And yes, no thanks to President Obama whose energy and emissions policies are holding us back.
This is a fascinating article by the author of the book that predicted the credit/debt crunch in 2007-8, and who is now predicting a 1950′s style boom. Charles Morris writes elegantly about how energy and manufacturing will lead the US back to economic prominence.
The most salient is the sudden emergence of the United States as a major energy producer. A recent U.S. Geologic Service study concluded that the Bakken Shale in North Dakota and Montana, already crowned as the U.S.’s largest-ever gas and oil reservoir, has far greater recoverable reserves than previously thought. At about the same time, a team from the University of Texas completed a well-by-well analysis of the Texas Barnett Shale — the most intensively developed shale field in the world — and confirmed that the fields can support decades of further development. The current official estimate — that by 2020 or so the U.S. will surpass Saudi Arabia in oil output, and Russia in gas — remains on track, and the country will be a major global energy producer far beyond that, which will do wonders for the U.S. trade deficit.Much depends on how much trouble the greens are going to give the energy industry — and conversely, how much trouble the energy industry is going to give the environment.
Energy production is a good job producer, offering classic blue-collar jobs at high pay to people without college degrees. Oil and gas rig workers can pull down $100,000 annual incomes before they’re thirty. Daniel Yergin, a leading energy analyst, estimates that the sector now accounts for 1.7 million jobs, including energy production itself, its direct supply chain, plus the multiplier effects from the additional spending power.
Each shale well requires up to 100 tons of high-quality steel pipe; fleets of specially adapted trucks and trailers; a small hangar of earthmoving, drilling and other equipment; specialty chemicals, sands and ceramics; and some very high-end seismic and other underground imaging gear. Many of these products are now U.S. specialties. According to the annual Oil & Gas Journal survey, American oil and gas industry investments will total $348 billion in 2013, equivalent to about 2 percent of GDP, with much of the investment flowing in from overseas.
The process of hydraulic fracturing is safe — as long as energy companies exercise care when using fracking to extract fossil fuels from shale. It is a far more complex process than traditional drilling, which means that there’s more that can go wrong.
It takes a year or more to develop a typical shale-rig “pad,” usually with about 10 wells. Once they’re in operation, they are unobtrusive — the piping is all underground and the operation is silent. But the development period is a 24/7 onslaught of floodlights, water tanker traffic, airport-level diesel noise, and much too frequently, chemical spills or toxic storage tank overflows. Understandably, it drives locals crazy, and generates indelible impressions of vast waste and pollution. The widely documented contamination of well water around shale developments has virtually all been from poor surface fluid handling and careless spills, not from the actual process of fracturing.Morris thinks that consolidation in the industry will lead to safer, more environmentally-conscious operations. I doubt whether any readers would want to live next to a fracking operation that didn’t have strict enforcement of toxic waste regulations.
Regardless, if allowed to proceed, there is little doubt that America will once again lead the world in energy production. And because of the boom in natural gas production, our energy costs are plummeting.
Morris also thinks that the manufacturing sector is poised to take off as well:
Onshore production also makes it easier to keep up with today’s just-in-time delivery mandates and ever-more-rapid product cycles. And like all American companies, GE has become wary of the Chinese propensity to knock off market-leading product designs. Manufacturing jobs also tend to have the highest employment multiplier effects. Lawyers and high school teachers are pretty much solo acts, but each new manufacturing job, especially in heavy manufacturing, creates as many as 1.3 to 1.8 additional jobs. A steel mill, for example, is at the center of a vast extraction, transportation, fuel, equipment and servicing network — mining and smelting iron, converting it to primary steel products, distributing it to fabricators of metal products, and much more.No doubt any boom will have uneven effects. The red state government model would appear to have a decided advantage in that labor costs are controlled by right to work statutes and business-friendly taxes and infrastructure construction will attract manufacturing start-ups. While many blue states are dithering over whether to allow shale oil development, states like Texas, Louisiana, and Wyoming are pushing ahead aggressively.
Citi GPS, Citigroup’s economic analysis group, estimates that by 2020, America’s energy revolution will support as many as 3.6 million jobs, both in the energy sector itself, and including the new manufacturing development it will support. The Financial Times recently reported on the concerns in European economic ministries at the rapid pace at which heavy industries are shifting operations to the United States to take advantage of its reasonable labor costs and inexpensive energy.
Dow Chemical recently compiled a list of 108 major manufacturing projects, from more than 80 different companies, either under construction or in development here, with planned investment of nearly $100 billion. About a third are already underway or due to start construction this year; 60 percent are scheduled to be under construction by 2015.
The amazing thing about this, is that all of this economic activity that may lead the US to more boom times is happening despite the least business-friendly administration in a generation. The increase in taxes, cost per employee, and regulations has so far hindered the recovery. But if Morris can be believed, the energy and manufacturing boom that’s on the way will occur despite all of the obstacles placed in the path of entrepreneurs.
It could all be derailed, of course. Another financial crisis or a ruinous war in the Middle East might delay or even destroy the nascent boom before it has a chance to get started. But to paraphrase Mark Twain, if Morris’ analysis is correct, “Reports of the death of the US economy have been greatly exaggerated.”