February 2010
After rough year, energy markets position for comeback in Metro Denver
Thanks to a decline in oil prices from 2008 highs, the energy sector was arguably one of those most battered by recession. While energy trends should strengthen in 2010, the sector still has some distance to go to recover, according to data compiled by the Metro Denver Economic Development Corporation (Metro Denver EDC) in its Monthly Economic Summary for February 2010.
Energy demand should rebound relatively quickly in industrializing countries like India and China, but demand in the U.S. and other developed nations will remain sluggish as consumers and businesses slowly return to normalcy. Energy markets are also struggling to manage oversupply due to weak demand in 2009, a reality somewhat hidden by recent speculation and price increases.
"Despite these challenges, energy markets are already positioning for a comeback," stated Tom Clark, executive vice president for the Metro Denver EDC.
In January, several fossil energy companies with Colorado ties announced strategic changes aimed at developing oil sands, oil shale, and other unconventional resources. Evidence of an improving market also emerged for Colorado renewable energy companies, several of which announced large turbine orders as 2010 began. While energy markets still face challenges this year, changes in the marketplace thus far suggest many energy companies expect better conditions soon.
While regulatory reforms have recently dominated the government’s recovery efforts, funds from the 2009 economic stimulus continue to flow. In early January, the administration approved $2.3 billion in stimulus-funded tax credits that officials hope will spur green jobs creation. Six Colorado companies – Abound Solar, Advanced Energy Industries, Coolerado Corp., ReflecTech, Hexcel Corp., and Vestas – received awards totaling $75.2 million.
In addition to tax credits for some renewable energy companies, Colorado will also receive roughly $6 billion in stimulus dollars from the U.S. Department of Labor for job training in renewable energy and other emerging industries. Two consortiums with Colorado members are scheduled to receive $78 million in stimulus grants for the development of biofuels. Solix Biofuels and Colorado State University are part of a group that will explore algae-to-oil technology, and the National Renewable Energy Laboratory is part of a group that will research infrastructure compatible with biofuels.
Furthermore, the Colorado Department of Transportation (CDOT) will receive $1.4 million in federal stimulus grants to examine the feasibility of a high-speed rail line. The Department will use the funding to study ways an inter-city, high-speed line could connect to Metro Denver’s FasTracks network. CDOT officials will also develop a State Rail Plan, which is required of states designated by the federal government as high-speed rail corridors. These corridors can be eligible for federal funding.
"The hope is that these stimulus dollars will create jobs locally," said Clark.
Metro Denver’s unemployment rate rose from 6.7 percent in November to 7.3 percent in December as the number of unemployed rose considerably. While year-end layoffs and weak holiday hiring trends were factors behind December’s higher unemployment rate, the notion of an improving economy and slightly better job prospects may also be drawing more job seekers back into the labor force. The nationwide unemployment rate rose from 9.4 percent to 9.7 percent.
Economic indicators for Metro Denver suggest the region’s economy lost some momentum in late 2009. While not encouraging, this shift was partly expected due to changes in stimulus-related incentive programs. Seven indicators moved in a positive direction for the month, down from 11 in the prior month’s report. Just one indicator moved in a positive annual direction this month, compared to two indicators in the prior report.
The Monthly Economic Summary provides a snapshot of metro area economic activity, as well as its relationship to national and regional economic trends.