After the Bell: The story of 2022, a year of grey swan events

27 Dec 2022

This past year brought a new kind of unpredictability, something with a dramatic but not cataclysmic effect. Economically speaking, the story of 2022 is somewhat exemplified by a single, small South American country: Guyana. Guyana’s real GDP growth this past year was heading for 57.8%. I am not making this up.

Guyana’s growth comes on top of growth in 2021 of 19.9% and in 2020 of 43.5%. Only one country has grown faster in history in a single year, and that was Libya in 2012 after the first civil war, and the growth was really only a rectification after a devastating contraction the previous year.

Guyana pootled along for years without looking anything like a world-beater. But then it discovered oil off the coast in 2015 and everything changed. Drilling began in 2019, and has continued feverishly.

The oil in the Suriname Basin could be the last huge oil find on the planet. Guyana’s production is expected to reach 1.2 million barrels a day by 2027, which would see the impoverished former British colony overtake Colombia to become the third-largest producer in Latin America, and fall within the top 20 in the world.

The difference is that Guyana has a population of about 800,000 people. The government is due to earn about $1-billion from oil revenue this year, reaching about $4.2-billion in 2027. That would be more than twice the country’s current budget of $2.5-billion. It would also mean an income of $5-million per person per year.

Of course, it wouldn’t last forever, but then again, what does?

It’s possible that the Guyana government could be sensible and create an oil fund like Norway did to invest for the future. But that would not be the way of oil-producing countries all over the world. There is almost nothing that distorts a country’s finances like sudden oil riches; it’s wonderful, but it puts a target on your back.

Internal politics gets to be a high-stakes game, and external relations become a delicate balancing act. But perhaps Guyana has learnt a thing or two. One can only hope.

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What the Guyana experience does illustrate for the rest of us is the enormous power of resource politics – as if we didn’t know already. And 2022 was the year when resource politics came crashing down on our heads.

The invasion of Ukraine suddenly created new winners and losers in the resource industry because of Europe’s dependence on Russian gas, which suddenly ended at both their own instance and that of Russia.

The planned step-down of carbon-based energy sources to mitigate global warming suddenly went into reverse. For the first half of the year, the oil price started pressing upwards strongly, starting at about $75 a barrel, with all kinds of other resources in tow. Oil’s price rise was impressive, but consider coal: it went from about $150 a tonne to about $400 a tonne.

Coal has never in its entire history seen anything close to these levels.

So that was the first half of the year. The second half was even crazier, because another big global trend took hold – recession.

We all know this story: inflation reared its head this year; central banks intervened and pushed up interest rates. So now a global recession is widely expected next year.

The possibility of a global economic decline began to become a factor in oil prices, which started their decline over the second half of the year.

Now it looks likely that oil will end the year where it began. But the coal price has stayed very high. Natural gas prices also shot up during the year, and have been bouncing around like crazy. But they have come down recently, as European stockpiles for the winter have been achieved.

What does this all say to us?

The Ukraine invasion was not what you might call a black swan event. Black swan events are dramatic, but have a very low chance of happening. If you had to pitch the odds of the Ukraine invasion happening at the start of the year, my guess is the odds would have been about 50/50, perhaps a bit less.

What happened in 2022 is a new class of unpredictability – something with a pretty good chance of happening that has a dramatic but not cataclysmic effect. What would you call that? A grey swan event?

The effect I think it may have had is that we are all jolted, uncertain and more pessimistic than we were at the start of the year. It’s doubly disconcerting because 2022 was supposed to be the year we bounced back from the Covid calamity. But, actually, Covid was rapidly overtaken by new sets of forces.

But you know, we should take heart, because 2022 was also the year autocrats got their comeuppance around the world, almost everywhere.

Even in South Africa, the Radical Economic Transformation faction of the ANC got severely thumped at Nasrec and President Cyril Ramaphosa won re-election with ease.

The world embarks on the new year a little more disconcerted, but with residual hope. It’s far from a triumphal moment, but it may be enough to create a foundation for something that looks roughly like a positive outlook.

It’s like a little bit of rain in the desert – not good enough. But we’ll take it. DM168

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R25.

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