The U.S. economy has expanded 7.6 percent since the recession ended in 2009. That’s better than Britain, Japan, the euro zone and many other advanced nations around the world. So why is that?
One popular theory is that the United States has benefited from a huge domestic energy boom. Thanks to new advances in drilling technology — particularly in hydraulic fracturing — U.S. companies have managed to exploit new sources of oil and shale gas in places like North Dakota, Texas, Ohio and Pennsylvania.
But not everyone is convinced that this drilling frenzy has carried the U.S. economy. In a new research note for Capital Economics, Paul Dales argues that the oil and gas boom has so far provided only a modest economic boost since 2009:
Since June 2009 the volume of oil and gas extraction has risen by 24%. Over the same period the production of mining machinery has risen by 47% and the output of mining support services, which includes oil and gas drilling, has leapt by 58%. The only disappointment is that output of petroleum refining has risen by just 3%.
But that rise explains only a small part of the economic recovery. Admittedly, it is responsible for a fifth of the 18.3% increase in overall industrial production. Given that the oil- and gas-related sectors account for only 2.5% of GDP, they have contributed just 0.6 percentage points (ppts) to the 7.6% rise in GDP.
Dales gets a similar result — about 0.7 percentage points of growth since 2009 — when he measures the value of the oil and gas boom in a different way, by looking at investments and the reduction of imports. That’s still significant (the reduction in imports alone have contributed 0.4 percentage points to growth), but it’s also relatively limited.
On the latter point, it’s worth noting that while the United States has managed to reduce the sheer volume of crude it imports, the price of oil has stayed high. So our total oil import bill hasn’t fallen as quickly:
LONDON: The world faces an oil supply crunch within the next five years, British business leaders led by Virgin tycoon Richard Branson warned on Wednesday.
The rate at which oil is produced risks hitting a peak by 2015, sparking a surge in crude prices and living costs, said a report from the UK Industry Taskforce on Peak Oil & Energy Security (ITPOES), of which Branson is a member.
The report, entitled 'The Oil Crunch - a wake up call for the UK economy', urged the formation of new organisation to address the issue, with members representing the British government, businesses and consumers.
"The UK Industry Taskforce on Peak Oil and Energy Security (ITPOES) finds that oil shortages, insecurity of supply and price volatility will destabilise economic, political and social activity potentially by 2015," the report said.
"Peak oil refers to the point where the highest practicable rate of global oil production has been achieved and from which future levels of production will either plateau, or begin to diminish.
"This means an end to the era of cheap oil," added the report from the taskforce, whose members include British tycoon Branson and Ian Marchant, head of Scottish & Southern Energy.
ITPOES forecast global oil output would reach a plateau at fewer than 95 million barrels per day potentially by 2015. That compared with 2008 global production of 85 million bpd.
"The taskforce states the impact of peak oil will include sharp increases in the cost of travel, food, heating and retail goods," the report added.
"It finds that the transport sector will be particularly hard hit, with more vulnerable members of society the first to feel the impact."
With Britain facing a national election by June, the grouping also warned that any new government must deal with the looming oil crunch.
"The taskforce warns that the UK must not be caught out by the oil crunch in the same way it was with the credit crunch and states that policies to address peak oil must be a priority for the new government formed after the election."
It added: "Unless we do so, we face a situation during the term of the next government where fuel price unrest could lead to shortages in consumer products and the UK's energy security will be significantly compromised."
Supply-side constraints - lack of construction capacity, oil rigs and skilled manpower - would all contribute towards peak oil, according to the taskforce.
The group also called for the development of alternative methods to powering transport.
Branson, founder of Virgin Group, added that businesses and the government must work alongside each other.
"Working together, we must ensure that the government takes action to address the impact of the oil crunch and ensure the UK is better prepared to withstand higher and more volatile oil prices," Branson said.
"UK competitiveness will be hampered unless we can develop viable, affordable and secure long term sources of alternative energy."
In recent years, oil prices have been extremely volatile, spiking to record heights above 147 dollars per barrel in July 2008, before plunging to 32 dollars per barrel as a global recession slammed energy demand.
World oil prices have since recovered ground to trade between 70-80 dollars as the market was boosted by signs of global economic recovery. - AFP/de
I suspect I should apologize. Here I am talking about the future projections for energy production made by companies such as ExxonMobil and Shell, as though they were still the key and only players in the world. Yet in reality, Saudi Aramco (12.5 mbdoe), Gazprom (9.7 mbdoe) and National Iranian Oil (6.4 mbdoe) appear in the list before ExxonMobil arrives (at 5.3 mbdoe), and then there is PetroChina (at 4.4 mbdoe) before BP arrives (at 4.1 mbdoe), and it is only then that we find Shell, which lies 7th at 3.9 mbdoe.
So the projections of the ExxonMobil’s of the world are of somewhat lesser value than they might have been at one time. (For those curious, the list continues with Pemex (at 3.6 mbdoe), Chevron (at 3.5 mbdoe) and Kuwait Petroleum Co (3.2 mbdoe). This not only rounds out the top ten, it also closes out the list of those producing more than 3 mbdoe. (Abu Dhabi comes next at 2.9 mbdoe).
Yet with those caveats, and recognizing that Saudi Arabia now produces only slightly less than ExxonMobil, Shell and BP combined, let me review the BP forecast, having already completed that for ExxonMobil and Shell. While the latter two looked sufficiently far into the future as to obfuscate a little their shorter-term projections, BP is still focusing on the relatively short-term that runs to 2030.
Within that time frame, BP expects overall energy demand to grow by 36%, though like the ExxonMobil projection, BP expects that a “tremendous increase” in energy efficiency will continue to develop, thereby slowing the need for future resources. They point out that without this improvement in efficiency, global energy supply will need to double by 2030 in order to sustain economic growth.
This is particularly true for the United States, which BP sees approaching self-sufficiency in Energy, while it is the continued growth in demand from countries such as China, India and the Asian Pacific countries that provide most of additional need. Comparing their view from 2 years ago with the present there does not appear to be much change in the overall forecast. (Note that after the first two figures all the remainder come from the 2030 BP Energy Outlook).
Figure 1. Comparison of BP data and projections for population growth between their 2011 report (left) and that for 2013. (right)
Figure 2. Comparison of current and anticipated energy demand through 2030, from 2011 (left) and 2013 (right) BP reports.
Natural gas future price (short term delivery) declined during the first part of the week only to changed course and sharply rose by the end of it. By the end of the week the Henry Hub future (short term delivery) increased again by 4.41%. Based on the recent EIA natural gas storage update, the natural gas storage changed direction and rose, much like the average five years did during the same time frame: The NG storage injection was 31 Bcf. In comparison, during the same week last year the injection was 25 Bcf; this injection in the storage may have been lower than many had anticipated, which may have led to the short squeeze by the end of the week,
Here is a short analysis of the latest changes in natural gas market for the week ending on April 19th 2013:
Natural Gas Market – April Report
The Nymex Henry Hub Future (short term delivery) rose again during last week by 4.41% and by Friday reached $4.41/mmbtu; its average daily change was 0.89%; its weekly average price was3.77% above last week’s average price.
The gap between the NG future and spot prices – future minus spot – zigzagged between backwardation and Contango during last week.
Natural Gas Charts
The following charts present the developments in Nat Gas future (Nymex Henry Hub) in $/mmbtu between April 15-19.
As seen in the chart herein, the NG prices (Henry Hub future and spot) rallied by the end of the week after they had decreased during the beginning of the week.
Leading commodities prices rose again on the first business day of the week: the prices of Brent and WTI oil increased on Monday; natural gas Henry Hub future (short term delivery) changed direction and tumbled down yesterday; silver and gold prices sharply rose on Monday; the Euro inched up against the USD on Monday. Moreover, several other currencies such as the Canadian dollar also slightly appreciated vs. the U.S dollar.
Here is a summary of the daily shifts of precious metals and energy commodities as of April 22nd, 2013:
Forex and Precious Metals Markets:
On Monday, gold sharply increased by 1.84% to $1,421; silver also rallied by 1.59% to $23.32. During the month, gold declined by 10.90%; silver, by 17.56%.
On Monday, the Euro/USD slightly increased by 0.1% to 1.3066; moreover, the U.S Dollar slightly depreciated against several currencies such as Canadian dollar by 0.10%.
WTI oil price rose by 1.34% to $89.19 per barrel; Brent oil also increased by 0.74% to $100.39 per barrel;
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