which suggest much more substantial impacts. 

The IMF’s estimates suggest modest impacts. Here’s a cheat sheet to the IMF’s analysis and here’s the full-blown study.

The latest IMF’s Commodity Review was presented at the MENA Industrial Gas Conference 2013. On my presentation, Rob Cockerill tweeted:

• “The message here is firstly that the advanced economies in the west, particularly the US and Europe, have to be very nimble in their policy making. Secondly, if countries who have benefited from China’s growth in the past fail to diversify, they will be vulnerable.”

• “Thirdly, don’t get carried away by the shale gale – the numbers do not translate into huge income gains in the US and therefore won’t have huge impact elsewhere. It might have huge impact for companies, but not countries.”

• “US incomes go up, by just a little over 1% after 12-13 years, there is very little additional employment generated from this, and domestic demand goes up by about 1.5% – we’re not talking about big changes in the US. Which means, we are not talking about big changes in the rest of the world either.”
• “We revise our forecast every three months, and what you can see here is that we have revised down our global forecast slightly, and we have also revised this down for 2014.”
• “This is due to some revisions within our outlook of developing and emerging economies. If you break down within the emerging markets, we’ve really marked down Russia, India and China, a little bit. The BRICs are areas where we are seeing softness, more than we did three months ago.”