Petrostate Hex: How Plunging Oil Prices Affect Currencies
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The Petrostate Hex: How Plunging Oil Prices Affect Currencies

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The Petrostate Hex: How Plunging Oil Prices Affect Currencies

The Petrostate Hex: How Plunging Oil Prices Affect Currencies

Every day, the world consumes 93 million barrels of oil, which is worth $4.2 billion.

Oil is one of the world’s most basic necessities. At least for now, all modern countries rely on oil and its derivatives as the backbone of their economies. However, the price of oil can have significant swings. These changes in price can have profound implications depending on whether an economy is a net importer or net exporter of crude.

Net exporters, countries that sell more oil abroad than they bring in, feel the sting when prices plunge. Less revenue gets generated, and this can impact everything from balancing the budget to the value of their currency in the world market.

Net importers, on the other hand, benefit from lower prices as it decreases input costs for production. For example, a country like Japan only meets 15% of its energy needs domestically, and must import 3.5 million barrels of oil each day. A lower oil price significantly decreases these costs.

Currency Swings

For many major net exporters of oil, changes in oil prices are highly correlated with their currencies. With oil prices crashing over the last year, currencies such as the Canadian dollar and Russian ruble have been highly impacted in terms of USD.

For example, the ruble is down over 40% since the price of oil began to crash in 2014. With a breakeven cost of $105/bbl, the dropping price of crude as well as dwindling ruble have sent ripples through the Russian economy.

Central Bank Policy

The impact of oil on currency depends on how central banks approach policy:

Floating exchange rate: The exchange rate is determined by supply and demand.

Fixed exchange rate: Countries with fixed exchange rates continuously arrange intervention to keep the rate the same.

Managed float: The central bank occasionally intervenes to “smooth out” the exchange rate.

Currency Correlations

The price of oil typically has the largest effect on countries with floating exchange rates such as Canada, Norway, or Mexico. Over the last 15 years, the loonie (-0.42), krone (-0.46), and peso (-0.31) have all had large negative correlations in exchange rates (paired with USD) against the price of oil.

Meanwhile, countries that have pegged their rate tend to feel the impact of oil price swings elsewhere in their economy. This is because such countries have to buy or sell currencies on the open market to maintain the currency peg. Another method that can be used is to enforce a particular exchange rate by making it illegal to trade currencies at other rates, but this can often create a black market.

As a result, countries with fixed-rate policies such as Venezuela, Saudi Arabia, and Qatar have little to no correlation in their exchange rates (paired with USD) against the price of oil.

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Energy

Visualizing 10 Years of Global EV Sales by Country

Global EV sales have grown exponentially, more than doubling in 2021 to 6.8 million units. Here’s a look at EV sales by country since 2011.

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Visualizing 10 Years of Global EV Sales by Country

This was originally posted on Elements. Sign up to the free mailing list to get beautiful visualizations on natural resource megatrends in your email every week.

In 2011, around 55,000 electric vehicles (EVs) were sold around the world. 10 years later in 2021, that figure had grown close to 7 million vehicles.

With many countries getting plugged into electrification, the global EV market has seen exponential growth over the last decade. Using data from the International Energy Agency (IEA), this infographic shows the explosion in global EV sales since 2011, highlighting the countries that have grown into the biggest EV markets.

The Early EV Days

From 2011 to 2015, global EV sales grew at an average annual rate of 89%, with roughly one-third of global sales occurring in the U.S. alone.

YearTotal EV SalesCAGR
201155,414-
2012132,013138.2%
2013220,34366.9%
2014361,15763.9%
2015679,23588.0%
Total sales / Avg growth1,448,16289.3%

In 2014, the U.S. was the largest EV market followed by China, the Netherlands, Norway, and France. But things changed in 2015, when China’s EV sales grew by 238% relative to 2014, propelling it to the top spot.

China’s growth had been years in the making, with the government offering generous subsidies for electrified cars, in addition to incentives and policies that encouraged production. In 2016, Chinese consumers bought more EVs than the rest of the world combined—and the country hasn’t looked back, accounting for over half of global sales in 2021.

EV Sales by Country in 2021

After remaining fairly flat in 2019, global EV sales grew by 38% in 2020, and then more than doubled in 2021. China was the driver of the growth—the country sold more EVs in 2021 than the rest of the world combined in 2020.

Country2021 EV Sales% of Total
China 🇨🇳3,519,05451.7%
U.S. 🇺🇸631,1529.3%
Germany 🇩🇪695,65710.2%
France 🇫🇷322,0434.7%
UK 🇬🇧326,9904.8%
Norway 🇳🇴153,6992.3%
Italy 🇮🇹141,6152.1%
Sweden 🇸🇪138,7712.0%
South Korea 🇰🇷119,4021.8%
Netherlands 🇳🇱97,2821.4%
Rest of Europe 🇪🇺 469,9306.9%
Rest of the World 🌍 313,1294.6%
Total6,809,322100.0%

China has nearly 300 EV models available for purchase, more than any other country, and it’s also home to four of the world’s 10 largest battery manufacturers. Moreover, the median price of electric cars in China is just 10% more than conventional cars, compared to 45-50% on average in other major markets.

Germany, Europe’s biggest auto market, sold nearly 700,000 EVs in 2021, up 72% from 2020. The country hosts some of the biggest EV factories in Europe, with Tesla, Volkswagen, and Chinese battery giant CATL either planning or operating ‘gigafactories’ there. Overall, sales in Europe increased by 65% in 2021, as evidenced by the seven European countries in the above list.

The U.S. also made a comeback after a two-year drop, with EV sales more than doubling in 2021. The growth was supported by a 24% increase in EV model availability, and also by an increase in production of Tesla models, which accounted for half of U.S. EV sales.

Tesla’s Dominance in the U.S.

Tesla is the world’s most renowned electric car company and its dominance in the U.S. is unmatched.

Between 2011 and 2019, Tesla accounted for 40% of all EVs sold in the United States. Furthermore, Tesla cars have been the top-selling EV models in the U.S. in every year since 2015.

EV Model2021 Sales% of 2021 U.S. EV Sales
Tesla Model Y*185,99429.5%
Tesla Model 3*147,46023.4%
Ford Mustang Mach-E27,1404.3%
Chevy Bolt EV/EUV24,8283.9%
Volkswagen ID.416,7422.7%
Tesla Model S*15,5452.5%
Nissan Leaf14,2392.3%
Porsche Taycan9,4191.5%
Tesla Model X*7,9851.3%
Audi e-tron7,4291.2%

*Estimates
Share of total sales calculated using total U.S. EV sales of 631,152 units, based on data from the IEA.
Source: Cleantechnica

Tesla accounted for over 50% of EV sales in the U.S. in 2021 with the Model Y—launched in 2019—taking the top spot. Furthermore, the Model Y remained the bestselling EV in the first quarter of 2022, with Tesla taking up a massive 75% of the EV market share.

Despite Tesla’s popularity, it could face a challenge as other automakers roll out new models and expand EV production. For example, General Motors aims to make 20 EV models available by 2025, and Ford expects to produce at least 2 million EVs annually by 2026. This increase in competition from incumbents and new entrants could eat away at Tesla’s market share in the coming years.

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Energy

Which Countries Produce the Most Natural Gas?

Natural gas prices have risen since Russia’s invasion of Ukraine. This visualization highlights the world’s largest natural gas producers.

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Which Countries Produce the Most Natural Gas?

This was originally posted on Elements. Sign up to the free mailing list to get beautiful visualizations on natural resource megatrends in your email every week.

Natural gas prices have risen since Russia’s invasion of Ukraine, exacerbating an already tight supply situation.

Making matters worse, Moscow has since cut gas exports to Europe to multi-year lows, sending Europe’s gas price to almost 10 times its pre-war average.

Using data from BP’s Statistical Review of World Energy, the above infographic provides further context on the gas market by visualizing the world’s largest gas producers in 2021.

Natural Gas Consumption at All-Time High in 2021

Natural gas is part of nearly every aspect of our daily lives. It is used for heating, cooking, electricity generation, as fuel for motor vehicles, in fertilizers, and in the manufacture of plastics.

The fuel is a naturally occurring hydrocarbon gas and non-renewable fossil fuel that forms below the Earth’s surface. Although the Earth has enormous quantities of natural gas, much of it is in areas far from where the fuel is needed. To facilitate transport and reduce volume, natural gas is frequently converted into liquefied natural gas (LNG), in a process called liquefaction.

Despite global efforts to reduce reliance on fossil fuels, natural gas consumption reached a new all-time high in 2021, surpassing the previous record set in 2019 by 3.3%.

Demand is expected to decline slightly in 2022 and remain subdued up to 2025, according to the International Energy Agency.

Region2021 Demand in Billion Cubic Meters (bcm)2022P (bcm)2025P (bcm)
Africa169172188
Asia Pacific895907990
Central and South America153147153
Eurasia634619632
Europe 604549536
Middle East564582627
North America1,0841,1081,116
World 4,1034,0834,243

The Asia Pacific region and the industrial sector are expected to be the main drivers of global gas consumption in the coming years

Natural Gas Production, by Country

The world’s top 10 producers of natural gas account for about 73% of total production.

RankCountry2021 Production (bcm)Share %
#1🇺🇸 United States934.223.1%
#2🇷🇺 Russia701.717.4%
#3🇮🇷 Iran 256.76.4%
#4🇨🇳 China209.25.2%
#5🇶🇦 Qatar 177.04.4%
#6🇨🇦 Canada172.34.3%
#7🇦🇺 Australia 147.23.6%
#8🇸🇦 Saudi Arabia 117.32.9%
#9🇳🇴 Norway114.32.8%
#10🇩🇿 Algeria100.82.5%
#12🇹🇲 Turkmenistan79.32.0%
#13🇲🇾 Malaysia 74.21.8%
#14🇪🇬 Egypt 67.81.7%
#15🇮🇩 Indonesia 59.31.5%
#16🇦🇪 United Arab Emirates57.01.4%
#17🇺🇿 Uzbekistan50.91.3%
#18🇳🇬 Nigeria 45.91.1%
🌐 Rest of the World671.816.6%
🌐 Global Total4,036.9100.0%

Natural gas accounts for 32% of primary energy consumption in the United States, the world’s largest producer. Russia is the second biggest producer, and also has at least 37 trillion cubic meters of natural gas reserves, the most in the world.

China’s natural gas production grew by 7.8% in 2021, and it has nearly doubled since 2011. This sustained growth in production is partly down to government policies incentivizing coal-to-gas switching.

Europe’s Natural Gas Crisis

Russia has significantly reduced flows of natural gas to Europe since Western nations imposed sanctions on the Kremlin following the invasion of Ukraine. Before the war, the European Union (EU) imported about 40% of its natural gas from Russia.

The gas is transported by the Nord Stream system, a pair of offshore natural gas pipeline networks in Europe that run under the Baltic Sea from Russia to Germany.

Russian energy giant Gazprom recently halved the amount of natural gas flowing through the Nord Stream 1 pipeline to 20% of capacity, blaming Western sanctions for a delay in the delivery in a necessary turbine. EU officials say Russia is “weaponizing” its gas supply.

Amid tensions, the EU bloc outlined a plan to phase out dependence on Russian fossil fuels. Lithuania ceased Russian gas imports at the beginning of April. Estonia’s and Latvia’s imports also dropped to zero at the start of that month. Bulgaria, the Netherlands, and Poland all announced that they do not intend to renew long-term contracts with Gazprom.

Despite these efforts, Europe remains dependent on Russia for its supply of natural gas, at least in the short and medium term.

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