Sunday, June 10, 2012

America's New Energy Reality of Increased Domestic Production, Thousands of New "Shovel-Ready" Jobs and "Energy Less Dependent"


Daniel Yergin writes in today's NY Times about America's new energy reality and he hits on many key points: a) how technology brought us the shale revolution of increased domestic production of natural gas and oil, b) how that increased production has brought us thousands of "shovel-ready jobs" and a powerful "energy stimulus" to the economy, c) how cheap, abundant natural gas is sparking a U.S. manufacturing renaissance with billions of dollars of new investment capital and thousands of new jobs, and d) how increased domestic energy production is moving us towards being "energy less dependent." Here are some excerpts:

"America needs a new political discourse on energy. This would recognize the emerging reality that the United States has turned around as an energy producer and is on a major upswing. And the impact will be measured not just in energy security and the balance of payments. Energy development also turns out to be an engine for job creation and economic growth.

The oil story is being rewritten. Net petroleum imports have fallen from 60 percent of total consumption in 2005 to 42 percent today (see chart above). Part of the reason is on the demand side. The improving gasoline efficiency of cars will eventually reduce oil demand by at least a couple of million barrels per day.

The other part is the supply side — the turnaround in United States oil production, which has risen 25 percent since 2008. It could increase by 600,000 barrels per day this year. The biggest part of the increase is coming from what has become the “new thing” in energy — tight oil. That is the term for oil produced from tight rock formations with the same technology used to produce shale gas.

Tight oil is redrawing the map of North American oil. At the beginning of this year, North Dakota overtook California as the nation’s third largest oil-producing state. It didn’t stop there. It just overtook Alaska, to become No. 2 after Texas. Tight oil could reach more than four million barrels per day by 2020. 

According to the old script, United States oil production was too marginal to affect world oil prices. But the gap today between demand and available supply on the world oil market is narrow. The additional oil Saudi Arabia is putting into the market will help replace Iranian exports as they are increasingly squeezed out of the market by sanctions that start later this month. But if America’s increase of 1.6 million barrels per day since 2008 had not occurred, then the world oil market would be even tighter. We would be looking at much higher prices — and voters would be even angrier. 

America’s new story for energy is still unfolding. It includes the continuing development and expansion of renewables and increased energy efficiency, both of which will be essential to our future energy mix. But what is striking is this great revival in oil and gas production in the United States, with wide impacts on jobs, economic development and the competitiveness of American industry. This new reality requires a new way of thinking and talking about America’s improving energy position and how to facilitate this growth in an environmentally sound way — recognizing the considerable benefits this will bring in an era of economic uncertainty."

MP: Yergin makes a key point that without increased domestic crude oil production, oil and gas prices might have risen much higher than they did in the last few years, and might be much higher today.  In other words, "Supply Matters."   


40 Comments:

At 6/10/2012 8:20 AM, Blogger Larry G said...

what percent of the US economy is this?

in terms of job creation, for instance,

how many jobs "need" to be created?

obviously 69,000 is considered not near enough.

so how many new jobs are created by this revival per month?

trying to get some context here.

 
At 6/10/2012 8:22 AM, Blogger marmico said...

"Supply Matters."

To start out, Yergin can't even add. U.S. monthly field production has not risen by 1.6 million barrels per day (bbl/d) since March 2008.

The EIA reported rise is 1.109 bbl/d and the production differential between March 2012 Texas state data and EIA (federal) data is almost 600,000 bbl/d today. If you halve the production discrepancy, the purported increase is only half of Yergin's number. Nonetheless the increase is impressive.

To put that in perspective, Saudi Arabia just cut production by 300,000 bbl/d for June exports.

Perry has been focused on North Dakota for eons yet supposedly the bulk of the domestic production increase has been in Texas and the Texan data gatherers are oblivious to it. Yergin, Perry and the EIA don't add up.

 
At 6/10/2012 8:53 AM, Blogger marmico said...

trying to get some context here

Since May 2008, 35000 jobs were added in oil and gas extraction and 237000 jobs in food service and drinking places.

Year over year job additions are 22000 and 265000, respectively.

Of course, the extraction jobs are higher paying with a higher multiplier in the economy due to the large capital expenditures.

From an output perspective the last year has probably been a wash between the job categories.

 
At 6/10/2012 9:03 AM, Blogger Larry G said...

" From an output perspective the last year has probably been a wash between the job categories."

okay. How would that be quantified to demonstrate the superior nature of that output?

 
At 6/10/2012 9:13 AM, Blogger VangelV said...

Daniel Yergin writes in today's NY Times about America's new energy reality and he hits on many key points: a) how technology brought us the shale revolution of increased domestic production of natural gas and oil, b) how that increased production has brought us thousands of "shovel-ready jobs" and a powerful "energy stimulus" to the economy, c) how cheap, abundant natural gas is sparking a U.S. manufacturing renaissance with billions of dollars of new investment capital and thousands of new jobs, and d) how increased domestic energy production is moving us towards being "energy less dependent."

LOL...This is the same clown who got the depletion rate wrong by 50% and has been hyping abundance and cheap oil his whole career. For some reason he forgot that once the spare capacity was gone the only way to reestablish it was to kill off demand, which is not what readers on this site consider progress. There is no energy independence for the US unless its currency collapses by enough to drive down oil use by around two thirds. And we have already seen the damage done by the shale gas hype. Companies were producing at a cost that was more than twice the market price as they were adding massive amounts of debt and playing with the EUR assumptions. The damage done was not just to shareholders but to the general economy as the shale industry donated money for environmental programs that pushed the closing down of coal generation facilities. With rig counts collapsing and old plants closed the US is vulnerable to a cold winter, probably after the effect changing ENSO conditions clear in a year or two.

What happens then?

 
At 6/10/2012 10:00 AM, Blogger marmico said...

How would that be quantified to demonstrate the superior nature of that output?

How about the increase in wage income over the last 12 months.

Oil and gas extraction: average hourly earnings $34.26 x average weekly hours 46.3 = $80000 per year x 22000 added positions

Food services and drinking places: average hourly earnings $11.06 x average weekly hours 25.7 = $15000 per year x 265000 added positions.

Do the math! I get dumbfounded with all those zeroes. ;-) But the incremental increase in oil and gas extraction wage income is less than half as much as food services and drinking places.

 
At 6/10/2012 10:27 AM, Blogger Larry G said...

" But the incremental increase in oil and gas extraction wage income is less than half as much as food services and drinking places. "

and the _rest_ of the economy?

what's the context?

is the gas/oil a 1% or a 10% (or more) part of the economy?

 
At 6/10/2012 10:56 AM, Blogger marmico said...

Why the hell did you mention jobs three times in your opening salvo, Larry?

Go to the BEA, find value added by industry and satisfy yourself. Sheesh, not to excuse your sloth, value added in 2010 (the last available data point) was twice as high for food, etc. than oil, etc.

 
At 6/10/2012 11:11 AM, Blogger Larry G said...

Why the hell did you mention jobs three times in your opening salvo, Larry?

Go to the BEA, find value added by industry and satisfy yourself. Sheesh, not to excuse your sloth, value added in 2010 (the last available data point) was twice as high for food, etc. than oil, etc.


all factors.. jobs, production, etc

I'm asking for some context to the oil/gas "boom".

lazy, yes but the one sided rah rah... tends to narrow the focus in a way that tends to portray it as a larger impact than it might really be.

I do not discount it ..it's a bright light in a dim economic sky of late but I also do not think it will come anywhere close to getting us back to where we were before - either.

"shovel-ready" in context was an attempt to re-gen a seriously-damaged economy - comprehensive in nature - and more effective than acknowledged as it resulted in a ton of highway projects and temporarily-saved jobs of teachers and police....

One can put the phrase "shovel-ready" on ANY newly-created job in the current economy but I think that the oil/gas jobs alone are low in number comparatively to how many other "shovel-ready" jobs are needed to get us back to a healthy economy.

probably a half-full, half-empty problem on my part.

 
At 6/10/2012 2:06 PM, Blogger Rufus II said...

Yergin's counting about a million bbl/day of biofuels as "oil."

A sneaky booger, he is.

 
At 6/10/2012 6:07 PM, Blogger Henry H said...

Besides jobs, people are forgetting about mineral rights. The professor has posted recently about the millions in deposits made at banks in the Eagle Ford Shale by families benefiting from mineral rights leases. How much money is brought to families through leases compared to a job? How many other jobs are created, when these previously poor/middle class families spend their discretionary income?

 
At 6/10/2012 6:17 PM, Blogger Henry H said...

A $88 million increase at Karnes bank in 2 years and 1 quarter is huge increase in wealth. What was the increase in spending and jobs? Are there sales tax receipts analysis to determine the money spent?

 
At 6/10/2012 6:20 PM, Blogger Craig Howard said...

it resulted in a ton of highway projects and temporarily-saved jobs of teachers and police....

None of which resulted in a single penny's worth of wealth creation. They only mean something if you still choose to believe that consumer spending drives the economy.

It doesn't.

 
At 6/10/2012 6:46 PM, Blogger Larry G said...

" None of which resulted in a single penny's worth of wealth creation. They only mean something if you still choose to believe that consumer spending drives the economy."

true. it was never designed to do that.

It was designed to keep the economy from going from recession to depression and they had to guess at how deep the recession would go and they guessed wrong.

what should have been done instead?

Looks like most other countries have the same basic response....Austerity in a recession is a death-spiral.

 
At 6/10/2012 7:23 PM, Blogger Paul said...

"true. it was never designed to do that."

In other words, Obama repeatedly lied through his teeth when he said otherwise.

"what should have been done instead?"

Lots of things. It even would have been better to do nothing.

".Austerity in a recession is a death-spiral"

Only if by "austerity" you mean raising taxes on productive people.

 
At 6/10/2012 7:31 PM, Blogger Larry G said...

" In other words, Obama repeatedly lied through his teeth when he said otherwise."

I was under the impression that it was stated that the purpose of the stimulus was to help recover the economy.

did you hear something different?

re: austerity

cutting spending during a recession leads to less revenues which then requires more cutting... etc...

wrong?

 
At 6/10/2012 7:58 PM, Blogger Paul said...

"did you hear something different?"

I'm not going to get sucked into one of your stupid Obama boot-licking sessions, especially when we've already been through this before. Obama repeatedly vowed the stimulus would be used for "investments" that would yield dividends for the country. He even put idiot "sheriff" Joe Biden in charge of overseeing the stimulus to make sure the money wasn't wasted.

"cutting spending during a recession leads to less revenues which then requires more cutting... etc..."

If that's how it works then how can a government ever cut spending? Why shouldn't we spend trillions more? Why is there any poverty left on the planet if it's simply that easy? Any idiot can borrow a bunch of money and throw it out the window.

The recession of 1920 was severe. President Harding's response was to cut spending in nearly half and cut taxes. The recession was over in about a year and set the stage for the roaring twenties.

 
At 6/10/2012 8:07 PM, Blogger Larry G said...

I never thought there was any real doubt to the purpose of the stimulus - from a wide variety of perspectives left and right.

they just disagreed as to whether it was the right thing to do and whether it worked or not.

in terms of cutting ...and when.. you cut when times are good...and revenues flush.

right?

 
At 6/10/2012 8:52 PM, Blogger Paul said...

"I never thought there was any real doubt to the purpose of the stimulus - from a wide variety of perspectives left and right."

The main purpose of the stimulus was to grow government. It succeeded. However, Obama sold the massive package as an "investment." He repeatedly promised not to piss money away. He lied. I agree that liberal economists may have made the "firehose money at anything that moves" argument, but that's not how Obama sold it.

"in terms of cutting ...and when.. you cut when times are good...and revenues flush."

Nope. Government is overhead. I cut overhead when things get tight, what do you do? Add a new car payment? Besides, we can look at what other countries have done. Germany didn't follow our big fiscal stimulus. Neither did Canada. Both have fared much better in terms of unemployment than us during the recession so far, though both had unemployment rates that tracked closely to ours before the meltdown.

 
At 6/10/2012 9:52 PM, Blogger Larry G said...

" The main purpose of the stimulus was to grow government. It succeeded"

it was not a permanent increase, guy

it was temporary spending.

Isn't Germany willing to give stimulus to other countries right now?

 
At 6/11/2012 7:04 AM, Blogger Henry H said...

This comment has been removed by the author.

 
At 6/11/2012 7:07 AM, Blogger Henry H said...

Ohio is in a real estate rebound. Delinquency rates are dropping. Thanks to fracking and the Utica Shale.

The 330-acre tract of Appalachian property is being transformed into an industrial park. The first tenant will be MRC Global Inc. (MRC), a Houston-based pipe and valve supplier that will serve Ohio’s emerging oil and natural-gas industry.

Chesapeake Energy Corp. (CHK), the second- largest U.S. natural-gas supplier, has acquired $2 billion in land leases comprising 1.35 million acres in Ohio.

http://www.bloomberg.com/news/2012-06-11/fracking-in-ohio-sparks-real-estate-rebound-mortgages.html

 
At 6/11/2012 7:17 AM, Blogger Larry G said...

you know... this "energy" "revival" has all the earmarks of a bubble.

it walks and talks just like the internet and housing bubbles...

No question the oil/gas and resulting dollars and prosperity are real but the bigger question is - how long will it last?

Ultimately what happens to towns that have a "boom" that is not sustainable? They usually "bust" and a lot of people lose their butts in the process.

 
At 6/11/2012 7:28 AM, Blogger Larry G said...

"Nope. Government is overhead. I cut overhead when things get tight, what do you do?"

if your "revenue" comes from others whose own economic status can affect you land depends on what you spend - then cutting your spending will result in less income to you also. The govt sits in the entire economy and is involved is both spending and revenues.

the Fed govt with a central bank entity is different from you and I and even different from states - and this aspect is true globally with respect to other countries (virtually all operate that way), and the vast majority of economists and the vast majority of countries view stimulus as an appropriate response to a recession because it is well known that austerity results in a down spiral in revenues needed to pay for govt.

"Besides, we can look at what other countries have done. Germany didn't follow our big fiscal stimulus."

Germany has done stimulus in the past, does not entirely rule it out on a "never" basis, and now supports stimulus as a response to recession in Europe in part because they believe it affects their own self-interests - and it does.

"Neither did Canada. Both have fared much better in terms of unemployment than us during the recession so far, though both had unemployment rates that tracked closely to ours before the meltdown"

Canada did a stimulus guy: " In early 2009, the federal government pumped up spending by about $50 billion over two years through tax cuts, income supports and fast-tracking infrastructure projects, among other measures, to limit the damage of the global recession. Even so, the country fell into a nine-month recession and lost about 430,000 net jobs before halting the slide"

http://www.edmontonjournal.com/business/Slump+will+with+stimulus+Tories/6731432/story.html

It's considered - worldwide AN option depending on each country's situation. It is NOT ruled out as wrong no matter what.

Paul - you read too many slanted articles.

At the least you need to acknowledge that around the world with both governments and economists that stimulus is considered an option in times of recession.

What Obama did has been done before in the US and around the world.

It was not a "obama" "plan". It was an option presented to him that he accepted and not only did he accept it - so did Congress because as you know Obama cannot spend a dime unless Congress first approves it.

And Paul - tax cuts are considered stimulus also - and tax cuts contribute to the deficit and debt if they result in lower revenues to fund existing spending - which is exactly what happened under Bush.

The question is - WHEN is it appropriate to borrow from the future because that's pretty much what stimulus is - when there is a recession and lowered tax revenues.

In good times, you buy down the deficit/debt and it is the best time to trim govt spending because the economy is better able to absorb govt workers and govt contractors and related who are let go.

If you do that in the midst of a recession, you increase unemployment and you decrease tax revenue which in turn makes the deficit and debt even worse results in a downward spiral that most economists say - will ultimately result in a depression.

 
At 6/11/2012 8:07 AM, Blogger VangelV said...

Chesapeake Energy Corp. (CHK), the second- largest U.S. natural-gas supplier, has acquired $2 billion in land leases comprising 1.35 million acres in Ohio...

CHK is near bankruptcy and has to sell off assets in order to repay debt. It is the poster child for malinvestment in the shale business.

 
At 6/11/2012 8:10 AM, Blogger VangelV said...

you know... this "energy" "revival" has all the earmarks of a bubble.

it walks and talks just like the internet and housing bubbles...


Like the internet bubble there are some shale companies that can make some money for a limited period that would allow them to find other opportunities. The sweet spots in the core shale areas can produce tight oil and gas at a profit so that is not the problem. The problem is the non-core areas, which make up the bulk of shale formations but have to be drilled in order to prevent a write-down of leases gone bad. Mark tends to ignore that important fact.

 
At 6/11/2012 8:11 AM, Blogger VangelV said...

if your "revenue" comes from others whose own economic status can affect you land depends on what you spend - then cutting your spending will result in less income to you also. The govt sits in the entire economy and is involved is both spending and revenues.

Your ignorance is showing again my idiot friend. Keynesianism is discredited and the world does not work as you believe it does.

 
At 6/11/2012 9:08 AM, Blogger Jet Beagle said...

Larry G: "what percent of the US economy is this?

in terms of job creation, for instance,"


Why don't you research this yourself and let us know? It's not hard to find the number of jobs in the U.S. economy. It just takes a little time.

 
At 6/11/2012 10:39 AM, Blogger Larry G said...

" Your ignorance is showing again my idiot friend. Keynesianism is discredited and the world does not work as you believe it does."

even the GOP believes in Keynesian economics sport!

worldwide - there is acceptance of central banking and stimulus during recessions.

that's not my view - that's the reality.

Austerity during a recession will create a depression.

virtually all mainstream and economists who advise govt say this.

 
At 6/11/2012 10:40 AM, Blogger Larry G said...

" Larry G: "what percent of the US economy is this?

in terms of job creation, for instance,"

Why don't you research this yourself and let us know? It's not hard to find the number of jobs in the U.S. economy. It just takes a little time."

let me rephrase.

"How about some CONTEXT to go with the Rah Rah"?

okay?

Hey, see my comment on the OHIO "boom".

 
At 6/11/2012 12:19 PM, Blogger VangelV said...

Why don't you research this yourself and let us know? It's not hard to find the number of jobs in the U.S. economy. It just takes a little time.

Our friend is either a fool or he is just playing games with people by asking questions that should be easy to get the answers to if he were willing to do a bit of reading. Given the fact that he has yet to look at any of the material that has been suggested to him it is a waste of time to bother with him too much.

 
At 6/11/2012 12:20 PM, Blogger Larry G said...

Van go suck a lemon boy.

it would at least sound more intelligent.

 
At 6/11/2012 12:24 PM, Blogger VangelV said...

even the GOP believes in Keynesian economics sport!

So? The GOP is not much different than the Dems. Which is the reason why the US is bankrupt and running out of runway.

worldwide - there is acceptance of central banking and stimulus during recessions.

Only among the bureaucrats and Keynesian/Monetarist academics. Given their track record that should be a point against stimulus.

Austerity during a recession will create a depression.

Except that it hasn't. A sustainable recovery requires the liquidation of malinvstments. No matter when a bureaucrat allows that to happen there will be pain. But the pain in necessary for gain.

virtually all mainstream and economists who advise govt say this.

Which is why you need to reject the mainstream and go with the economists who predicted this would happen and explained exactly how and why it would happen.

 
At 6/11/2012 12:31 PM, Blogger VangelV said...


it would at least sound more intelligent.


Why don't you try shedding some of your ignorance by learning a few things and practicing critical thinking?

 
At 6/11/2012 2:19 PM, Blogger Larry G said...

" worldwide - there is acceptance of central banking and stimulus during recessions.

Only among the bureaucrats and Keynesian/Monetarist academics. Given their track record that should be a point against stimulus."

what is the reality guy?

"Austerity during a recession will create a depression.

Except that it hasn't. A sustainable recovery requires the liquidation of malinvstments. No matter when a bureaucrat allows that to happen there will be pain. But the pain in necessary for gain."

you're confusing maladjustment with a recession. the two are not locked at the hip.

"virtually all mainstream and economists who advise govt say this.

Which is why you need to reject the mainstream and go with the economists who predicted this would happen and explained exactly how and why it would happen."

what is the reality guy?

you name call because I tell you what the reality is.

WTF?

"learn"... "learn" what ? that you have a different idea than virtually every single industrialized country in the world?

is this yet another "conspiracy" but this time of economists?

 
At 6/11/2012 2:30 PM, Blogger Ron H. said...

"you're confusing maladjustment with a recession. the two are not locked at the hip. "

LOL!

You may have meant to write "malinvestment", but in any case it's pretty funny.

 
At 6/11/2012 3:39 PM, Blogger VangelV said...


what is the reality guy?


Easy. Depressions and malinvestments are caused by regulations, interest rate manipulation, and easy credit schemes.

But how would you fix things? Regulations, interest rate manipulation, and easy credit schemes. See the problem?

you're confusing maladjustment with a recession. the two are not locked at the hip.

You don't read well. Or understand anything. To see the difference compare the Harding austerity, which created a liquidation that became the foundation of a sustained recovery with the Bush/Obama or Hoover/FDR stimulus that was the foundation of a weak economy that could not recover. If you want a recovery you need to flush out the lousy investments that never should have taken place. Stimulating to keep them going does not help the strong parts of the economy. (See Japan on that front.)

what is the reality guy?

you name call because I tell you what the reality is.


What do you think we have been telling you all along you moron? And why is it that you can't read or understand what my little kids have no trouble following?



You may have meant to write "malinvestment", but in any case it's pretty funny.

He probably did. I figure an IQ of 75 or someone so brainwashed that he has trouble thinking on his own.

 
At 6/11/2012 3:46 PM, Blogger juandos said...

"I was under the impression that it was stated that the purpose of the stimulus was to help recover the economy"...

Hmmm, I got a bridge for sale, you interested in buying it?

Just look at the amazing progress so far...

The Unstimulated Obama Economy
May 31, 2011 at 9:35 am

Doing fine: Sales growth at U.S. companies falls to lowest point since financial crisis
June 11, 2012, 10:09 am

 
At 6/11/2012 4:34 PM, Blogger Larry G said...

re: maladjustment.. oh...bad...

"Easy. Depressions and malinvestments are caused by regulations, interest rate manipulation, and easy credit schemes."

always? is that what the mainstream say?

"But how would you fix things? Regulations, interest rate manipulation, and easy credit schemes. See the problem?"

how do the majority of practicing economists do it?


you're confusing maladjustment with a recession. the two are not locked at the hip.

You don't read well. Or understand anything. To see the difference compare the Harding austerity, which created a liquidation that became the foundation of a sustained recovery with the Bush/Obama or Hoover/FDR stimulus that was the foundation of a weak economy that could not recover. If you want a recovery you need to flush out the lousy investments that never should have taken place. Stimulating to keep them going does not help the strong parts of the economy. (See Japan on that front.)

done in other times and places?


what is the reality guy?

you name call because I tell you what the reality is.

What do you think we have been telling you all along you moron? And why is it that you can't read or understand what my little kids have no trouble following?

not "learning" from youse guys is is like not learning from lunatics..... ya'll are deep into global conspiracies and unproven theories as the basis for your dogma.

and then you foist it on the gullible... no thanks.





You may have meant to write "malinvestment", but in any case it's pretty funny.

He probably did. I figure an IQ of 75 or someone so brainwashed that he has trouble thinking on his own.

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Posted by VangelV to CARPE DIEM at 6/11/2012 3:39 PM

juandos ✆ noreply-comment@blogger.com
4:46 PM (42 minutes ago)

to me
juandos has left a new comment on the post "America's New Energy Reality of Increased Domestic...":

"I was under the impression that it was stated that the purpose of the stimulus was to help recover the economy"...

Hmmm, I got a bridge for sale, you interested in buying it?

Just look at the amazing progress so far...

The Unstimulated Obama Economy
May 31, 2011 at 9:35 am

Doing fine: Sales growth at U.S. companies falls to lowest point since financial crisis
June 11, 2012, 10:09 am

 
At 6/11/2012 8:01 PM, Blogger VangelV said...

always? is that what the mainstream say?

No. They say the opposite and prefer to take the approach of Japan, Argentina, Zimbabwe, or the US under Hoover/FDR.

how do the majority of practicing economists do it?

Do what? And are you forgetting the important question? Cui bono?

you name call because I tell you what the reality is.

No. I name call because of reality. You really are an ignorant idiot who refuses or is incapable of learning.

 

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