The United States of America have now become the leading producer of natural gas and oil. The USA have now overtaken Saudi Arabia, and Russia in the oil business, reports the Bank of America Merrill Lynch (BAML) Global Research. In their note titled “The United Petro states of America”, the bank gave a detailed description of this latest development. Russia, and Saudi Arabia have been the leading producers of crude oil, and gas for a long time, and the United States of America was finally able to overtake their Middle Eastern and European competition.
US & Russian natural gas output
The BAML also says that they have noticed that the price of the domestic gas in the United States of America have managed to stay at a portion of the international cartelized costs, even when they were behind the shale boom. Also the report suggested that the benefits of that the American Industrial sector is getting is somewhat mixed, and not fully in their favor. Areas of the Industrial Sector of the United States of America such as the light manufacturing industries have only seen small gains, instead of large ones. So this development has not yet had a country wide effect. The BAML also stated that they have noticed that the relationship between the gains of the US Government and the growth of the oil production during the past half decade on a State by State analysis method. The BAML also states that the wage gains are more in the states where the oil production has significantly risen over the same amount of time. So overall, how tis development will affect the American market is yet to be seen.
Oil & natural gas investments in the USA are at their peaks
BAML also suggests that the money that has been flowing into the natural gas and oil sector of the United States of America is now estimated to be 20% of the total United States’ structure investment. This is the highest level recorded in the history of the United States of America, and says that the results are almost as good as the residential investment sector of the country. This is a huge development considering how much the investment has grown over the years. BAML also says that a reason behind this is the partial slowdown of the residential sector. The speed at which the residential construction costs were spent have slowed down over the years, but still to have overtaken the residential sector, the level of the oil, and natural gas sector has had to , and did rise by over $200 billion per year. And what I alarming about this rate is that this is still rising. This development will certainly be responsible for the aggregate shift of the market from the essentially durable consumption good which is housing, to a more durable production good, in the form of oil and natural gas.
US inflation dynamics still remain hugely influenced by natural gas and oil
Even when the United States of America have become the largest producers of crude oil, and natural gas in the world, their inflation dynamics are still hugely influenced by oil. It can be made clear by taking a look at the inflation expectations of the country which are five year breakeven, from both the pre shale oil boom and after the shale oil boom. The inflation drivers appear to have been shifting from the consumer prices and the labor market slack to the production slack. There might be concerns that are about the inflationary economic policy. But is has been clear that the influence of the oil prices has managed to remain strong in the said periods. As a matter of fact, the majority of the normalization of the inflation expectations that occurred after 2009, can and will be traced to the oil prices, and their rally. So it is clear how much the country has benefited from the production of oil, and what a big impact the oil production department has had on the economy of the country, be it stabilizing the economy after the inflation or boosting the country’s rank up the list of biggest oil producers.
Even the current run up of the oil prices from the low $87 to the current high of $ 99 per bbl, and that too in a five year period should be of concern to the hawks of inflation. But this news will be that like music to the ears to the people collecting wages from the petro states of the United States of America such as Colorado, North Dakota, or Texas.
On one hand the disruptions that are linked to the geopolitics or engineering have been the cause of the plague of the international oil producers in the past few years. While on the other hand the underwhelming reoccurrence on the investment that was achieved by the major oil producers in quite a few of the international projects over the years have also been responsible for the major cut down in the overall capex. This has also helped the United States of America to stand on their own two feet when it comes to energy demands.
The US oil output
The shale revolution of the United States of America had a major transforming effect on the United States and the major international economies in the recent few years. Since the inflation back in 2008, the United States Government did everything that they could do normalize the inflation, and the rise in the oil production of the country helped to escalate the process. It is estimated that the oil production of the United States on America has risen by almost 70% since the inflation, along with the rise in the outputs of both liquid natural gas, also known as NGLs, by almost 40% since the beginning of drilling for shale gas, was escalated in 2005. This had a direct effect on the position of the Unite States of America in the list of the leading oil producers of the world. The USA overtook Saudi Arabia, and Russia both of which were the leading oil, and gas producers of the world. The fact that America overtook the two oil giants in a time period of six months is even more shocking. BAML said that the United States of America also overtook Russia who was the leading producer of gas in the world back in 2010.
The dependency on foreign energy of America have collapsed recently
With the recent developments happening quickly, it seems as if the American foreign energy dependency ratios will or have started to collapse. The supply of the market is now vastly surpassing the rate of demand, and this has caused the collapse of the import of the seaborne natural gas into the United States of America. Replacing the liquid natural gas, is the crude oil whose importing levels have risen, and have been mirroring the massive increases in the production of the domestic oil. Thus, it is safe to presume that the country which till now have been depending on foreign energy, is starting to shift towards its own production of energy. This would be a huge development, not to mention the independency to use the energy as one wishes. The BAML also backs this opinion by saying that the United States of America have come a long since their financial crisis back in 2008, to their spending a mere 1.5 percent or even less of the total national income for buying foreign natural gas, and crude oil.
by Redacción Gas Shale México