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The US became the world’s No. 1 hydrocarbon-based energy producer in 2013 thanks to our abundant supply of shale oil and gas. No other country in the history of modern oil production has added more production so quickly than the United States. This points to the unsurpassed ingenuity of American entrepreneurs, as well as the economic benefits a free marketing brings to our country. Many thanks to Mark J. Perry of the American Enterprise Institute for providing these slides in conjunction with his appearance on The Oil & Gas Digital Marketing Podcast. You can connect with Mark across the interwebs here: American Enterprise Institute: http://www.aei.org/ Carpe Diem Blog: www.aei-ideas.org/channel/carpe-diem/ Twitter: twitter.com/Mark_J_Perry
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Mark J. Perry, Ph.D.Professor of Economics, University of
Michigan-FlintResident Scholar, The American Enterprise
InstituteCarpe Diem Blog
“Navigating the US Economic Recovery: A Year in Review and a Look Ahead”
First Merit BankJanuary 30, 2014
by
US fossil fuel production reached a record high in 2013, as US rose to become the world’s No. 1 hydrocarbon-based energy
producer in 2013
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1975 1980 1985 1990 1995 2000 2005 2010
US Production of Natural Gas and Oil, 1975-2013 (est.)
Quadrillion BTUs
Source: Department of Energy Carpe Diem Blog
America's Shale Revolution
US oil output in Jan. 2014 will be the highest in any month since June 1989
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1990 1995 2000 2005 2010 2015
Weekly US Crude Oil ProductionJanuary 1988 to January 2014
Barrels perday (1,000s)
Source: Department of Energy Carpe Diem Blog
America's Shale Revolution
Oil output increased 1M barrels per day in 2013, the largest annual increase since beginning of US commercial oil
production in 1859
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1,200
1875 1900 1925 1950 1975 2000
Change in Annual US Crude Oil Production, 1860 to 2013
Source: EIA Carpe Diem Blog
1,000s of barrels per day
2013 Increaseof 1M bpd
Texas oil output doubled in last 2 years to 2.75M barrels/day in Oct., highest output since 1980 and was 35.5% of US oil in Oct. As
a separate country, Texas would be 9th largest oil-producing nation in world.
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1985 1990 1995 2000 2005 2010
Texas Oil Production, January 1981 to October 2013
Barrels per day
Source: EIA Carpe Diem Blog
Oil Output Doubled betweenMay 2011 and October 2013
The US now has three super-giant oil fields, out of only ten ever worldwide, to produce 1M bpd at peak
production
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Oil Production: Permian Basin, Eagle Ford and BakkenJanuary 2007 to January 2014 (est.)
Barrels per day
Source: Energy Information Administration
Carpe Diem Blog
Permian BasinMay 2011
BakkenDec. 2013
Eagle FordMay 2013
Record-high natural gas production in the US at the end of 201327% increase since 2007, mostly from shale gas
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1995 2000 2005 2010
U.S. Natural Gas Production: Gross WithdrawalsJanuary 1994 to October 2013
Trillion cubic feet
Source: EIA Carpe Diem Blog
12-Month Moving Average
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1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Monthly Real US Spot Price for Natural GasJanuary 1994 to December 2013
Per Million BTUsin 2013 dollars
Source: EIA Carpe Diem Blog
Abundant US shale gas in last 5 years reversed a decade-long upward trend in gas prices, and helped save users $100B per year
vs. 2008 prices
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US
Belgiu
m
UK
Spain
India
Brazil
China
Japan
Korea
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tina
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13.714.7
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World Natural Gas Prices, November 2013
Per MM BTUs
Carpe Diem Blog
Source: Federal Energy Regulatory Commission
Compared to US, Natural Gas Prices are 3X higher in Europe and 5X higher in Asia, S. America
Lowest net US petroleum imports last year since 1986
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1990 1995 2000 2005 2010 2015
Net US Petroleum Imports: Share of US Consumption1986-2013 (through November)
Source: EIA Carpe Diem Blog
34.0%
In 2013, US will be more energy self-sufficient than in any year since 1987
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72%
76%
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84%
88%
1990 1995 2000 2005 2010 2015
US Energy Production as a Share of US EnergyConsumption, 1987 to 2013 (Through September)
Source: Department of Energy Carpe Diem Blog
84.5%
Some indications point to a manufacturing renaissance in the U.S., partly as a result of the
lowest nat gas prices in the world
Since January 2010, 568,000 new manufacturing jobs have been added to the US economy, and production rebounded to new highs in 2013.
Industrial production, Durable Manufacturing and Motor Vehicle and Parts Production all reached new highs in 2013, and are solidly above pre-
recession levels.
Industrial production has now made full recovery and ended last year at record high level. Motor vehicle
production at record high, 8.8% above 2007
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2007 2008 2009 2010 2011 2012 2013 2014
Motor Vehicles and PartsDurable ManufacturingIndustrial Production
Industrial Production, Durable Manufacturing and MotorVehicles and Parts, January 2007 to December 2013
Source: Federal Reserve Carpe Diem Blog
Recession Indexes = 100 in 2007+8.8%
+3.7%+1%
With record high output in 2013, US manufacturers’ 2013 profits were 32% higher than before Great Recession. Profits last year will be close
to a record high, and auto industry profits are on track to set a new record.
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US Manufacturing CorporationsAfter-Tax Profits, 1993-2013 (est.)
Billions Source: Census Bureau
Carpe Diem Blog
est.
12 Factors Favoring US Production
1. Manufacturing wage growth in China (15%) and a 4% jobless rate vs. wage growth in the U.S. (1.0%) and 6.7% jobless rate
2. New 2-tiered union contracts have made U.S. labor costs in some industries more competitive than ever before
3. Shipping Costs, $100/barrel Oil, Delivery Time
4. Real U.S. natural gas prices are back to late 1990s levels, 75% below 2005-2006 peak, cheapest natural gas in the world
5. Quality Issues and Delivery Delays for overseas production, especially for small and medium size firms
6. Lack of safeguards on intellectual property overseas
12 Factors Favoring U.S. Production7. Less flexibility for making changes when production is
8,000 miles away
8. Innovation, automation, robotic costs are coming down – “China labor is cheap, but robots work for less,” and you “Innovate around cheap labor.”
9. “Made in USA” preference has made a comeback, especially with a high jobless rate and “jobless recovery”
10. Manufacturing profits are at record-high levels
11. Cheap land and industrial property in U.S.
12. Advanced, smart manufacturing and 3-D printing favor some US production over China and Asia
Boston Consulting Group, May 2011
• Within the next five years, the US is expected to experience a manufacturing renaissance as the wage gap with China shrinks and certain US states become
some of the cheapest locations for manufacturing in the developed world.
Sometime around 2015, manufacturers will be indifferent between locating in America or China for production for consumption in
America.
2013 Was the “Year of the US Housing Recovery,” First year of annual gains in home prices in every month since 2006. Prices are now 8.9% below 2007 peak, and have been increasing +8%
YoY for last 5 months.
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2000 2002 2004 2006 2008 2010 2012 2014
FHFA Monthly Purchase-Only IndexJanuary 2000 to November 2013
Source: Federal Housing Finance Agency Carpe Diem Blog
Index = 100 inJanuary 1991
June 2008
8.9% below 2007 peak
The Global Economic Picture
World Trade and World Industrial Production Were Both at Record High Levels in November, Led by Strength in Emerging
EconomiesSource: CPB Netherlands Bureau for Economic Policy Analysis
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2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
World TradeWorld Industrial Output
World Trade Volume and World Industrial ProductionJanuary 2005 to November 2013
Source: CPB Carpe Diem Blog
U.S. Recession
Indexes = 100in 2005
+9.9% above2008 peak
+9.3% above2008 peak
World Stock Market Capitalization Ended 2013 at New Record High; Above Pre-recession 2007 Peak by $2.5T and
by 4%
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1996 1998 2000 2002 2004 2006 2008 2010 2012
World Stock Market CapitalizationJanuary 1996 to December 2013
Source: World Federation of Exchanges
Trillions (T)in USDs
U.S. RecessionsShaded
Carpe Diem Blog
$65.3T
$29.1T
$62.8T
Summary of US economy 4.5 years into the 12th economic expansion since WWII:
1.Forecasts call for 2.7% real GDP growth in 2013, followed by growth of 3.0% this year and next year2.2013 was the “year of the housing recovery” and we may see a return of home prices in 2014 to previous 2007 peak3.US energy revolution is at the forefront of the economic expansion – domestic oil and gas, thanks to technology4.Manufacturing and automotive sectors are coming back and are also at the forefront of the recovery5.Labor market is slowly healing, has a long way to go6.Final charts illustrate the current and future US economy
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Real GDP (left)Employment (right)
Billions of2005 Dollars
Thousandsof Persons
Real US GDP vs. Employment, 2002:Q1 to 2013:Q3
Recession
Sources: BEA, BLS Carpe Diem Blog
-2M jobs
+5.6%
US stock prices vs. corporate profits
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Corporate Profits(left scale)
S&P500 Index(right scale)
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US Corporate Profits vs. S&P 500 Index, 1990 to 2013
TechBubble
Thank you!Carpe Diem Blog
http://www.aei-ideas.org/channel/carpe-diem/
