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rofgile (59.61)

A decade of cheaper commodities in the US could launch the next boom.

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September 26, 2011 – Comments (3) | RELATED TICKERS: OIL

One of the major drags on the US economy has been the high prices of commodities such as oil, industrial metals, and agriculture.   In particular, lowering oil prices would really help consumers and consumer sentiment.

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This is a news item that is gaining interest to me - the US as a domestic oil producer due to technology advances (fracking).

 

It is worth noting how the US and world oil markets have begun changing quite fundamentally due to technology increases with fracking.  Newly accessible oil could make the US mainland a bigger oil producer than Saudi Arabia in the next decades (can you believe this?)  There is literally an oil boom occurring in places like North Dakota, with rents exceeding $1000 just to park your RV and utter lack of housing for employees.  In these places unemployment is below 2%. Feb 2011 : "Fracking opens vast oil fields". Sep 2011 (NPR) : "New Boom Reshapes Oil World"  

"Some are now saying, in five or 10 years' time, we're a major oil-producing region, where our production is going up," she says.

The US, Jaffe says, could have 2 trillion barrels of oil waiting to be drilled. South America could hold another 2 trillion. And Canada? 2.4 trillion. That's compared to just 1.2 trillion in the Middle East and north Africa.

Jaffe says those new oil reserves, combined with growing turmoil in the Middle East, will "absolutely propel more and more investment into the energy resources in the Americas."

 

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 Therefore the Middle East is going to be increasing irrevelant to the world in the next two decades.  Most of our energy is going to come from the US and Canada (fracking and shale). The great distortion of world trade that has happened since the early 1990's is going to have a big correction.

 The US would then become a net exporter in the coming decades and will probably have a very strong dollar (like Canada).   I am never really that worried about America, because we have such a huge country with so many human and natural resources.  Those advantages of human capital, accessible materials should not be underestimated. 

 -Rof 

 

3 Comments – Post Your Own

#1) On September 26, 2011 at 6:23 PM, miteycasey (99.90) wrote:

I hope you are correct, but from the numbers I've seen the output reperesent about 10%-20% of daily use. While that's not a lot it's at least something.

 

I think right now we import 50% of our daily use so we'll cut our imports of oil by 20-50% which is good.

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#2) On September 27, 2011 at 12:15 PM, imobillc (< 20) wrote:

I started reading your posting out of curiosity.

But when I read Fracking ....

Are you Fracking out of your mind?

Mars 

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#3) On September 28, 2011 at 10:10 AM, rofgile (59.61) wrote:

imobillc,

 What was the point of this comment or your blogs?  I don't support fracking for natural gas or oil.  I didn't even know that fracking for oil even existed until recently.  What is interesting to me is that while I think fracking and shale are both environmentally horrible activities, economically they are very much moving ahead.  I never thought shale extraction would be a real event - but now our biggest single place we import oil from in the US is Canada.  

 The world changes - and what I am noting is that while fracking and shale will definitely damage our water and air (and further global warming at a higher pace) that doesn't mean that these activities won't grow.  In fact, it looks like they will grow and could become major activities.  Combine this with the decline of the current major oil sources (Saudi Arabia) and you have a much less importance of the middle east and less US wars there.  

 For the record, I would rather that we did no fracking and no shale period - ever.  Not only do these activities directly harm the environment, this new cheap influx of natural gas is hurting the expansion of wind and solar.  However, that we environmentalists don't like this doesn't mean that it isn't happening and growing.  Worse, the expansion of these activities is lined up with US interests of both national security and trade.

 -Rof 

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