Standard Bank Oil ETN · JSE:SBOIL
Standard Bank Oil ETN — Standard Bank Group — Investor Presentation (September 2004)
30 slides from Standard Bank Oil ETN's investor presentation, Sep 8, 2004
Slide 1: Oil: water in the economy's engine?
Oil: water in the economy’s engine? 8 September 2004 More about “policy error” Goolam Ballim Elna Moolman Please refer to the important disclaimer on the final slide 1
Slide 2: What you're in for…
What you’re in for… Oil price trends … Theoretical dimensions … … Developed world … … Emerging economies … … South Africa … … Takeaways. 2
Slide 3: Thoughts in 1999
Thoughts in 1999 Source: The Economist 3
Slide 4: 140-year review
140-year review Source: The Economist “Normal” market price: $5-10/bl 4
Slide 5: Secular trend interrupted
Secular trend interrupted 50 40 USD per barrel 30 20 10 Jan-90 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Brent crude spot West Texas Intermediate spot Source: Bloomberg USD50 per barrel! 5
Slide 6: Price pressures
Price pressures • China’s increasing role as price-setter • Underestimation of total absolute demand by producers • Producers’ loss of purchasing power from a weak US dollar • Constrained production capacity • Geological constraints • Speculative positioning … 6
Slide 7: Price pressures
Price pressures • Geopolitical concerns • Iraq’s faltering production • Saudi Arabia’s fraying political fabric • Russia’s irregular supply • Venezuela’s volatile political climate 7
Slide 8: Transmission mechanism
Transmission mechanism Income transfer = f {spending on oil, mix of supply source, capacity to de-leverage, impact on fuel prices, fuel intensity, impact on other energy forms} 8
Slide 9: Subsidiary adjustments
Subsidiary adjustments • Curtails non-oil expenditure and investment • Tax receipts decline • Labour market rigidities • Currency risk • Asset price risk • Economic management • Confidence risk 9
Slide 10: Impact on developed world
Impact on developed world Impact of sustained $10/bl oil price rise on OECD nations* 2004 2005 GDP -0.4 -0.4 Consumer price index 0.5 0.6 Unemployment rate 0.1 0.1 Current account (USD billion) -32 -42 *Deviation from base case, in percentage points, unless otherwise stated Source: IEA 10
Slide 11: Impact on oil-importing developing economies
Impact on oil-importing developing economies Impact of sustained $10/bl oil price rise on oil-importing developing economies* Real GDP Inflation Asia -0.8 1.4 China -0.8 0.8 India -1.0 2.6 Malaysia -0.4 2.0 Philippines -1.6 1.6 Thailand -1.8 0.8 Latin America (includes Mexico) -0.2 1.2 Argentina -0.
Slide 12: South Africa
South Africa 12
Slide 13: Energy use (2001)
Energy use (2001) Transport General Domestic Commercial 3% 5% 20% 10% Agriculture 2% Mining 17% Manufacturing 43% Source: SARB Primary and secondary sector laden 13
Slide 14: Sectoral evolution
Sectoral evolution 65 64% 59% 55 45 Per cent 35 26.5% 24.5% 25 15 13% 9.5% 5 1990 1992 1994 1996 1998 2000 2002 Primary Secondary Tertiary Source: SARB Declining energy intensity 14
Slide 15: Energy intensities
Energy intensities 4.2 0.42 4.0 0.40 Intensity measure Intensity measure 3.8 0.38 3.6 0.36 3.4 0.34 3.2 0.32 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Total energy intensity Petroleum products' intensity (right scale) Source: DME, SAPIA, SARB, Standard Bank Group Diminishing intensity 1
Slide 16: Total primary energy intensities (2001)
Total primary energy intensities (2001) 600 OECD=100, 2001 (total primary energy supply/GDP - 568 474 500 442 toe/000 constant 1995 dollars) 400 321 300 226 200 121 100 100 0 OECD Brazil China Africa Thailand India South Africa Source: IEA SA high by developed world standards 16
Slide 17: Oil intensities (2002)
Oil intensities (2002) 350 OECD=100, 2002 (primary oil consumption/GDP) 288 300 232 234 237 250 200 142 150 100 100 81 50 0 OECD Brazil China Africa Thailand India South Africa Source: IEA SA: comparatively shallow oil intensity 17
Slide 18: Energy flow
Energy flow 18% (Im=55%) 62% 10% 28% 1% 71% 1% 1% 8% Source: DME Generous oil to fuels flow 18
Slide 19: Impact on SA economy
Impact on SA economy Impact of sustained $10/bl oil price rise on South Africa* Year 1 Year 2 Year 3 Year 4 Year 5 Total# CPIX 1.2 0.8 0.4 0.2 0.0 2.6 * Deviation from base case in percentage points Source: Standard Bank Group #Totals may not sum due to rounding 19
Slide 20: Impact on SA economy
Impact on SA economy Impact of sustained $10/bl oil price rise on South Africa* Year 1 Year 2 Year 3 Year 4 Year 5 Total# CPIX 1.2 0.8 0.4 0.2 0.0 2.6 Real GDP No interest rate increase -0.1 -0.1 -0.1 -0.1 -0.1 -0.4 * Deviation from base case in percentage points Source: Standard Bank Group #Totals
Slide 21: Impact on SA economy
Impact on SA economy Impact of sustained $10/bl oil price rise on South Africa* Year 1 Year 2 Year 3 Year 4 Year 5 Total# CPIX 1.2 0.8 0.4 0.2 0.0 2.6 Real GDP No interest rate increase -0.1 -0.1 -0.1 -0.1 -0.1 -0.4 50bp rate hike -0.2 -0.4 -0.3 -0.3 -0.2 -1.2 * Deviation from base case in percentag
Slide 22: Impact on SA economy
Impact on SA economy Impact of sustained $10/bl oil price rise on South Africa* Year 1 Year 2 Year 3 Year 4 Year 5 Total# CPIX 1.2 0.8 0.4 0.2 0.0 2.6 Real GDP No interest rate increase -0.1 -0.1 -0.1 -0.1 -0.1 -0.4 50bp rate hike -0.2 -0.4 -0.3 -0.3 -0.2 -1.2 100bp rate hike -0.3 -0.5 -0.6 -0.4 -0.
Slide 23: Growth and policy
Growth and policy Cumulative deviation from base case 4.2 0 0.42 0.41 4.0 0.40 (percentage points) -1 0.39 Intensity measure Intensity measure 3.8 0.38 0.37 3.6 -2 0.36 0.35 3.4 0.34 -3 0.33 3.2 year 1 year 2 year 3 year 4 year 5 0.32 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 No monetar
Slide 24: CPIX forecasts – actual and counterfactual
CPIX forecasts – actual and counterfactual 6 5 4 Per cent 3 2 1 0 Jan-04 Apr-04 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Average oil price USD36/bl Average oil price USD26/bl Source: Statistics SA, Standard Bank Group Not warranting action 24
Slide 25: Inflation expectations
Inflation expectations 10 9 8 Per cent 7 Get inflation expectations chart 6 5 4 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Break-even inflation rate - spread between R153 (2010) and R189 (2013) Source: Bloomberg, Standard Bank Group Again, justifying policy inertia 25
Slide 26: Impact on SA economy
Impact on SA economy Impact of sustained $10/bl oil price rise on South Africa, percent At $26/bl At $36/bl CPIX 2004 3.2 4.4 2005 4.0 4.8 Real GDP growth 2004 2.8 2.7 2005 3.1 3.0 Source: Standard Bank Group 26
Slide 27: Comparative impact of oil price rise
Comparative impact of oil price rise Impact of sustained $10/bl oil price rise over 5-year horizon* $10/bl Oil intensity US Real GDP -2.8 100 Short-term interest rate 0.9 Euro area Real GDP -2.6 100 Short-term interest rate 0.8 SA Real GDP -2.2 80 Short-term interest rate 1.0 * Deviation from base c
Slide 28: Key takeaways
Key takeaways • World GDP growth at risk • Marked and diverse impact on developing economies • South Africa less of a loser, GDP-wise • Prudent policy will help to mitigate damage 28
Slide 29: Thank you
Thank you Goolam Ballim Elna Moolman (011) 636 2910 Goolam.Ballim@standardbank.co.za Elna.Moolman@standardbank.co.za 29
Slide 30: Disclaimer
Disclaimer This document does not constitute an offer, or the solicitation of an offer for the sale or purchase of any investment or security. This is a commercial communication. If you are in any doubt about the contents of this document or the investment to which this document relates you should c
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