El Ojo del Lago

Thunder On The Right

By Paul Jackson

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There is a wave of prosperity - fuelled by typical and admirable American enterpreneurship and innovation - sweeping across the USA that is about to create hundreds of thousands of jobs.

Why haven’t you heard about this? Because no one seemingly ever wants to say anything nice about the oil and gas industry.

Instead, they blame ‘Big Oil’ for just about all their woes, even though the big western oil companies control only some 7% of the world’s oil reserves, with the other 93% being owned by state-run outfits in the Middle East and other oil producing regions that in cartel style - the Organization of Petroleum Exporting Countries ( OPEC) - try to set the price of a barrel of oil. To say Exxon-Mobil, Shell or British Petroleum can control world oil prices is like saying a small weekly newspaper in Nebraska can control the advertising rates of the New York Times or Washington Post.

But the negative attitude towards the oil and gas industry may be about to change.

Let’s start off small.

What is the fourth largest oil producing state in the USA? It’s North Dakota - which because of its oil and natural gas production now has the lowest jobless rate in the nation at 3.5%.

Yup, after Texas, Alaska and California comes North Dakota - and soon we’ll be adding Pennsylvania, Ohio and West Virginia to the list. These states, and others, are starting to exploit their reserves of ‘shale’ oil - sometimes called ‘tight’ oil which is oil drawn from rock-like formations.

Large corporations, some domestic and some foreign, are now planning to build manufacturing plants in these states because of economically feasible shale oil and natural gas resources. Analysts say these plants could create one million new jobs in the next 15 years.

As an aside, natural gas prices have fallen by roughly 75% in the past six years.

There’s more heartening news. For the first time since 1949, the USA this year will be a net exporter of refined petroleum products such as diesel, aviation fuel, heating oil and even basic refined gasoline.

It’s true, the USA is still dangerously dependent on imported crude oil from countries that detest America - but that situation is changing, too.

Remember when President Richard Nixon recalled that importing 20% of America’s oil needs was economically unsustainable and a security threat and was determined to cut that dependence back. Then Watergate intervened and eventually that 20% dependency climbed to staggering 70%.

Americans still remember what happened then - under President Jimmy Carter—the Middle East tightened the noose and there were staggering line-ups at the pumps.

Yet now some analysts assess that 70% of imported oil has fallen as low as 50% - down 10% since 2006 alone - and the largest supplier of ‘foreign’ imported oil is Canada. Canada now supplies some 20% of America’s imported oil and that will likely double within the next 12-15 years. Obviously, Canada will never try to threaten or blackmail the USA.

Incidentally, although Alberta’s oil sands are often said to contain the second largest oil reserves in the world after Saudi Arabia, some analysts believe the shale oil reserves across the USA are even larger.

To top off the good news a barrel of regular crude itself has fallen by 30% since 2008 - and in one day alone last year oil futures fell by 5% a barrel

Did I say to ‘top off’ the good news - that’s not exactly correct because there is so much good news about the oil and gas industry it’s hard to know where to stop.

It’s a continuing good news story.