Five charts that help put ‘Saudi America’s’ shale revolution into perspective

Article by Carpe Diem

1.  The Department of Energy reported yesterday that US oil production for the week ending August 30 averaged 7.62 million barrels per day (bpd), which is the highest weekly output of crude oil in the US since October 1989 (see chart above). Over just the last two years since August 2011, US oil output has increased by 2 million bpd. That increase is almost exclusively because of increases in domestic shale oil production in states like North Dakota and Texas, and that shale oil surge has completely reversed a multi-decade decline in US oil output and brought domestic crude oil production to the highest level in almost 24 years.

 

2. The Energy Information Administration (EIA) released new data this week on international energy production for the month of May. For the seventh consecutive month starting last November, “Saudi America” was again the No. 1 petroleum producer in the world in May, and the US produced more petroleum products (crude oil and other petroleum products like natural gas plant liquids, leased condensate, and refined petroleum products) at 12.06 million barrels per day (bpd) than No. 2 Saudi Arabia at 11.53 million bpd (see chart above). Starting in around 2009, revolutionary drilling technologies started accessing oceans of shale resources in America, which launched the US to become the world’s No. 1 petroleum producer by the end of 2012.  

 

3. Mostly as a result of increased production of domestic shale oil and gas, America produced more than 90% of all energy consumed during the month of May according to data released recently by the EIA. The last time the US was more than 90% “energy self-sufficient” in any single month was in September 1987, almost 26 years ago (see chart above).
 

4. Thanks to the abundance of domestic shale gas resources that have recently become available because of advanced drilling technologies (hydraulic fracturing and horizontal drilling), natural gas prices have fallen to historic low levels. The chart above shows natural gas prices adjusted to the energy equivalent of one barrel of oil based on a price ratio of 5.8-to-1 (one barrel of crude oil has 5.8 times as much energy content as one million BTUs of natural gas), on a monthly basis back to January 1994. For example, at the current price of $3.43 for one million BTUs of natural gas, gas would cost $19.89 for an amount of energy equivalent to one barrel of oil, which is currently priced at $108.67 per barrel.

5. The chart below shows the monthly percentage difference between the price of natural gas and crude oil, on an energy equivalent basis, back to January 1994. Thanks to the abundance of shale gas, natural gas is currently almost 82% cheaper than oil, adjusted for energy equivalence. The increased affordability of natural gas at historic levels, especially when compared to the price of oil, has provided significant economic and environmental benefits to the US economy including: a) lower energy costs for residential, commercial and industrial consumers that have generated billions of dollars in savings, b) increased competitiveness for energy-intensive US manufacturing that has contributed to an American manufacturing renaissance, and c) a reduction in CO2 emissions to an 18-year low in 2012 for total emissions, and to almost a 50-year low on a per-capita basis.

Bottom Line: The five charts above provide graphical evidence that America’s shale energy revolution is taking us from “resource scarcity” to a new era of “resource abundance” as the US was able to produce 90% of its own energy in May and has produced more petroleum products than Saudi Arabia in every month since last November. This energy bonanza in the US — described as the “energy equivalent of the Berlin Wall coming down” — would have been largely unthinkable even five years ago. But then thanks to revolutionary drilling techniques developed by America’s “petropreneurs,” we’ve unlocked vast oceans of shale oil and gas across the US and are now the world’s No. 1 producer of petroleum for seven months running. Welcome to America’s amazing shale revolution. 

Recent reports show some signs of economic strength in US housing, manufacturing and car sales, and Europe

Source Article: Carpe Diem

 

There have been a lot of positive economic reports released recently, here are six:

1. US cars sales in August rose to 16.02 million units on a seasonally-adjusted annual rate (SAAR) basis, which was the best sales month since November 2007, the month before the recession started (see chart above). For the month of August, sales this year were just slightly behind sales in 2007 (16.03 million) and ahead of sales in 2006 (15.9 million). As the chart above shows, US car sales have now made a complete recovery from the effects of the 2007-2009 recession, and have rebounded by 7 million units on a SAAR basis from a cyclical low of 9.02 million units in February 2009 to 16.02 million units last month.
2. For the weekend ending August 25, the American Staffing Association’s index for temporary and contract employment remained at a level of 97 for the second straight week. That’s the highest level of temporary hiring activity since December 2007. Temporary and contract employment has historically been a leading indicator of future employment trends in the economy, and therefore the increase in the ASA staffing index to 2007 levels is a positive sign that the labor market will continue to improve this year.
3. The Conference Board reported last week that its Leading Economic Index for the Euro Area increased 1.0 percent in July, after increasing 0.4 percent in both June and May. “The third consecutive increase in the Euro Area Leading Economic Index signals an improving economic outlook, now that the economy appears to be moving out of recession,” says Bert Colijn, Economist for Europe at The Conference Board.
4. Total construction spending in July reached $900.8 billion on a seasonally adjusted annual basis, which was the strongest performance since June 2009 for overall construction spending, and the best performance since September 2008 for residential construction.
5. CoreLogic reported this week that US home prices, including distressed sales, increased by 12.4% in July 2013 from a year earlier, marking the 17th consecutive month of year-over-year home price gains and posting the highest annual price gain since February 2006. Looking forward, CoreLogic expects home prices to rise in August by 12.3%.
6. The August ISM manufacturing index (PMI), a key measure of manufacturing sentiment nationally, came in at 57.7 and easily beat the consensus expectation of 54.0. It was the highest level of manufacturing activity in more than two years, going back to June 2011. According to the Institute for Supply Management, “The past relationship between the PMI and the overall economy indicates that the average PMI for January through August (52.5%) corresponds to a 3.2% increase in real GDP on an annualized basis. In addition, if the PMI for August (55.7%) is annualized, it corresponds to a 4.2% increase in real GDP annually.”