Presentation at DLSU, reviewing data on prices and output of oil and gas, medium term outlook, and impact on employment, especially the OFWs.

1. Bienvenido “Nonoy” Oplas Jr.
Minimal Government Thinkers
Cheap Oil and Gas,
Employment and OFWs
Presentation at Kapatiran DLSU, in partnership with
Development Economics classes,
De La Salle University, Manila
01 March 2016

2. Part 1: Cheap oil and gas
1. Oil and gas, prices and output
2. Oil and gas, number of rigs vs. production
3. Medium term outlook
4. Concluding notes
Part 2: Employment impact
1. Macroecon, jobs indicators, rich & emerging markets
2. Global remittances by country
3. OFWs destination countries
4. Saudi government finance
5. Concluding notes

3. Oil prices:
Left charts,
as of yesterday
http://oil-price.net/.
Lowest this year was
$26/barrel, early Feb.
Below chart,
WTI past 44 years,
adjusted for US
inflation.
Current prices are low
compared to 12-13
years ago, but higher
compared with late
90s prices.

4. Natural gas prices:
Left, as of yesterday, http://oil-price.net/
Below, past 8 years,
ttp://www.infomine.com/investment/metal-
prices/natural-gas/all/
Current prices are low since the previous decade
or even earlier.
Thanks to shale gas
revolution in the US, Canada,
other countries.
Medium term prices outlook is
stable low.

5. http://www.bloomberg.com/ne
ws/articles/2015-12-30/in-
world-with-too-much-crude-oil-
1-100-foot-steel-monsters-rule,
Dec. 30, 2015.
Glut in oil storage (left)
partly due to fast growth
in US shale oil output
(below), from 5-6 M bpd
in the previous decade to
current 9+ M bpd.
Four-week moving average of
US oil output, thousands of
barrels per day.
http://www.businessinsider.com/us-
energy-production-boom-charts-
2014-12

6. Annual change in US Oil Production, 1960-2014.
Source: EIA
US crude oil inventories, 1985-2015.
Source: EIA, Bloomberg

7. Declining Rigs Versus Rising
Production (left)
March 06, 2015
http://www.bloomberg.com/news/articles/
2015-03-05/the-price-of-oil-is-down-so-
why-is-production-still-going-up-
This clearly shows rising
productivity and output per rig.
Talk Markets, Feb. 16, 2015
Why The Price Of Oil Is More Likely To
Fall To 20 Rather Than Rise To 80
Rig productivity has acquired its
own momentum. And as oil
prices remain low, the search
for even higher productivity per
rig will rise further.

8. http://www.bloomberg.com/news/articles/2015-04-16/big-oil-is-about-to-
lose-control-of-the-auto-industry April 16, 2015
Oil Demand has flatlined for a decade

9. (US shale oil output
alone, from around 6.5
M bpd 2013 to 9+ M
bpd late 2014 until now.
Plus Canada shale…)
(While global oil demand
has generally flatlined,
see previous chart).

10. U.S. crude oil production (including lease condensate) increased during 2014 by
1.2 million barrels per day (bbl/d) to 8.7 million bbl/d, the largest volume increase
since recordkeeping began in 1900. On a percentage basis, output in 2014
increased by 16.2%, the highest growth rate since 1940.
U.S. oil production growth in 2014 was largest in more than 100 years, March 30,
2015. http://www.eia.gov/todayinenergy/detail.cfm?id=20572&src=email#

11. April 28, 2015, http://www.bloomberg.com/news/articles/2015-04-28/the-oil-rally-looks-doomed-in-five-
charts
NO MERCY. Above, Saudi Arabia output. Below, US fracklog, uncompleted wells

12. Sustained
decline in #
of oil rigs
since late
2014.
Closing
less
comm’l
ones.

13. Source: Mark P. Mills, “Shale 2.0: The emerging (American-driven) oil glut.”
Senior Fellow, Manhattan Institute for Policy Research, and CEO, Digital Power Group

14. http://www.businessin
sider.com/the-new-
structure-of-the-oil-
market-2015-8, Aug
9, 2015
Same pattern with US oil –
number of rigs decline but
overall output increases.
Meaning rising productivity
and declining cost per
shale rig. Perfect formula
to reduce the price in a
competitive environment.

15. http://www.bloomberg.com/ne
ws/articles/2016-01-14/for-
real-oil-prices-the-crash-is-
even-bigger-as-china-fizzles
Jan. 14, 2016
If already low nominal
prices are deflated or
adjusted for inflation to
get real prices, it’s
down to $20, $17 a
barrel.

16. Source: OPEC, World Oil Outlook 2015,
http://www.opec.org/opec_web/static_files_project/media/downloads/publicati
ons/WOO%202015.pdf, p. 48.
OPEC
projected in
2015 that oil
prices won’t
recover to
$50, $80 a
barrel (real
prices) until
a decade
after.
Interesting to
see their
new
projection
this year.

17. Concluding notes:
• Cheap oil is good. Especially for us oil consumers. Cheaper cost of
air, land and sea transport. Cheaper cost for farmers using tractors,
harvesters; for fisherfolks; for manufacturing, etc.
• Cheap oil though has negative effect on many OFWs based in Saudi
Arabia and UAE.
• Cheap oil hurts dictatorial governments more, many of them in OPEC.
Like Saudi Arabia, Iran, Venezuela. Also outside OPEC like Russia.
• Global capitalist competition is good. OPEC oil vs. Russia oil vs. US
shale oil and gas vs. others
• Medium term outlook, cheap oil will stay. Something like $40/barrel
average for the next few years.

18. Part 1: Cheap oil and gas
1. Oil and gas, prices and output
2. Oil and gas, number of rigs vs. production
3. Medium term outlook
4. Concluding notes
Part 2: Employment impact
1. Macroecon, jobs indicators, rich & emerging markets
2. Global remittances by country
3. OFWs destination countries
4. Saudi government finance
5. Concluding notes

19. The Economist, February 27th 2016,
http://www.economist.com/news/economic-and-financial-indicators/21693593-output-prices-and-jobs
Biggest economies in N. America, Europe & Japan have (1) low GDP gr, (2) low or neg. industrial
prodn., (3) near deflation prices, and (4) medium to high unempl. Greece, Spain outliers.

20. In contrast, rich and emerging economies in Asia (Japan and China not included):
(1) med. to high GDP growth, (2) mostly positive industrial prodn.,
(3) low consumer prices, and (4) low to medium unemployment rates, max 6.2%.
Low unemployment means more jobs are created, cheap oil has helped.
PH, from 7+ to only 5.6% unempl., more local businesses, can help absorb returning
OFWs from Saudi, UAE, others.

21. • Labor mobility and migration is a result of push and pull factors in both labor
exporting and importing countries. Labor-surplus countries have lower wages
and labor skills, labor-deficit countries have higher wages.
• If labor migration is heavily restricted via multiple regulations and permits,
wage gap and income inequality between the labor-surplus and labor-deficit
countries will worsen.
• If labor migration is less restricted, wage gap and income inequality between
the two group of countries will narrow or lessen. Global wages per industry and
sub-industry, wages per skills levels – other things being equal or held
constant – will move towards equilibrium or near-equality.

22. $ Billion 1984 1994 2004 2014 2015f R/GDP
India 2,293 5,855 18,753 70,389 72,178 3.4%
China 403 395 6,640 62,332 63,938 0.6%
Philippines 718 3,453 11,473 28,403 29,665 10.0%
Pakistan 2,580 1,750 3,942 17,066 20,100 6.9%
Bangladesh 501 1,150 3,582 14,969 15,760 8.6%
Vietnam .. .. 2,310 12,000 12,252 6.4%
Indonesia 53 449 1,866 8,551 10,487 1.0%
Sri Lanka 301 715 1,586 7,037 7,189 9.4%
Korea, Rep. 946 3,085 6,574 6,481 6,594 0.5%
Nepal .. 50 823 5,878 6,718 29.9%
Thailand 893 1,280 1,620 5,655 5,714 1.5%
Mexico 1,564 4,127 19,830 24,460 25,689 1.9%
France 1,262 3,955 12,260 24,968 24,414 0.9%
Nigeria 12 550 2,270 20,921 20,865 3.7%
Egypt 3,960 3,670 3,340 19,570 20,391 6.8%
Germany 1,964 4,405 6,581 17,629 17,494 0.5%
Belgium .. .. 6,867 11,494 11,060 2.2%
Spain 1,227 2,635 7,540 10,744 10,511 0.8%
Russia .. 4,568 2,499 7,777 7,871 0.4%
Lebanon .. .. 5,589 7,446 7,498 16.3%
Italy 3,274 2,418 2,176 7,256 7,176 0.3%
USA 80 1,940 4,730 6,878 6,998 0.0%
Poland .. 581 4,724 7,134 6,955 1.3%
Morocco 874 1,830 4,220 7,053 6,680 6.6%
Guatemala 3 285 2,632 5,837 6,408 9.9%
Ukraine .. .. 411 7,354 6,212 5.6%
World 35,361 85,677 226,426 580,365 588,199
Source: WB,
Migration and
remittances data,
October 2015.
http://www.worldbank.org/en
/topic/migrationremittancesd
iasporaissues/brief/migratio
n-remittances-data
(click the excel data)
R/GDP --
remittances/GDP ratio
PH low in 80s, fast
90s, now 3rd biggest
recipient worldwide
China very low until
90s, very fast growth
in last 2 decades.
Bangladesh, Vietnam,
Nigeria coming very
fast too this decade.

23. Sources: BSP,
http://www.bsp.gov.ph/statistics/keystat/ofw.htm,
http://siteresources.worldbank.org/INTRANETTRADE/R
esources/WBI-Training/288464-
1247082428215/Daisy_Cabral.pdf
Differences in WB and
Bangko Sentral ng
Pilipinas (BSP) figures.
For instance, BSP
data: 2014 remittances
was $24.35 B (vs.
WB’s $28.4 B). For
2015 forecast, BSP’s
target is $25.3 B while
WB’s forecast $29.7 B.
Difference could be
due to diff. accounting
method used by the
WB that applies to
other countries in its
global database.

24. 1. USA 1,998,932 17. Spain 38,291
2. UA Emirates 700,000 18. N. Zealand 37,299
3. Saudi Arabia 670,000 19. Guam 35,410
4. Canada 454,340 20. Oman 21,669
5. Malaysia 410,149 21. Norway 19,528
6. Japan 226,179 22. Thailand 17,581
7. Australia 189,969 23. France 14,280
8. Italy 129,788 24. Singapore 14,176
9. Qatar 185,000 25. Ireland 13,600
10. Kuwait 153,292 26. Austria 13,512
11. UK 126,972 27. Switzerland 13,213
12. China 121,320 28. N. Mariana Is. 12,324
13. Hong Kong 116,505 29. Netherlands 11,611
14. Germany 54,325 30. Macao 11,539
15. S. Korea 49,273 31. Sweden 11,468
16. Bahrain 43,971 32. Denmark 10,585
World 6,001,696
OFWs destination countries, 2013

25. US 9,653 China 452
UAE 3,496 Germany 252
Saudi Arabia 3,205 Bahrain 195
Canada 2,069 Spain 165
Malaysia 1,666 UK 563
Japan 1,001 New Zealand 161
Kuwait 844 Others
HK 564 TOTAL 28,403
Bilateral Remittance Estimates for 2013 using Migrant Stocks, Host Country
Incomes, and Origin Country Incomes (millions of US$) (April 2015 Version)
http://www.worldbank.org/en/topic/migrationremittancesdiasporaissues/brief/
migration-remittances-data
OFW Remittances by source countries, $ million, 2013
UAE and Saudi are huge sources of remittances. Cheap oil will affect
their revenues and hence, their capacity to employ foreign workers like
OFWs.

26. Revenues Expenditures Balance
2014 279 293 -14
2015 162 260 -98
2016 Est. 137 224 -87
Fiscal effect on Saudi Arabia -- from budget surplus to budget deficit, rising
from $14 B in 2014 to $98 B in 2015, highest in Saudi’s fiscal history,
despite significant spending cuts.
Meaning lower budget for public health, social sectors, physical
infrastructures, etc. Both direct and indirect spending (via private
contractors and suppliers).
Saudi government’s fiscal situation, in $ billion

27. Concluding notes
• Threat of reduced demand for OFWs in Saudi is real.
• But opportunities for employment in other countries, tourism-dependent
ones, will increase.
• Local businesses thriving, espec. tourism. High vehicles volume reported
in NLEX, SCTEX, SLEX, etc., meaning tourism in provinces booming.
• Cheap oil is one
proof we have
entered a period of
rising and
continuing world
abundance.
• The best is yet to
come. The young
people today are
lucky. But luckier
will be their
offspring.