Posted on 10/16/2014 4:31:04 AM PDT by thackney
The oil and gas drilling boom has been good news for U.S. manufacturing, keeping factories supplied with cheap chemical feedstocks and powered by inexpensive energy.
Now, a new report from The Aspen Institute and the Manufacturers Alliance for Productivity and Innovation says the United States can further drive the domestic manufacturing renaissance — and keep drill bits turning — by allowing energy companies to sell oil overseas.
The paper hinges on the notion that if the United States eases longstanding restrictions on oil exports, it will prompt further crude production inside the country.
“Higher levels of oil production require higher investment expenditures for capital equipment and construction, which in turn boost overall demand for goods,” the paper says. “This stimulates the manufacturing sector and its supply and distribution chains.”
If oil companies boost their own spending on exploration activities as well as the production and transportation of crude, it will drive activity along the supply chain that provides the industry with pipes, pumps, drilling rigs, earth-moving equipment and trucks.
According to the analysis, investment in machinery for exploration and development would climb by $7 billion in 2020. Capital investment for construction and mining machinery would be up by $3.6 billion.
“Purchases from manufacturers will be direct, as when a driller buys pipe or pumps and compressors,” the paper says. “Much indirect activity also will be stimulated, such as the production of coal, ore, and limestone used to produce the steel that makes up the pipe.”
The analysis, built on economic modeling from the University of Maryland’s Inforum predicts widespread oil exports would give a short-term boost to gross domestic product, tapering along with new capital expenditures after 2017. GDP would be about 0.93 percent higher during 2019 to 2021, according to the paper.
“The general improvement in economic growth and employment will provide manufacturers new ‘induced’ demand for products seemingly far from the oilfield supply chain,” the authors say. “For instance, securely employed steel and oil workers earning higher salaries will be better able to afford a long-delayed new vehicle purchase.”
According to the new study, if oil exports were broadly allowed:
real household income would climb by $2,000 to $3,000 in 2025 There would be an average gain of 37,000 manufacturing jobs each year through 2025 Some big industrial consumers of natural gas — led by the Dow Chemical Co. — have been wary of sending too much of that fossil fuel overseas.
The MAPI-Aspen Institute analysis predicts the refining sector would pare its capital investment by almost $1 billion in 2020.
That said, the SandP premarket is down over 3 at the moment and the price of oil is approaching $80. Not particularly bullish indicators for this economy or the current ebola situation all thanks to Barry.
Remember this quote from him a few weeks ago: “by any measure, the US economy is far better now than when I took office.” Just one more lie in the wall of lies this clown has pushed out. His mouth has been writing checks that the FED can no longer cover.
Would it help the shale oil industry since the price of oil going down ?
Removing restriction of to who they are “allowed” to sell their product would help any industry.
Government bans on moving products/commodities are bad for any business. Removing them will help those businesses.
freeing the marketplace will invariably lead to improved efficiency and subsequent prosperity gains.
only those with agendas against that stand in the way.
>> The oil and gas drilling boom has been good news for U.S. manufacturing
Good news, indeed. Still waiting with bated breath for fertilizer prices to drop though. :-)
First we need Obama’s regulatory Nazi’s out of the way.
The reason for the export ban has outlived it’s purpose since the oil shale revolution and natural gas industry has removed any fears of any energy disruptions or shortages.
Once the domestic production of oil reaches to the point that we import very little if any at all and there is evidenced that, that supply can last for a good long time then there is no reason to keep a antiquated ban on exports of crude oil.
There is no oil and gas drilling boom. Can’t be. There’s a Dem in the White House.
http://www.wallstreetdaily.com/2014/10/09/nitrogen-fertilizer-yara-cf/
Oct 9, 2014
Two companies – CF Industries (CF) and Norway’s Yara International ASA (YARIY) – are working on a $27-billion deal that, if agreed to, will create the world’s largest producer of nitrogen fertilizer....
In fact, thanks to low-cost U.S. shale gas, CF’s profit margin in its nitrogen fertilizer division was a whopping 52% in 2013. In contrast, Yara’s profit margin was only 9.2% thanks to higher-cost European natural gas....
America needs industry.
Stop importing everything from China.
there is no reason to keep a antiquated ban on exports of crude oil
That was the only portion needed. Qualifications to justify government intervention is a bad idea. Government should not be picking winners/losers in the marketplace, not solar, not wind, not oil producers, not refineries, none.
Thanks, thackney.
Europe is kinda far from which to ship fertilizer :-), but from the same article:
“This cheap gas, according to Mark Gulley of BGC Financial, is already translating to $12.7-billion worth of new fertilizer plants that are set to start producing by 2020 in the United States.”
WOO HOO! Bring it!
>> Government should not be picking winners/losers in the marketplace, not solar, not wind, not oil producers, not refineries, none.
With an attitude like that, you might be a conservative!
Are your taxes in order? :-)
Expanding production requires capital expenditures and the oil and gas industry is already over leveraged. Not sure how falling prices help in that situation.
End corporate taxation and 99% of regulation of business and watch an industrial and economic renasissance of near unimaginable proportions.
If the oil boom is not accompanied by reduction and/or elimination of regulation and taxation of business then it has the potential of turning the USA into a temporarily successful Resource Supplier. This will give the appearance of Prosperity and Wealth but is temporary so long as the government continues to increase the throttling of business by high taxes and regulation. Yes, we could be a sort of Saudi Arabia but the population is far too large to use that wealth to retire the population and it is temporary, anyway.
Cheap natural gas is bringing back some manufacturing to Ohio, PA, WV, etc. There is always a freight consideration when purchasing a product delivered to its final destination. If it is too expensive to ship steel from South Korea to Pa for a job, they will not get the business. This has led to more steel manufacturing being done in the US and Canada.
Another example currently happening. Calcium Chloride is primarily produced by Occidental Chemical under the brand name Dow Flake or Dow Pellet. It is used for melting ice at temperatures lower than (-10F).It is a big seller in the northern part of the US and Canada in the winter. It can not be bought this year because Ox Chem can get more money for Calcium Chloride from the oil/gas industry where it is used in the fracking of wells. Therefore, we are looking for suppliers from overseas to import Calcium Chloride to the US. The other major manufactures in the world are in China.
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