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Daily Update August 9, 2023

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Daily Update August 9, 2023

Start every business day with our analyses of the most pressing developments affecting markets today, alongside a curated selection of our latest and most important insights on the global economy.

Energy Transition and Energy Demand in India

In honor of our new “Look Forward” report on India, this week’s Daily Updates will cover different aspects of the Indian economy.

A developing country needs cheap energy to grow, but renewable energy tends to be much more expensive than traditional sources. Coal is cheap but has high greenhouse gas emissions. Solar is expensive but generates no emissions once the panels have been manufactured. Like many countries, India has established net-zero emissions goals, but the country’s energy needs are growing quickly, and economic growth, particularly in the manufacturing sector, will require inexpensive energy for the immediate future. In this way, India’s energy trilemma is emblematic of the challenges of the entire Global South — how to balance availability, affordability and sustainability while improving the standard of living.

Dr. Atul Arya and Gauri Jauhar of S&P Global Commodity Insights looked at India’s energy transition and how the competing goals of more energy with fewer emissions are likely to play out. Economic growth in the world has always required more energy. In India, energy demand more than doubled between 2000 and 2020, from 417 million tons of oil equivalent (MMtoe) to 937 MMtoe. As India is on track for further economic growth, this demand is likely to increase many times over. India’s energy consumption per capita is still less than 1/10th of the US’.

India has limited domestic sources of energy. The country has substantial coal reserves, but heavy coal use is inconsistent with net-zero goals absent new types of carbon capture technology. This means India is heavily dependent on imports of oil and natural gas. India will need to export more than 90% of its oil by 2030 and 60% of its natural gas. Renewables such as wind and solar have the virtue of providing ongoing energy, and solar photovoltaic installations have grown 12-fold in India since 2015. But India will continue to be in the market for imports of carbon-intensive fuels through 2050. 

India has been criticized in some quarters for buying cheap Russian oil despite Russia’s invasion of Ukraine. “The decision to buy Russian oil — as well as from other new suppliers — was driven to make fuel affordable to our consumers,” said Hardeep Singh Puri, India’s minister of housing and urban affairs & petroleum and natural gas, in an interview with S&P Global.

Reducing emissions under these circumstances will be challenging. The power sector is heavily dependent on cheap domestic coal. Industry and transport can achieve some emissions reductions over time, but a growing economy tends to have more vehicles on the road and more factories. Even a reduction in emissions per vehicle will lead to higher total emissions.

The Indian government estimates that more than $10 trillion of new investments will be required to reach its goal of net-zero by 2070. This number represents a staggering challenge. Improved market orientation in the energy sector will help to attract the necessary investment, but the pace of technological change must increase for the 2070 goal to be achievable.

“As I see it, even if we make a major transition to green energy, we will still need oil and gas, at least for another 20 to 30 years,” said Puri.

Today is Wednesday, August 9, 2023, and here is today’s essential intelligence.

Written by Nathan Hunt.


China's Quest for Food Security is Bound to Be a Long Drawn Saga

In recent years, the growth in China's food consumption has outpaced its domestic supply, forcing the government to import large volumes of agricultural products every week to satisfy its 1.4 billion population. China is now the leading purchaser of soybeans, corn, wheat, rice, beef, pork, barley and sorghum, and it is also one of the top buyers of poultry.

—Read the full report from S&P Global Commodity Insights

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Capital Markets

North American Insurance Underwriter Deal Activity Rises YOY in H1'23

There were 69 underwriter M&A transactions in North America in the first half of the year, according to an S&P Global Market Intelligence analysis, compared to 55 in the prior-year period. Deal activity increased as the year went on, with 39 transactions in the second quarter and 30 in the first quarter.

—Read the full article from S&P Global Market Intelligence

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Global Trade

Global Trade Downturn Accelerates in July

The worldwide Purchasing Managers' Index (PMI) surveys compiled by S&P Global Market Intelligence indicated a seventeenth successive monthly fall in global export orders for goods and services, signalling an extension of the deterioration in global trade performance into the second half of 2023.

—Read the full article from S&P Global Market Intelligence

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Temperatures in July Surge to Record Highs: EU's Climate Monitor

July 2023 was the hottest month on record, with severe heatwaves and wildfires observed in the Northern Hemisphere, the EU's Copernicus Climate Change Service said Aug. 8.

—Read the full article from S&P Global Commodity Insights

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Energy & Commodities

Interactive: Platts Renewable Energy Price Explorer

The market value of wind and solar generation in Europe fell further in July as record summer wind output combined with weak demand, Platts Renewable Energy Price Explorer shows.

—Read and explore more from S&P Global Commodity Insights

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Technology & Media

Thai Media Corporations Seeing Content Growth Outside Thailand

Netflix and PCCW Media Ltd.-owned Viu announced in 2022 their slate of Thai originals for 2023, boosting local content to drive audience engagement. Thai media conglomerate BEC World Public Co. Ltd., media producer The ONE Enterprise PCL and content distributor and producer JKN Global Group PCL, meanwhile, are pushing for growth in their content export business, inspired by the success of their Korean counterparts.

—Read the full article from S&P Global Market Intelligence

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