Peak Oil is You
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Page added on August 3, 2013
The United States of OPEC
As someone who cheers for the success of this great country, I desperately want to believe in the concept of America’s energy independence. In the past decade we have been inundated with predictions of the U.S. becoming the next Saudi Arabia of oil and natural gas production. Fracking, tar sands, shale gas, et al., are supposed to bring about a manufacturing renaissance and trade surplus in the near future. But, as of now there isn’t much evidence we are headed in that direction.
It is true that the U.S. is importing much less oil than in the past. During 2005 we imported 60% of our oil consumption–that dropped to just 40% last year. The fact is we are producing more oil and natural gas–so why aren’t we enjoying any of those real benefits?
Natural gas prices have plunged from the low double digits in 2008, to $3.5/mcf currently; most of which was caused by the overwhelming belief that we would be suffocating in natural gas by now. However, prices bottomed 18 months ago and now seem to be headed higher. Conversely, in the case of oil, prices have been rising over the past four years from below $60, to over $105 per barrel today. Therefore, so far at best it’s been a mixed picture on seeing reduced energy prices from the oil and gas revolution we were promised.
Where are the benefits?
But has the increased energy production boosted our manufacturing sector or helped with our balance of payments deficit? The short answer is “no.”
Manufacturing as a percentage of GDP was 11.9 for last year. That figure is down from 12.1% during 2007. And, most importantly, there was an average of 13,879,000 persons employed in the manufacturing sector during 2007. The average number of persons employed in this sector by 2012 plummeted to just 11,919,000. This trend is continuing, with the U.S. losing 52k manufacturing jobs Y.O.Y. from June 2013. It’s simply hard to come up with a story about a domestic manufacturing renaissance when we lost nearly 2M jobs in just the last five years.
Also, there hasn’t been any significant improvement in our trade deficit since the Great Recession ended. The downturn in the economy and global trade occurred in the summer of 2009. The U.S. trade deficit was $32 billion in July of 2009; it has slowly climbed back to over $45 billion in May of this year.
More than just energy
It is my hope that our increased energy production will lead to low natural gas prices that are sustained, much lower oil prices from where they are today, a boom in manufacturing jobs, and a trade surplus in the near future. Nevertheless, we don’t seem to be headed in that direction at this time.
Perhaps the best explanation for this is that a revival of the goods-producing sector of the U.S. economy requires much more than just an increase in domestic energy production. If we don’t also reform our tax structure, reduce regulations, lower labor costs, boost the educational system, stabilize interest rates and strengthen our nation’s balance sheet it won’t fix the problem … even if we had all the energy production in the world.
9 Comments on "The United States of OPEC"
BillT on Sat, 3rd Aug 2013 3:11 pm
finance.yahoo says it all. BS in large packages.
economists should be ashamed to admit that that is what they studied in college. A bit like going to Harvard to learn how to be a witch doctor.
CAM on Sat, 3rd Aug 2013 3:30 pm
It’s even worse than that. In the “old days” even witch doctors served a societal purpose.
Plantagenet on Sat, 3rd Aug 2013 4:19 pm
Anyone who believes Obama’s promises that the US will be energy independent is a dupe and a fool.
Jerry McManus on Sat, 3rd Aug 2013 4:51 pm
Funny how all of their anti-labor and corporate welfare prescriptions for a return to economic health are exactly the same things that got us so very sick in the first place.
Here’s a radical prescription: Hang the bankers from a lamp post and give the government the power to spend interest free money directly into the economy.
History has shown that to be a most effective cure for countries infected with a criminally psychopathic financial elite.
Fulton J. Waterloo on Sat, 3rd Aug 2013 4:59 pm
Lower labor costs? Is he NUTS? Global “free trade” is what got us huge deficits AND an ever smaller manufacturing sector. The going rate for industrial labor in Bangladesh is 24 cents an hour. Is that the RX for an American recovery?
rollin on Sat, 3rd Aug 2013 5:33 pm
The American people are becoming poorer and don’t purchase as much, so much of American manufactured products is going overseas. Manufacturing jobs have been going overseas since the 1950’s. Still the US allows 1.5 million immigrants every year and who knows how many illegals. We can’t even do a “Red Queen” with those numbers, just a steady slide.
Wages have fallen dramatically also, sometimes as much as 2/3 for the same position. Don’t worry about peak oil, much of the nation will have gone over the edge economically within a few years, if they have not already.
GregT on Sat, 3rd Aug 2013 6:08 pm
Overseas manufacturing by American corporations, is a large part of what has caused the American people to become poorer.
The immigrants are providing cheap labor for those Americans that are still doing well, which is also contributing to the ever growing gap between the rich and the middle class.
The nation has already gone over the edge thanks to peak oil, and peak oil is going to deal the final blow.
poaecdotcom on Sat, 3rd Aug 2013 7:57 pm
The U.S WILL be energy independent alright.
The day after international energy trade breaks down.
International trade is a function of credit markets and trustworthy currencies.
Sadly, that clock is ticking down quickly….
actioncjackson on Sat, 3rd Aug 2013 8:52 pm
People living near fracking sites can light their tap water on fire. There’s hundreds of thousands of sites and countless more planned, all around major watersheds in the country. They are not regulated nor can they be held legally accountable for contaminating water sources. The sheeple asked for it, now they’ll get it. Only it won’t be energy independence, it’ll be fucking cancer.