Accelerating energy boom cloaks flat-line U.S. industrial activity
To the rescue.
What is becoming increasingly clear is that the nation’s booming fossil-fuel energy activity is not only exceeding all recent records in this arena, but cloaking general industrial activity (manufacturing, mining, utilities) shortfalls at levels still well under the degree of industrial production and capacity utilization reached prior to the 2008-10 Great Recession.
At least the overall August 2013 results exceeded those generated a year earlier, although manufacturing seems to have flattened out so far this year with little indication of meaningful pickup for the rest of this year. However, overall capacity utilization, the rate at which all manufacturing facilities operate, is only 0.6% points over any year earlier, but even a more significant 2.4% points below its long-run (1972-2012) average.
What is cloaking an even more severe backup in overall manufacturing activity is the red-hot fracking activity and continued expansion, especially in the recently developed major shale areas of Texas’ Eagle Ford and Permian Basin; along with the Marcellus Shale in Pennsylvania and Ohio (liberal New York has a moratorium against fracking) and the long-standing North Dakota-centered Bakken Belt, which is approaching production of one million oil barrels daily, more than most of the world’s significant producers (with the exception of major Mideast OPEC sources, plus Russia and Venezuela).
Despite the fact America’s world-leading refining capacity has reached new levels of output and is adding to America’s unprecedented export growth by shipping oil derivatives to Mexico as well as Latin America, the output of U.S. plants, utilities and mines is upstaging the current demand cycle. This accentuates businesses in holding back from spending on new plants and equipment. Their monetary expenditures are primarily targeted at increased productivity, full-time employment cutbacks and part-time hires.
With the unresolved issue of Obamacare introduction, a potential debt increase and 2014 standoff adding to the heavy smoke of confusion darkening the unresolved litigious issues awaiting the Senate, the House of Representatives and an indecisive White House, it’s doubtful that hundreds of thousands of independent small businesses are prepared to unzip their well-padded pocketbooks anytime soon.
With the administration loath to negotiate on the additional ballast of Obamacare, small businesses are looking to a major shift of employment to a part-time sector, whose definition of less than 30 hours a week is already being contested by major labor unions.
While employment potential in the nation’s Southeast and parts of the Southwest seems hopeful going forward, an obstreperous administration refusing to rein in its Environmental Protection Agency extremists could make the employment picture even worse in early 2014 barring unexpected demand improvements in areas other than energy.
Liquid natural gas exports ready to roll
When President Obama made an off-hand remark two months ago regarding the economic export opportunities provided by America’s unprecedented natural gas production (as a byproduct of the current revolutionary oil shale development), it signaled a green light for full speed ahead in the construction of liquid natural gas terminals.
Although not noted by any aspects of the national media at that time, it was obvious the combined efforts of the hostile EPA in conjunction with major U.S. chemical companies hoping to keep natural gas prices low had failed. It seemed only a matter of time before this golden opportunity would kick off our nation’s outstanding 2014 export breakout and all benefits derived from it.
Even though a previous energy development approval had been granted for an export terminal conversion in Freeport, Texas, the recently announced approval by the U.S. Department of Energy for LNG-export clearance for the Maryland-based Dominion Cove Point LNG shipping dock to countries without a free trade agreement is a major breakthrough.
The EPA and its associated pressure groups had bombarded DOE with 200,000 emails indicating the extreme displeasure of this broadening anti-U.S. domestic energy development, all of which that agency considered “climatic poison.”
The DOE announced the government’s permission was based on exports up to 770 million cubic ft. of natural gas per day for 20 years. In effect, this gives Dominion a wide-open door to generate the maximum that such a facility could manage to ship and no time limit spanning a generation. This “gateway” decision very likely is the base for similar decisions to follow, utilizing the immense quantity of natural gas being released from current and future oil shale production sites.
With the U.S. price of less than $4 per million Btu, major natural gas users in Japan, the United Kingdom and central and Western Europe will provide multi-billion dollars of export potential plus thousands of additional employees as early as mid-2014.
The resistance by major U.S. chemical companies has been based on the obvious domestic price increase for this energy-powering source, which already has returned plants back to the U.S. from offshore chemical production facilities due to the huge price gap that has reached as high as $15 per one million Btu in Europe and parts of Asia.
At this stage of LNG export inception (still awaiting substantial terminal development) and continuing opposition from statewide sources and lawsuits, the crest of this export tidal wave may not make itself felt until 2015-16. But once underway, it’s a sure bet U.S. liquid natural gas, along with coal and oil derivatives could eventually vault American energy exports into an annual figure in excess of the low $100 billions. The beneficial effects on national revenues, employment and component products needed in all aspects of this development obviously will be immense.
Mine closings gain acceleration
While the “bankruptcy of coal” was prophesied by former presidentially hand-picked EPA head Lisa Jackson, her not-to-be-outdone successor Gina McCarthy is keeping the downhill coal mine closings at an ever greater pace.
With U.S. electric utilities bringing coal utilization down to the lowest percentage in decades (37%) by switching to natural gas as fast as possible, even record overseas shipments are not productive enough to maintain the tonnage needed to keep the many hundreds of working mines open. According to the U.S. Safety and Health Administration, a total of 151 coal mines were idled in the first half of 2013. This included 15 mines in the first quarter, 77 mines idled in the second quarter and 59 mines already shutting their shafts near the end of the third quarter.
Production data from the Mine Safety and Health Administration indicates mines idled in the first half of 2013 produced a combined 124 million tons of coal in 2012. These mines also employed 2,658 workers in combined surface and underground operations.
The biggest hit in production and employment production occurred in “central Appalachia,” America’s traditional hotbed of soft-coal mining. The states hardest hit were West Virginia (by far hit the hardest) followed by Kentucky, western Pennsylvania and eastern Ohio.
This continuing “death by a thousand cuts” seems to be the basis of a strategy to eventually bring coal mining down to an irreducible minimum. The eventual key to this ongoing EPA strategy likely will hit its “go-no-go” point of no return after domestic coal usage is reduced to a minimum by electric utilities and metallic coal usage for conversion of iron ore to basic steel.
At that point, the EPA likely will be prepared to close residual mines based on mining and safety health issues, as increasing demand from developing nations keeps residual mines actively producing for export. At that point, the final decision will be in the hands of whatever “climatologically pure” attitudes the U.S. power structure advocates.
NAFTA’s rise to prominence
After thorough analyses of the expected world’s population growth by mid-century and the attendant outburst of a vast middle-class population demanding modern housing structures, automobiles and discretionary personal and household objects by a majority of nine billion (now seven billion global occupants), it’s painfully obvious that today’s energy demand of 120 quadrillion Btu will, according to conservative estimates, more than double by 2050.
The most intense population expansions today are taking place in Southeast Asia, Africa, South America and the Middle East. Simultaneously, only the U.S. is generating a moderate replacement population, while central and Western Europe, once the dominant centerpieces of modern civilized advancement, now are facing certain shrinkage of their traditional Caucasian populations.
While the current mix of fossil fuels (coal, oil, natural gas), supplemented by a modest renewables growth (solar, geothermal, bio-diesel, wind), could not begin to suffice the energy demands of the upcoming mid-century output, the meteoric rise of the North American Free Trade Authority could fill the bill if today’s “climatically controlled purism” is replaced by a realistic regional North American leadership. Such an outlook has been immensely facilitated by Mexico’s dynamic young president Federico Nieto and Canada’s highly respected Prime Minister Steven Harper. If America’s administration leadership was to follow their examples, the U.S./Canada/Mexico axis will arrive as the facilitator of today’s still inadequate energy development focus.
It’s estimated that the combined hydraulic fracturing (fracking) of oil in the U.S. alone on private and federal lands would far outdistance the uncertified 260 billion-barrel reserve claimed by Saudi Arabia. If considering all of OPEC, primarily comprised of the Islamic Mideast and northern Africa, this today avails the world less than 40% of the current 90 million-barrel daily demand. China now is the world’s prime energy consumer, with India due to take second place and the U.S. in third by 2020 at the present rate.
While fracking is not necessarily confined to the U.S., America’s combination of technological superiority, infrastructure, and rail and truck transportation facilitate the development of almost unending shale finds far more expeditiously than similar attempts in the U.K., China and others that have proven costly and unsuccessful.
To put America’s revenue-generating and employment-producing potential into perspective, one has to only view North Dakota’s breakthrough. This once lagging 600,000-population farm state is now generating one million oil barrels a day with its Bakken Belt shale development that has left the area short of employees and housing, but still swimming in cash. This is allowing a new infrastructure in education and technology that places North Dakota into a top economic sphere.
According to a University of Southern California study, the Golden State could count on $75 billion and a 200,000 construction worker hike in the next five years once the go-ahead is given by the state’s “progressive politicians.” California’s Monterey Shale (the largest shale play in the nation) is waiting to be serviced. However, the state’s California Air Resources Board and the Sierra Club extremists’ position stand in the way, for now.