FT: Angola goes to IMF

The FT reports:
Angola becomes latest oil producer seeking IMF bailout

Angola has requested a bailout from the International Monetary Fund that could be worth more than $1.5bn, making the OPEC member the latest oil-producing country to seek international help to cope with the fallout from low crude prices.

 

FT: Oil: From boom to bailout

The FT published an in-depth article about how some countries are coping, and addressing, the recent fall of commodity prices, in particular fossil fuels.

Cheaper crude means many developing countries will take longer to catch up with advanced economies

The problem, says Mr Basu [World Bank chief economist], is that too many producing countries are in denial about the shift or the potential remedies — and are afraid of the political consequences. “It will be very difficult. There’s no getting away from it,” he says.

FT: Azerbaijan may be first to receive assistance from IMF/World Bank following oil price collapse

The FT reports: "IMF and World Bank move to forestall oil-led defaults. Team flies to Azerbaijan over possible $4bn emergency loan" See also here [rferl.org]. The country has been burning through it's foreign reserves, but it's SWF would still have ~ $35bn, 60% of GDP, according to the article.

We've noted the potential difficulties, and economic and political contradictions in Azerbaijan before.

VoxEU: The trade consequences of the oil price

Former OxCARRE researchers Pierre-Louis Vézina (King's College, London) and David van Below (Copenhagen Economics) write on VoxEU,

The trade consequences of the oil price

The price of oil rose to unprecedented highs in the 2000s, and its recent plunge took many by surprise. Although there are many consequences of such price fluctuations on the world economy, they are notoriously difficult to pin down. This column examines the trade consequences of varying shipping costs caused by oil price fluctuations. High oil prices are found to increase the distance elasticity of trade, making trade less global. The recent drop in oil prices could thus be a boon for globalisation.

Read on here 

New research: Natural Resource Booms in the Modern Era: Is the curse still alive?

Andrew Warner, IMF, writes on

Natural Resource Booms in the Modern Era: Is the curse still alive?

Abstract

The global boom in hydrocarbon, metal and mineral prices since the year 2000 created huge economic rents - rents which, once invested, were widely expected to promote productivity growth in other parts of the booming economies, creating a lasting legacy of the boom years. This paper asks whether this has happened. To properly address this question the empirical strategy must look behind the veil of the booming sector because that, by definition, will boom in a boom. So the paper considers new data on GDP per person outside of the resource sector. Despite having vast sums to invest, GDP growth per-capita outside of the booming sectors appears on average to have been no faster during the boom years than before. The paper finds no country in which (non-resource) growth per-person has been statistically significantly higher during the boom years. In some Gulf states, oil rents have financed a migration-facilitated economic expansion with small or negative productivity gains. Overall, there is little evidence the booms have left behind the anticipated productivity transformation in the domestic economies. It appears that current policies are, overall, prooving insufficient to spur lasting development outside resource intensive sectors. 

Full paper here [pdf, img.org]

It has a hint of a paper by former OxCARRE Researcher Alexander James [alexandergjames.weebly.com], "The Resource Curse: A Statistical Mirage" (Forthcoming, Journal of Development Economics) View

New OxCARRE Research: Left in the Dark? Oil and Rural Poverty

OxCARRE's Sam Wills [wordpress.com] and Brock Smith [brockdsmith.com] brought a new research paper,

Left in the Dark? Oil and Rural Poverty

Abstract

Oil booms do not benefit the rural poor. To show this we combine data on night-time lights and population at a very fine (1 km2) resolution to construct global measures of rural poverty from 2000-2013. We find that oil booms, due either to high prices or new discoveries, increase GDP per capita. However, the increase in output is limited to cities and towns, and does not benefit the rural poor. We also find that while urbanization is occurring throughout the developing world, it is not being hastened by oil wealth.

Available here [oxcarre.ox.ac.uk, pdf].

FT: Oil bear bets on return to $25 a barrel

The FT reports on a hedgefund manager who has been successful in betting on the recent patterns (spike and bust) of the oil price. The manager reckons a low ($25-$50) oil price for the next two years.

Expect some interesting "Bust" papers coming out over the same period.

A taster from the OxCARRE Blog:

VoxEU: Commodity prices: Over a hundred years of booms and busts (Thursday, April 30, 2015)

Dutch Disease and the Oil and Boom and Bust (Tuesday, March 25, 2014)

New Research: The Economic Aftermath of Resource Booms (Thursday, October 16, 2014)

Commodity booms, busts and bubbles (Thursday, March 28, 2013)

From Boom to Bust: A Typology of Real Commodity Prices in the Long Run (Friday, March 22, 2013)

Commodity Price Booms and Busts: A Primer (Wednesday, December 19, 2012)

VoxEU: Commodity prices: Over a hundred years of booms and busts

At VoxEU, Andrew Powell [voxeu.org] writes about

Commodity prices: Over a hundred years of booms and busts

Commodity prices are very persistent. A boom is always followed by a bust, and after a slump, a boom comes along. This column reviews some basic aspects of commodity theory and their role in the last boom. Finally, it presents arguments stating that lower commodity prices are here to stay for a while. We may have to wait many years for the next boom to come along.

 Read here [voxeu.org]

New Research: The Economic Aftermath of Resource Booms

New research forthcoming in Economic Journal by Grant D. Jacobsen and Dominic P. Parker

The Economic Aftermath of Resource Booms: Evidence from Boomtowns in the American West

Abstract:
The current U.S. oil and gas boom is injecting labour, capital, and revenue into communities near reserves. Will these communities be cursed with lower long run incomes in the wake of the boom? We study the oil boom-and-bust cycle of the 1970s and 1980s to gain insights. Using annual data on drilling to identify western boom-and-bust counties, we find substantial positive local employment and income effects during the boom. In the aftermath of the bust, however, we find that incomes per capita decreased and unemployment compensation payments increased relative to what they would have been if the boom had not occurred.

Dutch Disease and the Oil and Boom and Bust

OxCarre WP by Brock Smith: This paper examines the impact of the oil price boom in the 1970s and the subsequent bust on non-oil economic activity in oil-dependent countries. During the boom, manufacturing value added and exports increased significantly relative to non-oil dependent countries, along with wages, employment and investment. These measures decreased, though to a lesser extent, during the bust, displaying a positive relationship with oil prices. In contrast with the Dutch Disease model, exportable manufacturing sectors grew faster than non-exportable ones. However, exports of non-hydrocarbon natural resources and agricultural products displayed a strongly negative relationship to prices. The results suggest a push towards industrialization induced by the oil revenue windfall.