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Energy Boom Begins to Ripple Through US Economy
« on: March 25, 2013, 04:28:27 AM »
The boom in new oil and natural gas flowing through U.S. pipelines is beginning to ripple through the wider American economy.

Just ask Edrick Smith.

In September, Smith traded temp agency jobs for full-time employment with Baltimore-based Marlin Steel Wire Products, which makes wire baskets for industrial customers. An experienced machinist, Smith is now expanding his skills by learning to set up and operate factory robots.

“Knowing each and every machine in here gives me an opportunity to make good money, and to educate myself more,” he said. “This is my career.”

Smith’s hiring was just one of thousands of openings created indirectly by a new boom in domestic oil and natural gas drilling – a bounty so rich that it has even caught energy industry insiders by surprise. In part 2 of our four-part “Power Shift” special report, we examine how the explosion in drilling in places like North Dakota and West Texas is spreading through the general economy – despite controversy over the potential environmental impact of the new industry practices.

Marlin Steel Wire, for example, has expanded its payroll and invested in high-tech equipment to keep up with a steady pick-up in orders from other U.S. manufacturers. Orders are rising, said owner Drew Greenblatt, because his customers are receiving a widening discount in the price of natural gas and electricity.

“That’s making U.S. companies that used to be at a price disadvantage now uniquely positioned to win contracts they never won in the past -- or haven’t for a while,” he said. “Everyone talks about what’s going on in North Dakota, but it’s filtering down now to conventional factories throughout America."

Some analysts believe the energy cost savings for businesses, factories and consumers will last for decades.

“This is not going to be a one- or two-year thing,” said Ross Eisenberg, head of energy and resources policy at the National Association of Manufacturers. “We’re going to see lower natural gas prices for a long, long way into the future.”

Booms, busts and booms
Since the first gusher of oil spewed from of the ground above the Spindletop salt dome outside Beaumont, Texas, more than a century ago, the U.S. energy industry has enjoyed its share of booms and busts. After peaking in the early 1970s, U.S. oil and gas production began to decline as thousands of depleted wells were shut down. The U.S. rapidly became dependent on foreign suppliers to fuel its economy.

About a decade ago, advanced oilfield production technologies like hydraulic fracturing, or "fracking," and horizontal drilling began to reverse that trend. Many of the now-bountiful fields being brought back on line were mothballed long ago when the remaining “tight” oil and gas deposits were considered too costly or technically difficult to produce.

“It is a sizeable opportunity,” said John Larson, an economist with IHS Global Insight. “It’s a game changer.”

Interactive map: Where US energy is produced

The economics of production have also played a role in the boom. A tripling in the market price of a barrel of crude over the past decade supports widespread use of costly extraction methods that didn't make sense when energy prices were lower.

Barring an unanticipated setback, so-called “unconventional” oil and gas production is expected to continue to grow over the next two decades. Over that period, the industry is expected to make more than $5 trillion in new capital investment that will support more than 3.5 million jobs by 2035, according to the financial analysis firm IHS Global Insight.

That economic impact of such spending already is spreading, especially to companies that rely heavily on natural gas as a raw material or energy source and investing and hiring.

F0405B352FCE1D74CF71986BCBF7FC   :icon_study:  :icon_scratch:

Offline g

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Don't know what to believe anymore.  Tend to side with Stoneleigh on these matters, but there seems to be two sides, as usual, to this coin.  :icon_scratch:

Power shift: Energy boom dawning in America

Randy Foutch calls it a renaissance, but when you listen to the veteran Texas oilman and others describe America’s nascent energy boom, it sounds more like a miracle.

Politicians have been warning for decades that the U.S. must wean itself from foreign energy, but just a few years ago their words seemed like so much wishful thinking: The U.S. was facing what seemed like ever-rising oil prices and was importing about 60 percent of its supply. Natural gas inventories were shrinking, and the country was considering importing a liquified form from the Middle East.

But in a turnaround that industry insiders describe as nothing short of amazing, the picture has drastically changed. Oil and natural gas drilling is now booming in places like Eagle Ford, Texas, and the Bakken formation in North Dakota, bringing jobs and prosperity to those regions. And believers say the newfound resource is so much bigger than anticipated that it can help drive economic growth nationwide for years to come.

“For the first time in my career, we actually have the ability to talk about real energy security or independence,” said Foutch, 61, a burly Texas native with four decades experience in the oil business.

Technological innovation – primarily the growth of horizontal drilling and hydraulic fracturing, or “fracking” as it’s commonly known – is driving the new production, enabling oil and gas to be extracted from geological formations once considered impregnable.

Infographic: How 'fracking' works

“The ability to drill these long-reach horizontal wells into reservoirs we could never reach before was a big change for the industry,” said Foutch, head of Oklahoma-based Laredo Petroleum.

As a result, U.S. oil and gas production is growing so rapidly - and demand dropping so quickly - that in just five years the U.S. may no longer need to import oil from any source but Canada, according to Citigroup. And the International Energy Agency projects the U.S. could leapfrog Saudi Arabia and Russia to become the world’s biggest oil producer by 2020. IEA sees the U.S. becoming a net oil exporter by 2030.

In a four-part series starting Monday and continuing over the next three weeks, NBC News and CNBC will examine how this boom occurred almost overnight and look at the implications that U.S. energy independence would have for the U.S. economy, other types of energy, foreign policy and the environment.

Horizontal drilling is not new but the widespread application of it is. When combined with fracking, which uses highly pressurized water and sand to break through rock formations, usually shale, and "stimulate" the movement of hydrocarbons, it has made recoverable billions of more barrels of oil and vast stores of natural gas.   :icon_study: :icon_scratch:



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